Optimizing Product Cost with Supply Chain Cost Modeling

Abstract

Demands on the electronics industry for smaller, better, and cheaper packages have made the supply chain more complex. Outsourcing, new technologies, and increasing performance requirements make designing and building the right product for the right price more difficult than ever. We will present a framework for understanding and managing the supply chain through cost modeling. Cost models that accurately reflect the cost impact from technology and design decisions enable a more precise understanding of supply chain behavior. Cost models can show the extra cost of adding a layer, the expected savings from relaxing design rules, or the cost of package on package assembly compared to 3D packaging with through silicon vias (TSVs). The models also provide context to understanding the ″should cost″ of a product and the path to achieving it. Since the guidance from cost models is based on the actual supplier cost drivers and pricing behavior, designer cost reduction efforts will result in higher savings compared to not using the cost models. Without cost models, designers risk missing their suppliers' real cost drivers and, therefore, the opportunity to decrease cost. This cost modeling framework allows the designers to realize the lowest cost product by matching the right design with the right supplier. It is a method for understanding a design decision's cost impact: a design change, a supplier change, or even the impact of new technology.