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3CM 11 Mbps Wireless LAN Workgroup Bridge-- Access Points Manufacturing Cost Analysis Report
ARS, Jan 2002
As the IT hardware and consumer electronics markets have become increasingly price aggressive, Original Equipment Manufacturers (OEMs) like HP, Lexmark, Sony and Apple find profit margins shrinking to less than adequate levels.
Risking substantial loss in market share by increasing price, OEMs are forced to look to margin increases by more efficiently managing back end costs.
As a result, they have increasingly turned to less labor-intensive regions of the world to fulfill manufacturing needs, outsourcing up to all of the product development to contract manufacturers.
Indeed, the practice of outsourcing to contract manufacturers can achieve substantial returns on investment by allowing OEMs to continue to decrease price while still realizing a profit.
However, if not managed correctly, the relationship can breed major costing inefficiencies, as the actual component procurement and assembly costs get veiled in a myriad of expenses presented by the contract manufacturer to the OEM in the form of an invoice.
This relinquishing of control and loss of component and subassembly costing data by the OEMs necessitates internal product cost analysis programs.
Failure to implement such a program can result in higher than necessary component and subassembly costs, resulting in:
- Loss of profit margins due to over-inflated manufacturing costs
- Loss of sales due to more aggressively priced competitive products
Solutions
ARS has corroborated with its client base during the past 9 years regarding the most meaningful reporting methodologies and formats for these highly specialized solutions.
This open communication has resulted in a highly respected and trusted methodology for cost analysis.
This has proven to be an effective cost reduction solution for the vendor, in some cases offering seven figure savings.
Detailed Direct Materials Manufacturing Cost Analysis
- Component Level, Subassembly, Final Assembly
Detailed Labor Manufacturing Cost Analysis
- Subassembly, Final Assembly
Detailed Overhead Manufacturing Cost Analysis
- Component Level, Subassembly, Final Assembly
Origin Identification
- Component Manufacturing, Subassembly, Final assembly
Design/Engineering Analysis
- Assembly/Manufacturing Technology Analysis
- Form Factor Quality Assessment
- Product Specification Identification
High Resolution Photographs
- Comprehensive component level tagging, grouped by
subassembly
Other
- Side by side product comparisons
- Side by side regional cost comparisons for up to 17 different
countries
- Design and fabrication processes identification through
disassembly of packaging and dye layers
- Chip counts
Clients for cost analysis reports:
Vendors
Determine if your competitors are using new technologies or building their products more efficiently or competitively.
How do your products compare in design and quality?
Are your materials, tooling overhead and labor costs too high to be competitive?
Original Equipment/Design Manufacturers
Monitor competitors' products for patent and license infringement.
Are manufacturers illegally using your processes and/or components?
Resellers
Understand your suppliers' costs.
Are you paying too much to stock your shelves with their products?
Could your margins improve?
IT Buyers
Increase ROI by reducing your costs.
Identify a product's true manufacturing costs and benchmark your suppliers.
Are you getting a good deal from your suppliers or are you paying over the industry standard?
Procurement Teams
At up to 150,000 components per product, do you have the resources to ensure you are negotiating the best possible prices per component with your contract manufacturers and/or component suppliers? ARS can provide“benchmark” estimates of both commodity and pre-fabricated component high volume purchase costs. Armed with this data, you will be better able to negotiate pricing -Even a 10% reduction in cost for 1 component can save millions in a single production run.
Executives
In today's highly competitive IT Hardware and Consumer Electronics markets, maintaining acceptable profit margins means effectively managing backend costs:
- Are the most aggressively priced components being considered during the product's design phase?
- Are you provided with an accurate, high level view of where your product costs are allocated?
- At up to 150,000 components per product, are your procurement teams truly negotiating the best possible prices per component with the contract manufacturers and component suppliers?
Design Teams
With manufacturing and design houses supplying components and final assembled products all over the world, how do you ensure you are making your designs are the most efficient and cost effective? ARS labs can provide objective analysis regarding your design applications against the competition.
Legal Teams: Patent and Licensing Management
With manufacturing and design houses supplying components and final assembled products all over the world, how do you ensure those patents and licenses you worked so hard to capture are being enforced? ARS provides effective and cost efficient methodologies for monitoring patent and license infringement violations.
Expertise
An OEM will be hard pressed to complete a cost and design analysis as accurately, timely and cost effectively as ARS ARS lab personnel have been entrenched in the manufacturing of IT hardware and consumer electronics products for decades.
In addition, within the ARS arena, their methodologies and practices regarding costing and design analysis have been continually refined and proven since 1993.
Concerning economies of scale, one-time capital equipment costs can range from a few hundred thousand to a few million dollars - a large expense for a company to perform a few cost analysis projects per year.
All MCAs are performed at ARS' lab site, located in Houston, Texas. Arslabs has extensive product teardown experience, with expertise in design, production engineering, manufacturing, and program management. It is equipped to perform analysis on all types of hardware products, including:
-Printers and Copiers
-Imaging Devices
-Computers
-Handsets
-Displays
-Networking Devices
-Storage Devices
-Telematics
. and more!
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