ENSURING PROFITABLE PRODUCT: Costing And Optimisation

The economic parameters explained here give us indication of the profitability and risk of our product development work. Ideas that give more profit with less risk are always preferable

- SOUMYANATH CHATTERJEE

Business economics plays an important part in the product development process. There is no fun in developing a product that is not profitable. As product architects, we need to ensure the technical, environmental as well as financial viability of our products. The product must be socially acceptable and environmentally friendly.

A well-designed product must ensure the viability of the three Ps of sustainability-planet, people, and profit. Ensuring these 3Ps is the basic requirement to remain in the market for a long time.

In the formative stages of product development, we start with estimates and incomplete ideas. During the development process, there are many changes in our product idea as we get and process more information.

Sometimes the design changes are competitor driven, sometimes by our innovation. During the idea formation phase, it is important to quickly evaluate many alternatives and select the better ones. As we progress with our development, we add more details and get more accurate information to check the viability of our product ideas.

In the QFD (quality function deployment) analysis itself, we should include the requirements of environmentally friendly products as well as social requirements. Many of the environmental requirements, like the conservation of energy and other resources, also directly impact profitability. Even in cases where such direct relation is not present, consumers prefer a product that is less harmful to the planet.

Analysis of the profitability often poses a problem as different expenses happen at different times and may not be apparent right at the beginning. One needs to account for all the revenues and expenses to get an idea of the profitability.