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Technology

Economic Constraints in the Use of Technology

“If you think good design is expensive, you should look at the cost of bad design.” – Ralf Speth

Both good and bad designs are constrained by the price they can fetch in their target markets. No matter how good a design is, if it costs too much, it won’t sell. Cost is far more than the price of materials and extends to the price of tooling and other capital equipment required to produce the design as well as manufacturing and labor costs. Packaging and shipping also play into product cost and together, these are the major components of cost.

Cost alone is only part of the equation in determining price. The two major layers on top of cost, overhead and profit margin, further constrain what the engineer and design team can and should spend on a design. Both overhead and profit alongside the multiple components of cost can vary widely from product sector to product sector, from country to country, and so on. While the economic constraints of a design may seem far too complex to assess accurately during the design process, finding a ballpark target for costs of materials and labor/assembly are not impossible but necessary even early on in design. Understanding some basics about cost-pricing and determining a price point are important to stay within this all important ballpark from the beginning of the design process.

Join us as we take a look at the world of economic constraints – especially setting price and understanding cost in the context of engineering design and early product development.

No matter how good the design, it can’t cost more than the customer is willing to pay!  

Know more:
Economic Constraints in Product Design

Presentation (.pdf)
Audio Recording (Youtube)
Assignment in MS Word (.docx) or Portable Document Format (.pdf)
Quiz in MS Word (.docx) or Portable Document Format (.pdf)

Acknowledgements:

This work has been conducted in collaboration with the University of Washington and is funded in part by the National Science Foundation (DUE-1245464).