Optimization of product design based on a design-function-oriented cost model: a strategic non-throw-away perspective

Abstract

Most published studies adopt a throw-away cost model to solve minimum production cost problems, without considering subsequent risk-based contingent costs at the product design stage. The design-function-oriented cost model proposed in this study considers multi-characteristic quality specifications, product design functions, and subsequent risk-based contingent costs of a product for minimizing total costs during the initial product design stage. The optimization of in-house manufacturing process selection and quality assessment for outsourcing is associated with variation/cost functions. An adjustable managerial contingent cost coefficient was used to enable design teams to make appropriate trade-offs at various stages of the life cycle of product marketing based on the product’s intended strategic market position. An empirical case study demonstrated the efficacy of the proposed model as one that can be easily understood and applied by any organization. The results and processes of the case study also provide useful managerial implications.

Keywords:

• throw-away cost model
• design-function-oriented cost model
• process capability index (PCI)
• specification tolerance variation
• risk management

Acknowledgements

The authors would like to thank the National Science Council of the Republic of China, Taiwan, for financially supporting this research under Contract No. NSC 97-2410-H-231-014. The case company H and managers are appreciated for their supports on this study.