What is Design to Value vs. Design to Cost?

Matthew Hinshaw

Design to Value, also known as DTV, is transforming the way manufacturing organizations approach product development and design iterations. Manufacturers must prioritize and focus on more than just product cost reduction and meeting target costs. They must also assess how their products might be redesigned or revised to deliver more value to the product end user.

Despite some potential hurdles, manufacturers today can balance value and cost-reduction objectives early in the product design process. This ensures that products are designed at the lowest cost while meeting the critical needs and preferences of the consumer.

In this comprehensive article, we will explore the differences between the Design to Value and Design to Cost methodologies. We also present how organizations can leverage manufacturing simulation technology to make real-time design iterations to achieve both design-based initiatives.

What Is the Significance of the Design to Value and Design to Cost Concepts?

It is widely reported that the early design stages of the product development process determine 80% of a product’s cost. Teams that apply these concepts early in development can identify and capitalize on cost-saving opportunities without risking valuable product functionality. When combined effectively, the design-based concepts enable product development teams to compete on both quality and price in a market.

It is vital to emphasize that product teams are responsible for identifying how to make the most effective cost-value tradeoff decisions. Managing these tradeoffs often requires fruitful cross-functional team collaboration between dedicated cost specialists or estimators and a design engineering department.

Differentiating Between Design to Value and Design to Cost Methodologies

The Design to Value (DTV) and Design to Cost (DTC) methodologies both pave the way for companies to deliver profitable products. Individually, the DTV and DTC approaches can be summarized or defined as follows:

What Is the DTV Concept in Manufacturing?

DTV is a design-driven approach that aims to maximize the value of a new product for the consumer or end user. It also assists product teams in removing or eliminating features that do not deliver end value to the customer. The DTV approach emphasizes and focuses on a product’s performance, reliability, and survivability rather than just meeting target costs. This is especially important in industries such as aerospace, where product part performance is critical to a crew’s safety.

According to McKinsey, DTV not only improves product quality but can also increase manufacturing companies’ gross margins by 10 to 25%. Further, McKinsey reports that DTV has been able to generate margin improvements of 12 to 15% in the automotive industry. Manufacturers, however, can only achieve increased margins if they have the right customer and competitive insights to make informed product design iterations.

In short, the DTV process allows organizations to provide target consumers with the most optimal, value-added product features. Manufacturing companies can differentiate themselves in the market by offering products that buyers are willing and ready to pay for.

What Is the DTC Concept in Manufacturing?

The core concept behind DTC is creating cost-effective product designs that allow teams to meet pre-determined and specified target costs. Product development teams can create lower-cost products during the design process by reducing performance or removing unnecessary features. As previously mentioned, DTC enables manufacturers to remain cost competitive across industries with several competitor products.

Alongside feature-driven design changes, today’s manufacturers can reduce product costs by changing their manufacturing and production methods. For instance, companies may switch from selective laser sintering to injection molding processes if it produces a lower cost output. They can also invest in cost-effective and readily available raw material substitutes to score cost-saving wins during the design process.

Procurement and sourcing teams must locate and source cost-effective raw material alternatives in several regions across the globe. Some companies may switch from nylon to ABS material to obtain a more competitive price, potentially resulting in cost savings. Sourcing teams are responsible for negotiating ABS material prices with strategic or new suppliers to obtain an even more favorable price.

Balancing Design to Value and Design to Cost Initiatives With Manufacturing Simulation Technology

Manufacturing simulation technology such as aPriori provides real-time, data-driven insights into cost, design, and manufacturability implications. Companies simply load their 3D CAD files into aPriori to explore different materials, manufacturing processes, regional factories, and annual volumes. Today’s manufacturing companies can leverage aPriori’s advanced, highly accurate data and simulation-driven capabilities to:

  • Obtain Insightful Cost Breakdowns and Summaries. Product development teams can use aPriori to generate comprehensive cost summaries. These breakdowns provide real-time insight into the primary drivers of the fully burdened and total cost of an initial product design. This data can be utilized to address and control the costs of various factors, including material, labor, and direct overhead. Accordingly, product teams have the right cost information to make fact-based design iterations to meet and reach set target costs.
  • Deliver Unmatched Customer Value to the Market. Value engineering teams can run quick product design iterations using the aPriori manufacturing insights platform. They must compare consumer insights and market research data to digitally redesign products in aPriori to meet customer needs. The overall objective is to reduce product costs while also adding valuable, cost-effective product features that can exceed stakeholder expectations. With aPriori, organizations can make better feature-related decisions to compete on product design quality in a crowded and competitive market.

Although DTC and DTV fall on a spectrum, teams can use aPriori to find the perfect balance between both design-based initiatives. The two concepts are not mutually exclusive as aPriori’s data-driven insights allow for simultaneous competition on both quality and price.

How to Make Design to Value and Design to Cost Count

The most successful manufacturing companies understand that they cannot sacrifice DTV in favor of DTC, and vice versa. Manufacturers can now leverage powerful manufacturing simulation technology to combine both initiatives to achieve cost and design-based wins. It is crucial for companies to strike a balance between both approaches to effectively bring valuable new products into competitive market conditions.

Although balancing DTV and DTC may be difficult, manufacturers can apply the insights in this article to secure wins in 2023.

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