Executive Briefings

The Delicate Balancing Act Between Product Cost and Innovation

Product costs comprise 60 percent to 80 percent of a typical manufacturer's total cost structure. And if that isn't daunting enough, the global economy continues to roil; raw material, labor and transportation prices are tougher than ever to predict; and low-cost competitors seem to appear constantly -- and not just in emerging markets.

However, the cost-management headache is even bigger than that, since most manufacturers are also pressed to develop products that can be rapidly and inexpensively tailored to changing (and increasingly local) customer expectations. This ability to mass-customize is vital but expensive, which is why leadership in manufacturing often stems from a company's ability to balance product cost and innovation.

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Product costs comprise 60 percent to 80 percent of a typical manufacturer's total cost structure. And if that isn't daunting enough, the global economy continues to roil; raw material, labor and transportation prices are tougher than ever to predict; and low-cost competitors seem to appear constantly -- and not just in emerging markets.

However, the cost-management headache is even bigger than that, since most manufacturers are also pressed to develop products that can be rapidly and inexpensively tailored to changing (and increasingly local) customer expectations. This ability to mass-customize is vital but expensive, which is why leadership in manufacturing often stems from a company's ability to balance product cost and innovation.

Read Full Article