Design to Cost

Posted on May 11, 2010 by

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A product development term, Design to Cost (DTC) is an approach that places cost constraints on the product’s design in order to create a product that is affordable for consumers. Much of what the final product will cost is tied into the design at its inception. Although the concept is simple, there can be much involved to actually achieve the cost goal. Project Managers managing a product development project must keep this additional constraint in mind especially in the early stages of the project. For example, Katy is developing a flavor of homemade ice cream to sell at a fundraiser event. She is trying to make a kiwi-chocolate variety that contains fresh kiwis, imported dark German chocolate, cream, eggs, and vanilla. She quickly realizes that she must adjust the recipe, serving size, or both, in order for the product to be sold for $4 or less, which is what she has been told is the most that people would be willing to pay for a serving of ice cream. She decides to replace the imported dark chocolate with a cheaper type of domestic milk chocolate and to use imitation vanilla instead of real vanilla. Also, she reduces the amount of kiwi in the recipe. After making these adjustments, she successfully designs an ice cream product that can be sold for $4 per serving and still be profitable.