DFMA: SHOULD COSTING
DFMA: PRODUCT SIMPLIFICATION
What is design to cost?
Design to cost (DTC) is a systematic approach to product development where a target unit manufacturing cost is set early—typically derived from market price, required margin, competitive benchmarking, or contractual requirements—and treated as a design constraint throughout the development process.
The target cost is then allocated to subassemblies and individual parts. As the design progresses, engineers use should-cost analysis to estimate the cost of each part based on its geometry, material, and manufacturing process—and iterate on the design until each part and the total product meet their cost targets.
Design to cost is not a one-time exercise. It is a continuous loop of estimate → compare to target → identify gaps → redesign → re-estimate that runs throughout concept selection, detail design, and pre-production.
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Why design to cost matters
The fundamental problem design to cost solves is timing. By the time most teams discover their product costs too much, the design decisions that caused the cost are already locked in—tooling has been ordered, suppliers have been qualified, and production processes have been set.
- Cost is discovered at first supplier quotes—often too late
- Cost reduction becomes reactive: negotiate harder, substitute cheaper materials
- Margin targets are missed, leading to price increases or scope cuts
- Engineering changes after tooling are expensive and slow
- Cost is visible from concept selection through detail design
- Cost reduction is proactive: change the design, not just the supplier
- Margin targets are designed in, not negotiated after the fact
- Parts arrive at target cost before tooling commitment
Design to cost vs. cost reduction
Design to cost and cost reduction are often confused, but they operate at different points in the product lifecycle and produce different outcomes:
| Dimension | Design to cost | Traditional cost reduction |
|---|---|---|
| When | During design, before tooling | After production launch |
| What changes | Geometry, part count, process, tolerances | Supplier, material grade, labor efficiency |
| Cost of change | Low (CAD revision, re-analysis) | High (retooling, requalification, ECOs) |
| Typical savings | 20–50% vs. initial concept | 3–8% incremental |
| Who drives it | Design engineering with cost data | Procurement and manufacturing |
| Approach | Proactive — design the cost out | Reactive — squeeze the cost down |
The most effective programs use both: design to cost during development to hit targets, then continuous cost reduction in production to improve margins further. But the order matters—design to cost captures the largest opportunities.
The design-to-cost process
Design to cost is an iterative loop, not a one-time gate review. Here's how it works in practice:
Derive the allowable manufacturing cost from market price, margin requirements, or competitive benchmarks. Allocate the target across subassemblies and key parts.
Use should-cost analysis to estimate the manufacturing cost of the current design—based on geometry, material, process, and volume. This is the baseline.
Compare estimated cost to target cost at the part, subassembly, and product level. Identify which parts and cost components (material, process time, tooling, secondary ops) are driving the gap.
Make targeted design changes: simplify geometry, consolidate parts, change processes, relax non-functional tolerances, substitute materials. Each change addresses a specific cost driver.
Re-run the should-cost analysis on the revised design. Compare to target. If gaps remain, repeat steps 3–5. Continue until every subassembly meets its allocated target.
Use the detailed cost breakdown as the basis for supplier quotes and negotiation. Discrepancies between should-cost and quoted cost reveal either design issues or supplier assumptions worth discussing.
Setting the target cost
The target cost is the anchor for the entire DTC process. Setting it well is critical. There are three common approaches—and the best programs use more than one:
Start from the competitive selling price. Subtract required margin, distribution, warranty, and overhead. What remains is the allowable manufacturing cost.
Tear down a competitor's product. Estimate its manufacturing cost using should-cost methods. Set your target at or below their cost structure.
In defense and government contracts, the target cost may be specified. In automotive, the OEM platform cost target is allocated down to tier-1 and tier-2 suppliers.
Once the product-level target is set, it must be allocated to subassemblies and parts. This allocation should reflect the function each part provides and the cost-reduction opportunity available—not just an even split.
Tools that enable design to cost
Design to cost requires a specific capability: the ability to estimate manufacturing cost from the design itself—not from historical quotes or parametric curves, but from the actual geometry, material, and process. Without this, the iterative DTC loop breaks because engineers can't see the cost impact of each design change in time to act on it.
- Estimate cost from geometry and process parameters (not just weight or past quotes)
- Break cost into visible, auditable components (material, process, setup, tooling, secondary ops)
- Show which design decisions drive each cost component
- Re-estimate quickly when the design changes
- Support process comparison (e.g., machining vs. casting vs. molding)
- Adjust for production volume and regional cost differences
- DFA reduces part count and assembly cost at the product level
- DFM models each remaining part's manufacturing cost from first principles
- Cost breakdowns show exactly which component dominates and why
- Designers iterate on geometry and specs with immediate cost feedback
- Global manufacturing profiles model regional cost differences across 22+ countries
- Transparent, defensible estimates support supplier should-cost discussions
Worked example: hitting target cost on a sensor housing
Here's an illustrative example of a design-to-cost cycle for an industrial sensor housing with a target manufacturing cost of $12.00 per unit at 10,000 units/year:
| Iteration | Design change | Cost driver addressed | Est. unit cost |
|---|---|---|---|
| Baseline | Original design: CNC machined from billet aluminum | — | $22.40 |
| Iteration 1 | Switch to die-cast aluminum | Material waste, cycle time | $14.80 |
| Iteration 2 | Consolidate 3 parts into single casting; eliminate 4 fasteners | Part count, assembly time | $12.60 |
| Iteration 3 | Relax non-functional tolerances; add draft to eliminate secondary machining | Secondary ops, tooling | $11.35 |
Result: the team moved from $22.40 to $11.35—a 49% reduction—by making three rounds of design changes, each targeting a specific cost driver. The final design met the $12.00 target with margin, and the detailed cost breakdown provided a defensible basis for supplier negotiation.
Values are illustrative. Actual results depend on geometry, material, volume, and production region. DFMA calculates these from your specific design and process assumptions.
Common pitfalls
If the cost target arrives after concept selection, the most impactful decisions (architecture, part count, process choice) are already made. Set targets before or during concept.
If engineers can't estimate cost until suppliers quote, the DTC feedback loop is too slow. Should-cost tools must be in the designer's hands, not just procurement's.
A single product-level target is too abstract. Allocate targets to subassemblies and parts so engineers know what each component must cost and can prioritize effort accordingly.
DTC should not mean cheapening the product. The goal is to achieve the required function at the target cost—by designing smarter, not by cutting corners or degrading performance.
Industries that use design to cost
Design to cost originated in aerospace and defense but is now standard practice across most manufacturing sectors:
Often a contractual requirement (e.g., DoD DTC mandates). Programs must demonstrate cost targets were considered during design.
OEMs allocate platform cost targets to tier-1 suppliers, who cascade them to tier-2. Should-cost is standard in sourcing negotiations.
Reimbursement pressure drives aggressive cost targets. DTC helps achieve them without compromising the quality and reliability regulatory bodies require.
Complex assemblies with long lifecycles benefit from DTC to manage total cost and support margin across product families and variants.
Tight retail price points and high volumes make small per-unit cost improvements extremely valuable. DTC ensures products ship at target cost from launch.
Capital equipment with long procurement cycles benefits from DTC to avoid cost overruns and support competitive bidding.
Frequently asked questions
What is design to cost?
Design to cost (DTC) is a product-development approach where a target manufacturing cost is set early—usually derived from market price, margin requirements, or competitive benchmarking—and treated as a hard design constraint alongside performance, quality, and schedule.
What is the difference between design to cost and should-cost analysis?
Should-cost analysis estimates what a part ought to cost based on its design, material, and manufacturing process. Design to cost uses should-cost estimates iteratively—setting a target, estimating current cost, identifying gaps, changing the design, and re-estimating—until the target is met. Should-cost is the measurement; design to cost is the process.
When should design to cost be applied?
Design to cost is most effective when applied during concept and detail design, before tooling and processes are committed. At this stage, design changes are inexpensive. The same changes after production launch can cost 10–100× more and require retooling, requalification, and supply-chain disruption.
What tools support design to cost?
Effective design to cost requires tools that can estimate manufacturing cost from geometry and process parameters—not just historical averages. DFMA software models material, process time, setup, tooling, and secondary operations from first principles, giving designers real-time cost feedback as they iterate toward target cost.
How does design to cost differ from cost reduction?
Cost reduction typically happens after the design is finalized—through supplier negotiation, material substitution, or process changes. Design to cost builds cost into the design process itself, so the product arrives at target cost by design rather than by after-the-fact pressure. DTC is proactive; cost reduction is reactive.
What industries use design to cost?
Design to cost originated in aerospace and defense (where it is often a contractual requirement) but is now used across automotive, medical devices, industrial equipment, consumer electronics, and any industry where manufactured product cost must meet a competitive price point.
Start designing to your target cost
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