How Do You Implement Cost Reduction of Products?
Cost reduction doesn't have the glamour of New Product Development, but it's every bit as important to the
bottom line. It's essential that it starts with fundamental design philosophies and continues iteratively
throughout the Product Lifecycle.
Ongoing cost reduction begins with input from Finance to see which reductions yield the
greatest benefit to the bottom line, and from Marketing as to which are strategically important. Sometimes the
work is as simple as a component substitution, and sometimes is an R+D effort to redesign a subsystem. Given
the proper prioritization and resourcing, these efforts are a powerful bottom line builder. For example, after
leading an initial 10% cost reduction on top-running products in 2006, I continued to deliver
portfolio-wide, year-on-year reductions on the order of 3% to 5% – even in times of increasing commodities costs.