Course : ME22023 NEW PRODUCT DEVELOPMENT

Unit 5 Industrial Design &

– Cost evaluation

Dr C Senthamaraikannan
Associate Professor,
Dept of Mechanical Engineering
Sri Venkateswara College of
Engineering
 Outline
• Goals for ID
• ID expenditures
• Importance of ID
• ID process and timing
• ID roles
• ID quality assessment

5/12/2025 2
 ID Importance to product
design
• Ergonomics
– Ease of use
– Ease of maintenance
– User interaction with the product
– Minimum knowledge of using it safety.
• Aesthetics
– Amount of product differentiation required
– The importance of pride of ownership, image.
– Motivation to the design team (for their pride in
product)
5/12/2025 3
 ID goals
• Product utility
– safe, easy to use, and intuitive
• Appearance
– form, line, proportion, and color
• Communication of corporate image
– through the visual quality
• Ease of maintenance and repair
• Low (mfg) costs
5/12/2025 4
 Product types from the ID
point of view
• Technology-driven products
– Engineering or technical requirement is paramount
– ID has little involvement
– Extreme cases of Intel chips and GE engines
• User-driven products
– Usually there is a high degree of user interaction for these
products.
– The functionality and/or its aesthetic appeal are important
– ID works closely with marketing and engineering throughout
the process.

5/12/2025 5
 Tech- vs. User-Driven
Products

Mobile Phone
Camera
Super Computer Laptop Computer Coffee Maker
Desktop Computer Wrist Watch
Hard Disk Drive Automobile Office Chair

Technology-Driven User-Driven
Products Products
Technology or User Driven?
Technology or User Driven?
 Timing of ID involvement
• Technology-driven products
– During the later phases of product development
• In concept generation for user interface
• In concept testing for for customers for feedback.
• In detailed design and refinement for packaging and marketing
• User-driven products
– Throughout the entire process
• In need analysis for identifying customer needs.
• In concept generation for creating multiple concepts
• In concept testing for creating models
• In system level design for refining promising concepts
• IN detailed design for selecting final concept and coordinating
eng-mfg.-marketing efforts.
– See Exhibit 11.10 on page 223
5/12/2025 9
5/12/2025 10
 Quality assessment of ID
• User interface
– Intuitive, safe, comfort, easy to use
• Emotional appeal
– Attractive, exciting, pride of owning and being o the team
• User’s ability to maintain and repair product
– Easy, intuitive
• Appropriate use of resources
– Value (quality vs. cost)
• Product differentiation
– Easy to stand out, recognize, & remember.
– Fit with or enhance corporate identity
5/12/2025 11
 The ID Process
1. Investigate customer needs
2. Conceptualize
3. Preliminary refinement
4. Further and final concept selection
5. Control drawings of the final concept
6. Coordinate with engineering and
production.
5/12/2025 12
 Industrial Design Chapter Example:
Motorola RAZR
1. Investigation of Customer Needs

• in researching customer needs for a new medical

instrument, the team would study an operating
room, interview physicians, and conduct focus
groups.

• While involvement of marketing, engineering, and

ID certainly leads to a common, comprehensive
understanding of customer needs for the whole
team,

• it particularly allows the industrial designer to gain

an intimate understanding of the interactions
between the user and the product
 Motorola “Flip Phones”

MicroTAC (1989) StarTAC (1993) V60 (2001) RAZR (2004)

Concept Sketches and Rendering
Control Models and CAD Models
Concept Sketches and Rendering
Soft and Hard Models
Control Models and CAD Models
Industrial designers complete their development
process by making control drawings or control
models of the final concept.

Control drawings or models document

functionality features, sizes, colors, surface
finishes, and key dimensions. Although they are
not detailed part drawings (known as
engineering drawings), they can be used to
fabricate final design models and other
prototypes.
 ID expenditures
• Depending on the product type
– Hand-held medical instrument are the
highest in terms of budget %
– Technology-driven products are the lowest
– See Exhibit 10-2 on page 192 for details

5/12/2025 20
 ID Costs Breakdown
• Direct costs of ID services
• Mfg. costs to implement ID creations
• Costs of extended lead time for ID

5/12/2025 21
 Motorola “Flip Phones”

MicroTAC (1989) StarTAC (1993) V60 (2001) RAZR (2004)

Concept Sketches and Rendering
Soft and Hard Models
Control Models and CAD Models
 COST EVALUATION

Cost estimates are used in the following ways:

1. To provide information to establish the selling price of a product or a quotation for a good

or service

2. To determine the most economical method, process, or material for manufacturing a

product

3. To become a basis for a cost-reduction program

4. To determine standards of production performance that may be used to control costs

5. To provide input on the profitability of a new product

 DIRECT COST Vs INDIRECT COST

DIRECT COST

A direct cost is one that can be directly associated with a particular unit of product that is
manufactured.
In most cases, a direct cost is also a variable cost, such as materials cost. Advertising
for a product would be a direct cost when it is assignable to a specific product or
product line, but it is not a variable cost because the cost does not vary with the quantity
produced.

INDIRECT COST

An indirect cost cannot be allocated to any particular product.

Examples are rent on the factory building, cost of utilities, or wages of the shop floor
supervisors. Often the line between direct costs and indirect costs is fuzzy.

For example, equipment maintenance would be considered a direct cost if the machines
are used exclusively for a single product line, but if many products were manufactured
with the equipment, their maintenance would be considered an indirect cost.
 Fixed costs
1. Indirect plant cost
(a) Investment costs
• Depreciation on capital investment
• Interest on capital investment and inventory
• Property taxes
• Insurance
(b) Overhead costs (burden)
• Managers and supervisors not directly associated with a specific
• product or manufacturing process
• Utilities and telecommunications
• Nontechnical services (office personnel, security, etc.)
• General supplies
• Rental of equipment
2. Management and administrative expenses
(a) Share of cost of corporate executive staff
(b) Legal and auditing services
(c) Share of corporate research and development staff
(d) Marketing staff
3. Selling expenses
(a) Sales force
(b) Delivery and warehouse costs
(c) Technical service staff
 Variable costs

Variable costs

1. Materials

2. Direct labor (including benefits)

3. Direct production supervision

4. Maintenance costs

5. Quality-control staff

6. Intellectual property licenses

7. Packaging and storage costs

8. Scrap losses and spoilage

 OVERHEAD COST

An overhead cost1 is any cost not specifically or directly associated with the production of
identifiable goods or services.

The two main categories of overhead costs are factory or plant overhead and corporate
overhead.
❑ Factory overhead includes the costs of manufacturing that are not related to a particular
product.
❑ Corporate overhead is based on the costs of running the company that are not
manufacturing or production activities.

Since many manufacturing companies operate more than one plant, it is important to be able
to determine factory overhead for each plant and to lump the other overhead costs into
corporate overhead
 ACTIVITY-BASED COSTING (ABC)

ABC tries to be more fair by saying,

"The Product that use more of a specific support activity should bear more of the cost of that
activity.“

Why is ABC Better?

•More Accurate Costs: It gives us a better idea of the true cost of making each toy,
especially when some toys are more complex or require more support than others.

•Better Decisions: With more accurate costs, we can make better decisions about pricing,
which toys are most profitable, and how to improve our processes.

So, instead of just spreading all the workshop overhead based on work hours, ABC looks at
all the different things we do in the workshop and then assigns those costs to the toys based
on how much each toy uses those activities. It's a more detailed and often more accurate
way of understanding costs.
 How to Calculate Costs with ABC (Simplified):
How to Calculate Costs with ABC (Simplified):
Instead of one big bucket of indirect costs, ABC creates smaller buckets for each activity.
1. Identify the Main Activities: First, we figure out all the important things we do to make and sell our
products
2. Figure Out the Cost of Each Activity: Then, we see how much money we spend on each activity. For
example, how much do we pay the engineers for designing? How much do we spend on packing materials
and the packers' time?
3. Find the "Cost Driver" for Each Activity: For each activity, we find something that causes that cost to
happen. This is called a "cost driver." Examples could be:
o For designing: The number of design hours spent on a product.
o For machine setup: The number of times we need to set up the machines for a specific product.
o For packing: The number of products (Ex toys) packed.
o For shipping: The number of orders shipped for a toy.
4. Assign Costs to Toys Based on Activities: Finally, we figure out how much of each activity each type of toy
uses. For example:
o The super-robot might take 10 hours of design time, while the wooden block takes only 1 hour. So, the
robot would get a bigger share of the design cost.
o We might need to set up the machines 5 times to make a batch of robots but only once for a batch of
blocks. So, the robots would get a bigger share of the setup cost for those batches.
 ACTIVITY-BASED COSTING (ABC)

ABC cost accounting is best used when there is diversity in the product mix of a company in
terms of such factors as complexity, different maturity of products, production volume or batch
sizes, and need for technical support.

Computer-integrated manufacturing is a good example of a place where ABC can be applied

because it has such high needs for technical support and such low direct labor costs.
The Strategic Importance of
Designing for Serviceability
Designing for serviceability ensures
long-term success and customer
satisfaction. Easy maintenance and
repair cut costs and boost loyalty.
Why Serviceability Matters

Reduced Downtime
Minimizes revenue loss and productivity disruption.

Lower Maintenance Costs

Simplifies repairs, reducing time and expense.

Customer Satisfaction
Reliable products build trust and advocacy.

Increased Lifespan
Proactive maintenance extends usability and value.
 Key Design Principles for Serviceability
Modular Design
Easy access and replacement of components.
Standardized Parts
Simplifies inventory and repairs.

Diagnostic Accessibility
Built-in tools speed troubleshooting.

Clear Documentation
Comprehensive manuals and training materials.
Ergonomic Design
Ensures safe and comfortable servicing.
 The Benefits of Serviceability:
Data-Driven Perspective
1 40% Lower MTTR
Product A reduces repair time drastically.
2 25% Cost Reduction
Annual maintenance costs fall significantly.
3 15% Higher CSAT
Customers rate Product A more favorably.
Real-World Examples of
Excellent Serviceability

Automotive Electronics Industrial

Engine layout Modular Predictive
optimized for smartphones sensors
key ease battery minimize
component replacements. unexpected
access. downtime.

Medical Devices
Remote
diagnostics
speed
troublesho
oting.
 Measuring and Improving
Serviceability
Key Metrics

MTBF, MTTR, and First-

Time Fix Rate track
performance. Feedback Loops

Gather insights from

technicians and
customers continuously.

Continuous Improvement
Refine designs using real field data regularly.
 Implementing a Serviceability-Focused Strategy
Cross-Functional Collaboration Promote Culture
Design,
Invest in Training Make serviceability
engineering,
Equip teams with a core
service, and
tools and organizational
marketing work
knowledge needed. value.
together.
Conclusion: Designing for the Long Run

Strategic Imperative
Serviceability is vital, not an afterthought.

Boosts Success
Enhances product adoption and customer loyalty.

Future Profitability

Invest now for sustainable long-term gains.

Key C o m p o nents o f M anufacturing C o st
Key Components of
Manufacturing Cost

Understanding manufacturing costs is vital for

product success. It includes materials, labor, and

overhead expenses.
 D irect M aterials

Definition

Raw materials that become part of the final product.

Examples
• Steel in cars
• Plastic in toys
• Fabric in clothing
Direct Labor
Definition
Wages and benefits for workers directly making the product.

Examples
• Assembly line workers
• Machinists
• Factory painters
 Manufacturing Overhead
Indirect Labor
Supervisors, maintenance,
security wages.

Indirect Materials
Supplies like cleaning and lubricants.

Factory Costs
Rent, utilities,
depreciation, tooling,
repairs.
Importance of Early Cost Forecasting

Financial Viability
Ensures product can be profitable
and priced realistically.
Design Decisions
Influences materials, processes, and manufacturability.

Serviceability
Design for easy maintenance reduces long-term costs.
Design Decisions Impact

Material Choices
Balance cost with quality standards.

Manufacturing Methods
Design may require specific, costly
processes.

Design for Manufacturability

Reduces labor and waste by efficient design.
 Investment and Budgeting

Investment Decisions
Cost forecasts guide investment in new products.

Budgeting & Planning

Essential for production budgets and future operations.
Summary: Cost Forecasting Benefits

Guides Design
Ensures product is
functional and
financially sound.

Prevents Losses
Avoids selling products below cost.

Supports Decisions
Helps set prices and secure investments.