In order to achieve the ultimate success of the new hardware product.
You have to know all the costs of developing and manufacturing a product in advance.
Of course, this also includes the expansion costs of certification, tooling, etc.
Especially for startups, the cost of launching a new hardware product can be significant:
The cost of development will be the first financial hurdle you need to overcome;
And the cost of scaling will be your biggest cost;
The landed production cost is certainly the most important cost, as it determines profits, sales**, and inventory costs.
If you don't understand these costs early, you're likely to run out of money before the product is completed.
Even worse, you'll find yourself trapped in prototypes that can't be made profitably.
Another point is that if you want to reduce all costs and at the same time increase your chances of entering the market.
A very important lesson is that you need to prioritize simplifying the product from the start.
This way, all of these costs will be reduced and your product will be brought to market faster.
Let's take a closer look at the main cost components.
The development cost of most hardware products is mainly divided into three categories, which are:
Electronic components, including programming;
Plastic components;other mechanical components, as well as retail packaging.
Electronic components are often the most complex and expensive part of the product to be developed.
It usually consists of two main parts:
One is PCB design;
The second is programming, because most products require some degree of programming to implement functionality.
For enclosures, unless you're selling your product to a DIY or manufacturer market. Otherwise, some type of enclosure will be required, which will usually be made of plastic. Sure, you can have the best products in the world, but if the retail packaging doesn't get it across to the customer quickly.
Your product won't be sold.
And if there is no sale, everything in the early stage will not matter!
There is a chasm that needs to be crossed from prototype to mass production.
This is probably one of the most underestimated steps when launching a new hardware product.
For example, you need to face the cost of certification.
The cost of certification really depends on the product, and to a large extent on how any wireless feature is implemented.
The main certifications required for electronic hardware products include:
Wireless-capable products sold in China need to be certified by Radio SRRC
Electrical products sold in the U.S. require FCC certification;
Other countries require similar certifications.
The second is the cost of manufacturing preparation.
The transition from prototype to mass manufacturing is a complex process that most people grossly underestimate.
In fact, it is expected to take about a year to complete this transition.
Having a prototype is still a long way from having a mass-produced product.
This is mainly due to the need for high-pressure injection molds, which are very expensive for high-volume production.
The landed production cost is the final cost of the product to the warehouse.
Landed costs are the sum of procurement costs and logistics costs.
The cost of procurement refers to the cost paid to obtain the goods.
That is, the purchase cost = the purchase quantity x the unit price of the product.
Logistics costs, on the other hand, include warehousing, transportation, and all associated operating expenses.
Undoubtedly, the landed production cost is your most important cost.
It will tell you the cost of inventory and how much your product can be sold for.
and how much profit your startup can make.
Whether the product is made or purchased affects how the landed cost is calculated.
For outsourced parts, the landed cost is the total direct cost of obtaining the raw material.
And for self-made parts, it is mainly the cost of goods sold cogs.
The cost includes the following aspects:
The first is the direct labor costs, including wages, overtime pay, and bonuses
The second aspect is the cost of raw materials;
The third aspect is indirect manufacturing costs, that is, the costs of supporting production.
Also, unlike development and expansion costs.
As long as your company exists, you'll always face landed production costs.
You need to always strive to reduce this cost in order to make more profit in the end.
Author, Wei Peng, public account: product person Wei Peng, author of "Hardware Product Manager: From Beginner to Mastery", everyone is a product manager columnist.