Outdated belief #5: Bill of materials trumps everything

A long time ago, I had a discussion with a software architect working for a consumer electronics company. We talked about development efficiency and he explained to me the economics of high-volume manufacturing. When you manufacture a million televisions and you can squeeze one euro out of the bill-of-materials cost, you’ve made the company a million.

This concept has of course spread far and wide in the industry and virtually any company has cost-down initiatives where, also after the initial release of the product, redesign efforts take place to squeeze the bill-of-materials cost. The general belief is that the benefits of this reduction will outweigh the necessary R&D expenses to such an extent that no analysis is necessary.