Challenge
Assist a client in evaluating the cost of developing owned intellectual property for future product generations against the risk of using commercial off-the-shelf intellectual property.
Solution
Estimate the production costs of existing product labor and material content to assess the amount of amortized intellectual property development costs in purchased component assemblies.
Summary
Product development companies understand that designs using commercial off-the-shelf (COTS) components can be cheaper and faster to implement than creating a fully proprietary product. /product_improvement_cost_reduction.png)
Companies, however, are also frequently eager to take the next step toward product differentiation, increased market share, protection of intellectual property, and a unique position within their market niche. Due diligence prior to making a “build vs. buy” decision requires thorough investigation and evaluation of the value of a custom solution against the risk to market share growth using the COTS product.
A large power equipment manufacturing corporation identified the need to make such a “build vs. buy” decision on an existing product design. The design, due for a technology upgrade, was based primarily on COTS components but was undifferentiated from other market competition.
Tecnova and the client design team worked together to assess the COTS technologies used, address opportunities for improvement and scalability, and identify potential for material and assembly labor reductions. Combined with manufacturing experience and the buying power of Logical Products, Incorporated (LPI), the contract manufacturing division of Tecnova, a detailed assessment of the design and production cost for both the COTS and proprietary designs was delivered.
Tecnova and Logical Products were uniquely qualified to provide a comprehensive set of data and detailed options, from design review of implemented products through assessment of the total cost of manufacturing. The client was able to use this information internally, resulting in their ability to set the technical scope and development cost targets for a next generation, customized product.
