On Mar 31, 2006, at 12:09 PM, Tom C wrote:
My point was long the lines that if $10,000 is wasted to save $.01
on a single unit, it will take a million sales of the unit to make
that up.
...
I understand what you're saying, and agree from a certain
viewpoint, but that cost is still a cost. It's just that the
corporation doesn't recognize it because it's somewhat intangible.
As you say, it's viewed as money that's already spent. Come upon
hard times, and often the first place corporations look to reduce
cost is by reducing the workforce. If that workforce had been more
efficient and productive...
To consider the numbers as you are stating is overly simplistic. No
manufacturing company that survives works that way.
Think of it from the point of view of aggregates. You don't invest
$10,000 in development to save $.01 per unit alone, presupposing
recouping that cost on a million units. You invest $10,000 in multi-
targeted cost-reduction development to reduce costs on several dozen
parts of the total by a penny here, a nickel there, etc, making the
aggregate savings such that it pays for that extra development work
in the first 10,000 units you produce. That's well worth the expense
if you're going to make 20,000 units, and a profit increase if you're
going to make 100,000 units.
By the time you reach 1,000,000 units, you've paid for all those
engineers' retirement plans. ;-)
Godfrey
