Do you want a better understanding of how product design, materials, and specifications affect your procurement costs? One way to gain valuable insights and identify design-improvement and cost-reduction opportunities is through a product teardown.
A product teardown involves disassembling a product to identify all of its component parts. Companies can then compare a competitor’s product to their own to identify areas for design improvement and/or cost reductions. BCG’s teardown process also includes a feature value analysis, which can be used to improve product value and quality.
A BCG product teardown can answer following questions:
A BCG product teardown provides specific cost-reduction ideas for both existing and new products—and leverages design-to-value methods. It enables realistic target cost setting and best-of-best goals.
A BCG teardown can provide specific cost-reduction ideas for reducing cycle times and transformation. It can also provide ideas on how to improve manufacturing costs, such as using alternative processes and technologies.
The BCG process focuses on overall cost cutting, including labor and manufacturing, raw materials, and indirect costs. That data can then be used as leverage during future negotiations with suppliers.
A BCG product teardown highlights how your products stack up against those of the competitors in terms of cost of goods sold. This value-chain benchmarking identifies opportunities for cost reduction based on best-in-class competitors, which can inform other areas of the business, such as engineering and manufacturing.
What are some best practices to follow when embarking on a product teardown?
Set up effectively.
Dedicate cross-functional teams (engineering, procurement, quality control, etc.) and set clear objectives and comparable products.
Create a workable project sequence.
Establish a schedule and stick to it.
Thoughtfully define modules.
Categorize product components into logical subgroups and then prioritize to help your team focus.
Follow the 80/20 rule. First, complete a rough quantification, and then follow it with more details.
Get supplier involvement.
Consider how supplier experience can trigger design or cost ideas, benchmark components, and challenge the status quo.
Ensure that the group conducting the teardown is credible, and make your costing methodology transparent.
The focus or expertise is too narrow.
Avoid making this a procurement-only or engineering-only teardown, for example. Be sure to include expertise and input from many business sectors.
The teardown is unstructured.
Thoughtfully plan your processes or objectives to get the most value from the teardown.
The project is comparing the wrong products.
It won’t help you to compare apples to oranges. Compare similar product features, price points, and value propositions, and be sure to get broad acceptance from your teardown team.
The concept phase is too exhaustive.
Keep this phase simple to avoid inaction or the inability to make decisions that will stick.
The supplier is inexperienced.
Make certain participating suppliers possess sufficient industry or product knowledge.