What’s in a Product Cost Part 1 — Grand Theft Auto [Capital]

May 292012

One thing that is interesting about Product Cost Management is that people have different thoughts as to what is included in the product cost. Is the product cost the raw material, labor, and direct labor? What about the capital tooling? What about logistics and shipping? Oh, and what about warranty cost or end of life disposal fees for which your firm is responsible?

The short answer is E. All of the above.

In a product and manufacturing firm, everything on the income statement is included in the product cost. However, the income statement does not easily present a direct association between a particular cost with a certain product. Hence, accounting came up the concept of “indirect,” “period,” or “burden” costs. This is accounting speak for, “We’re not really sure how to reliably split this bucket of cost and assign it to an individual product.” Later, academics and consultants made a lot of money, and caused great pain and suffering, with Activity Based Costing. This method was invented to try to reasonably amortize indirect costs in a logical way, so that people could call them direct costs. ABC was a good idea, but in most companies, it was badly implemented in an impractical way that made everyone lose interest in it.

So, what IS in Product Cost? That’s a tricky question that we may be talking about for a long time. However, I would like to address one particular cost that is a perennial burr in my bell bottoms.

Grand Theft Auto — Yes Virginia, Capital is a Real Cost

Imagine you were selling your car and put a “For Sale” sign on it in the parking lot of your company. Over lunch one day, one of the engineers in your firm walks up to your desk and says he’d like to buy your car. You might say, “Great! I’ll make you a deal. It’s $5,000.” But the engineer looks at you in a confused manner and said, “Oh no, you see, I’m only responsible for the ‘variable’ costs of the car such as gas, insurance, those little pine tree air fresheners, etc. The capital cost of the car is not my problem. It comes out of ‘another budget,’ for which I am not responsible. Can I have the keys now?” You would not give him your car and might actually ask his supervisor to have the guy checked out for behaving in such an irrational way.

That’s a bizarre story, and no engineer that I know would say something like that… unless they are talking about Product Cost. I wish I had a dollar for every time an engineer or his manager told me that capital tooling “didn’t matter because that comes out of a different budget.” Capital Investment and Capital Tooling are real things that cost real money. However, most organizations treat them as if they are totally different than the variable product costs (e.g. raw material, labor, direct overhead, etc.). No, capital is not different, in the sense that the design team’s decisions will determine how much capital is needed, just as their decisions affect variable costs. However, at best, engineering teams will only consider capital as completely separate from the “Piece Part Price.” Many engineering departments do not consider capital in any serious manner at all.

This leads to perverse decision making. Why? Typically, investment in capital will reduce the variable cost of a part, and there are often multiple ways to make a part. For example, let’s say that you are Joey Bag O’Donuts design engineer, who has been given challenging cost targets for Piece Part Cost. You design a part and your purchasing guy comes back with quotes from 3 suppliers:

Supplier	Piece Part Cost	Capital Tooling Cost
Louie’s Laser Library	$15.10	$1,000
Pete’s Press Emporium	$12.50	$15,000
Chuck’s Casting Shack	$10.50*	$13,000

Capital breakeven in Product Cost Management Hiller Associates

Click to Enlarge!

* Redesign will be required to use Chuck as a supplier

Of course, capital is “considered” by Joey’s engineering team, but it’s hard to comprehend because it is considered separately from variable costs. Joey would likely choose Pete as a supplier because Pete is cheaper on Piece Part Cost. Joey won’t have to redesign as he would if Chuck was Joey’s supplier. Joey’s Cost Target is based on Piece Part Cost. Sure, his supervisor tells him to “watch the capital,” but the capital budget is this big amorphous pot of money that everyone shares, so Joey is not personally penalized for using it.

However, using a bit of eighth-grade math, we can graph the real cost to the company, including the capital amortized over the life the tool. We see that the right decision for maximum product profit depends on the volume of products we will sell before more capital needs to be spent to refurbish or replace the tool.

Capital is Different… It’s MORE Important Than Piece Part Cost

The attitue of most product development teams towards capital shows that they implicitly believe capital is LESS important than the Piece Part Cost. However, I would argue that the opposite is true for at least 3 reasons:

Time Value of Money — You have to buy capital up front, spending the dollars earlier. Using sophomore math and a proper cost of capital for the organization, you can calculate how much more expensive capital is than variable costs.
Risk of Change — Capital Tooling is often called “hard tooling” because it is made for a specific part. Often out of hardened steels that are expensive to manufacture and machine. But, the tooling is ‘hard’ in another way: it’s hard to change. Let’s say that Joey’s part failed in the field and needed to be modified. It’s likely that the tooling will need to be to be modified, and tooling modifications are expensive. So, how do we account for the risk of changes in calculations of tooling cost? I will have to look into that, or perhaps, one of our readers can suggest a method. One method would be to ask the following questions: What percentage of parts are modified after tooling is created and what is the average cost of tool modification as a percentage of the original tooling cost? Using these two numbers, we could create a reasonable risk multiplier for capital.
Return on Assets — Since the 1980’s, Wall Street has been obsessed with “asset light” companies. Some of this is just Wall Street codifying reasons 1 & 2 in the stock price. However, a lot of this has to do with leveraged buyouts and other financial “engineering” voodoo. Regardless of whether assets light strategy really adds or subtracts value from the firm, Wall Street thinks it does.

These are just three reasons why capital is an expensive cost that should be considered as part of product cost and considered together with piece part cost. There may be others, too, but at the end of the day remember:

Cars are not free and neither is the capital tooling for your product.

This advice may help keep you out of jail and/or the world of unprofitable products.

A Reverent Memorial Day to Our Veterans

Uncategorized No Responses »

May 282012

Today we want to honor and say thank you to all the United States veterans, both living and dead, who gave so much of themselves. Many made the ultimate sacrifice to protect the interests of the United States of America and to defend others around the world from evil and tyrrany. We also honor those many men and women who labored so diligently under difficult conditions in US manufacturing facilities to supply our military and our allies during wars and conflicts. One of the biggest reasons that we were able to defeat such powerful enemies in both World War I and II was simply that we could out-manufacture our enemies. This is a sobering thought to consider the next time you consider outsourcing.

We share one picture today of a memorial to just one veteran that I run past in the center of Arlington, MA almost every day. Thank you to Mr. Samuel Whittmore and all the other patriots who bled for the United States of America.

Click to Enlarge. Memorial to Samuel Whittemore

The Voices of Discord in Product Cost Management (Voices Series, Part 2)

Product Cost Culture, Product Cost in Industry, Product Cost Management 1 Response »

May 212012

In last week’s post “Do you hear the voices? (Voices Series, Part 1) ” we talked about the different voices that speak throughout the product life cycle and how they relate to Product Cost Management. This week, we’ll talk about some voices give bad advice and expectations. As the diagram to the left shows (click to enlarge), there are at least two typical conversations happening in the product life cycle. The conversation at the top shows the voices that are beneficial to Product Cost Management and help lead to a profitable product. The conversation at the bottom has some of the same voices, but also replaces some of the voices with new, discordant voices, who more often than not, lead to an unprofitable product.

Voices in Product Cost Management Hiller Associates

CLICK TO ENLARGE Good and Bad Product Cost Conversations

Hope is Not a Strategy

Organizations have a variety of excuses for why they don’t let the Voice of Reason limit the finance team’s desires for product cost or profit. The same is true for not listening to the Voice of Intent (seriously evaluating alternatives in concept design and costing them), and for having no Voice of Engineering (not doing product cost management in engineering or being lax on cost roll-ups). These voices are replaced by a new voice: the Voice of Hope!

“Hope” — that sounds pretty positive, doesn’t it? However, as Rick Page taught us in his book, if hope is not a strategy for sales, why would a company think it is a good strategy for its Product Cost Management? The difference between a conversation on product cost with the Voices of Reason / Intent / Engineering vs. a conversation with only the Voice of Hope is the difference between a profitable and unprofitable product.

The Voice of Resignation (…or Eeyore)

Eeyore Voices in Product Cost Management Hiller Associates

Voice of Resignation

This brings us to the Voice of Partners and the Market, i.e. your suppliers and factory who have to actually deliver your new product. The supplier or plant will determine the price at which they are willing to sell to you.

People often add pernicious voices to the conversation that are manic depressive opposites. The first is the Voice of Resignation. If you have kids, or if you ever were a kid, you may know this as the Voice of Eeyore. Eeyore is the lovable, but chronically dejected donkey in Winnie the Pooh. This voice says, “I don’t care what your ‘should-cost’ says. This is what the market will sell for, so I guess that I have to buy at that price.”

The Voice of the Bullying (…800 lbs and growing)

The manic brother of the Voice of Resignation is the Voice of Bullying. However, instead of Tigger as the opposite of Eeyore, we have another mascot for this voice — the 800 pound gorilla. After all, Tigger is more of an annoyance than a bully. The Voice of Bullying

Gorillas in Product Cost Management Hiller Associates

The 800 Lbs Customer Purchaser

says: “We’re the 800 pound gorilla customer, and we’ll use our weight to force some cost reductions with the supplier.” Is the price requested reasonable? The 800 pound gorilla doesn’t care, because he needs the price to be what he wants it to be for one of several reasons that are beyond explanation in this post. I plan to discuss the reasons more fully in a subsequent post, but for now we’ll just list them as the following:

Cost was never targeted properly in the first place (a.k.a. the Voice of Hope was listened to over the Voice of Reason)
Engineering let things get out of control (a.k.a. the Voice of Sound Cost Engineering was replaced with the Voice of Hope… or apathy)
The Voice of the Ghost-of-Product-Costs-Past haunts purchasing (a.k.a. the demand for post-launch cost reductions)

So, how do we silence, or better yet, learn from the Voice of Resignation and the Voice of Bullying, while keeping them in control? I’ll leave that for next time.

Do you hear the voices? (Voices Series, Part 1)

Product Cost Culture, Product Cost in Industry, Product Cost Management 4 Responses »

May 142012

Lately, it’s become popular to talk about “voices” in business, e.g. the “Voice of the Customer.” With all the voices, it is difficult not to wonder if one is listening in on a business meeting, or a group of choral composers arguing over the score’s balance, psychologists trying to diagnose a patient, or a kitschy show with karaoke singers trying to go pro. I believe that the “voice” nomenclature is the new new way to say “stakeholders,” a term that was the new way to describe the groups of people and forces of the universe that prioritize your product decisions and limit its possibilities.

All frivolity aside, the Voices framework is not a bad one. Instead of arguing over what we call the rose, I’d like to focus on WHO and WHAT those voices are with respect to Product Cost Management. Click on the diagram to the right. In this graphic, I show three categories across the product development cycle:

Click to Enlarge! Voices in Product Cost Management

What are the ‘Voices’ in the discussion of product cost and profit
What are the target costs or cost statuses that the voices dictate or influence
What are the ways that people can estimate the cost target or cost

The First Voices in the Discussion Had Better Be Balanced

The first two voices are the Voice of the Customer and the Voice of the Business. The Voice of the Customer is supposed to tell you what consumers will pay for a certain bucket of product features and attributes based on perceived customer value. Understanding the weird customer dialects isn’t so easy because customers won’t give you an exact number for the price they expect, such as $44.85. If customers do give you an exact number, the number should still be considered fuzzy because customers have a hard time conceiving the value of your intended offer. It is traditionally marketing’s job to read these tea leaves in order to decipher the Voice of the Customer.

The second voice, the Voice of the Business, gives us the Product Target Price and Product (System) Level Cost Target. To illustrate, the CEO or Group VP comes in and says, “We need X total revenue and Y market share,” and the VP of Finance comes in and says “We need to have Z profit margin on the product.” Great! Right? Well, yes, but this is a TOP-DOWN cost target, or as the EE‘s in the room would say, an “open loop” control. Normal people refer to this as an “estimate” or a “guess” (a.k.a. a hope).

Trade-offs in Product Cost Management Hiller Associates

Click to Enlarge! Product Fiscal Planning Triangle

The hopeful nature of the top-down product cost target is why the next voice in the discussion is so important: the Voice of Reason. What modern businesses don’t like to think about (or have been taught not to by consultants) is that there is a fairly rigid triangle (see the figure to the left) linking the price you must charge (or the customer will pay), the feature set (value) you will deliver in the product, and the product’s cost (margin). If you set two of the corners of the triangle, the third will move to compensate. I am not saying that people cannot do better on their product cost, but there are limits.

The key is to ALSO estimate what is theoretically possible for product cost in a BOTTOMS UP way — given REASONABLE assumptions.

The bottoms-up estimate moves you from an open loop control to a closed loop control (with feedback for adjustment), as the EE’s would say. If the top-down and the bottoms-up costs are too far apart, somebody needs to throw a flag. The first figure above shows the methods one can use to get an early bottoms-up product cost estimate. Another voice that is often not heard is the Voice of Intent. People often just assume a design alternative and immediately launch into full scale engineering. But the old DARPA study told us that 80% of cost is decided in the first 20% of decision making. So, the solution is pretty obvious.

Spend significant effort and time in the concept design stage seriously generating, considering, and costing a series of alternatives with your cross-functional team of design, manufacturing, purchasing, etc.

Spend the money needed on comparative teardowns of carryover systems you plan to cost reduce and systems with new features you plan to design versus similar systems of your competitors’ products. Spend time together in a workshop evaluating your design alternatives and estimating your costs (raw material, manufacturing, shipping, etc.). You do not need triple point precision — you only need a good enough estimate to allow you to compare one alternative to another. Then you should give a REVISED Product Cost Target to management and marketing. Very little cost has been spent up to this point, so if a program needs to be stopped or modified, now is the time!

Keep the Conversation Going

The next voice that should be in the product cost discussion is the Voice of Engineering. Often, the discussion on product cost just stops for months or years until suppliers send in the first quotes at the end of the detailed design phase. However, the conversation should continue. Where is the engineering team in their cost roll-ups? Have they discovered problems and barriers that will force costly changes, or have they found clever ways to beat the cost target?

Shrink the Triangle with Should-Cost and Spend Analytics

The Voice of Partners and the Market refers to the price your suppliers (or your internal plant) will charge you to produce your design. If you want to get the best prices, it is important to understand another triangle: the Purchased Cost Triangle (to the right). The corners of this triangle are the price the supplier or plant quotes, the final cost you negotiate with the supplier/plant, and your should-cost calculations. Here’s the secret: this triangle is much more flexible and stretchy than the product fiscal planning triangle above. Powered by the number and quality of your should-cost and spend analytics estimates, you want to drive all three vertexes together and converge. Product cost is a difficult and fuzzy world; it’s even fuzzier when you have no facts (or even well-reasoned estimates) to rely upon.

Triangulating in Product Cost Management Hiller Associates

Click to Enlarge! Purchased Cost Triangle

If you want your Negotiated Costs to reflect the actual costs of manufacturing plus a reasonable supplier margin, invest heavily in good Should Cost and Spend Analytics.

If that’s too hard or too expensive… well, it’s only your product’s profit anyway, right?

Time to Pay the Piper

For the most part, the final voices settle things. The Voice of Realization happens when you actually start to make the product and do the formal accounting to see what the product actually costs. Sadly, this is where most companies spend the lion share of their product cost management effort. This is not to say that there are not opportunities to reduce costs after launch. However, this is not where companies should be spending a lot of Product Cost Management effort. Cost is pretty much set at this point, and companies should be working on the NEXT product.

The last voice is the Voice of Regulation / Responsibility. In general, the Voice of Regulation should be known up front, in regards to disposal fees or other government penalties and taxes for which the company is responsible. On the other hand, the Voice of Responsibility is trickier. The company should take its warranty predictions very seriously. Most products, though, tend to have surprises, and they are typically not positive surprises. Sometimes, the Voice of Responsibility speaks with legal authority (e.g. contractual warranty), but it should also speak to the corporate conscience to do the right thing for the customer, even when the company is not legally bound.

Next week….

This week we talked about how things SHOULD work. However, the framework and solutions presented are not how many companies DO work. Next week, we’ll talk the ad hoc and emergent system by which most companies operate, and what problems this causes.

All That Glitters Isn’t Gold… and Neither Are Product Material Cost “Multipliers”

PCM Technique / Cost Models, Product Cost in Industry 8 Responses »

May 072012

I happened to stumble upon an article on SpendMatters from a few weeks ago by Sheena Moore:

Friday Rant: What’s in a Brand? For Tiffany’s new “Rubedo” Cuff, a Preposterous Mark-Up

The article about the manufacturing cost versus the price of a new bracelet at Tiffany. If you don’t know what Tiffany is, you’re probably unmarried and have not been dating. Some say you can’t put a price on love; Tiffany disagrees and will help you do it! The first great thing about the article is Sheena’s calling out of Tiffany’s deceiving marketing. Apparently, they told her the bracelet is made of a golden “metal” called “Rubedo.” No ladies it’s not gold; it’s something better; it’s Rubedo. (Rubedo is actually just an alloy that helps Tiffany water down the gold to make more $$$. Sheena and I had a good laugh about this on the phone).

Sheena’s article caught my eye for two reasons. First, I’m just really cheap, and the idea of a $7,500 bracelet made of 55% Copper and 31% Gold flabbergasted me. However, more interesting than my miserly instincts was that Sheena does a nice little product cost analysis of the bracelet. In doing so, she highlights another form of fool’s gold: Material Cost Multipliers.

The Material Cost Multiplier

Material Cost Multipliers are a simple idea. They postulate that one can first calculate the cost of a product’s raw material and multiply it by a number to get the overall “Piece Part” cost. But wait, you may object: how can this be valid? Why would someone vastly oversimplify the product cost calculation like that? That’s simple: calculating actual cycle times and tooling costs for each machine needed in the product’s manufacture is HARD, and it requires a lot of manufacturing knowledge.

Material Cost Multipliers just sweep all that nastiness under the rug… or into the multiplier, in this case. They have the following assumptions:

Assumption 1: Parts is Parts. Remember the old Wendy’s commercial making fun of the contents of Chicken McNuggets? No? Well I do, and you can too, by watching the video below.

The Material Cost Multiplier inherently assumes that all parts that you are manufacturing require the same processes and have the same complexity of design. For example, assume that our Tiffany bracelet and this Gucci Earring had the same mass:

Assume these had the same mass!

Would you guess that both of these items take the same effort to make? If you said ‘no,’ you are right.

Assumption 2: The Biggest Loser – The Material Cost Multiplier also assumes that the part mass is very highly correlated to the part’s processing costs. Therefore, the more mass you lose, the more your processing cost goes down in DIRECT correlation. There is no doubt that many manufacturing costs do have a correlation to the mass of the part, but many do not. For example, the polishing or burnishing of the Tiffany bracelet is much more dependent on the surface area burnished, the complexity of the surface, and the hardness (composition) of the material than the mass of the item.

The Cost of the Tiffany Bracelet

Sheena received notice from a colleague that material is only about 25% of the cost of an item. So, Sheena first did a nice material cost analysis of the bracelet. She says that the cost of material is $1,500. Although, she does not account for scrap or loss, this is a pretty good assumption, given that this type of material which can be re-melted. Also, the manufacturing process is likely a net form process, where there is virtually no loss in specific design). I would, however, question the assumption that:

Material Cost = 25% * Piece Part Cost.
Or, Materal Cost * 4 = Piece Part Cost. Basically, 4 is her Material Cost Multiplier.

First of all, that seems backwards in the world of simple metal part manufacturing which, in my experience would be more likely to have:

Material Cost = 75% * Piece Part Cost
Materal Cost * 1.33 = Piece Part Cost).

In fact, I think the processing costs are even lower than my general assumption. Just looking at the picture of the bracelet, my guess is that this is made by a routing such as:

Extrusion Routing for Jewelry Hiller Associates

CLICK TO ENLARGE! Tiffany Bracelet Mfg Routing

Extrusion is very efficient and cheap, especially for a straight cylinder. I would shoot from the hip and say the processing is definitely under $20 (probably under $10). Let’s say we have the $1500 raw mat’l cost + $20 processing/logistics + $100 for marketing (which might be outrageously high). That’s a $1,600 Fully Burdened Cost for the high class Wonder Woman wrist bracer (you’ll need 2 for Halloween). At a price of $7,500, just one bracelet is generates $5,900 PROFIT (370+% margin)! I did a product cost analysis in one of the commercial Product Cost Estimation tools for a very similar looking part to the Wonder Woman Tiffany Bracer, and I got a result of $5.25 (Extrusion = $2.20, Flaring = $0.7, Marking = $0.50, Polishing = $1.30, Packaging – $0.55). My former co-founder’s wife owns a florist and gift shop and once told me told me once that typical mark-up for jewelry is ~50%, so the bracelet should be priced (at max) at $3,200, not $7,500.

So are Material Cost Multipliers bad?

No, they are not necessarily bad or inaccurate… but they often can be because they are misapplied. It’s important to know:

What processes will be used to make a product? Each major process probably needs its own multiplier for accuracy.
What physical part attribute most strongly drives cost in each process?
Make sure if someone gives you a multiplier that it is based on these considerations?

Consider the differences:

Sheena’s general manufacturing Material Cost Multiplier = 4x –>Processing Cost = $6,000!
Eric’s general simple part metal manufacturing Material Cost Multiplier = 1.33x –> Processing Cost = $1,900!
Eric’s manufacturing “judgment” from experience and given the the routing Eric assumed Processing Cost = $20 –> Material Cost Multiplier = 0.013x!!!
The Product Cost Estimation Tool’s estimate of Processing Cost = $5.25 –> Material Cost Multiplier = 0.003x!!!

There is no doubt in my judgment that the Product Cost Estimation tool is the closest to reality. Regardless, a fast back-of-the-envelope calculation is far better than nothing. I am a big fan of common sense and back-of-the-envelope reality checks. I applaud Sheena’s effort, which, honestly, is more than many design engineers or purchasing engineers would do in considering the profit impact of their decisions.

Conclusions

Material Cost Multipliers are useful, but can be dangerous. They should be applied by experts or with expert guidance.
My analysis shows that Sheena is even MORE correct in that the bracelet is not worth it.
Kudos to Tiffany for Jedi Mind Tricking girls into believing a $1,600 bracelet is worth 3x as much.
Ladies, your boyfriend’s/fiancee’s/husband’s willingness to buy you the Tiffany Rubedo bracelet may mean he’s filthy rich, desperate, or not too smart… but it may not necessarily mean he loves you. Admittedly, that’s just my guess… but then again, I’m a product cost guy, not the love Dr.)

Eric

p.s. Guys, perhaps you would be interested in buying the woman of your dreams the Hiller Associates RubedA bracelet. It’s just like the Tiffany RubedO bracelet, but MINE is 35% gold, not 31% like Tiffany. The only difference is my bracelet will say “H&CO” where Tiffany’s says “T&CO”, and likewise mine says Hiller’s, instead of “Tiffany’s”. It’s a bargain at $4,999, versus Tiffany’s $7,500. H&CO: “Don’t just show her your love; show her your intelligence.”

The Economist Joins HBS in Re-discovering Manufacturing

American Manufacturing 1 Response »

May 032012

A friend of mine just sent me this article from the much venerated “The Economist” magazine. Just like the Harvard Business School, the Economist is also interested in manufacturing again. See their article here:

A third industrial revolution | The Economist

That is pretty encouraging, except that I think the reporters that are covering the subject may be a bit too uneducated on manufacturing, or sensationalistic, or optimistic. Consider The Economist’s comment about making a hammer on a 3D printer:

That is why the process is more properly described as additive manufacturing. An American firm, 3D Systems, used one of its 3D printers to print a hammer for your correspondent, complete with a natty wood-effect handle and a metallised head. This is what manufacturing will be like in the future.

Yes, maybe in the DISTANT future. They don’t bother to tell the reader (or maybe they are not aware) that a hammer has a forged head, and I am not aware of any rapid prototyping method that produces objects with the performance of forging. Then we have the problem that one wants the handle of the hammer to be of a different material, so that it is light weight, unlike the head. To be fair, the author does admit:

Additive manufacturing is not yet good enough to make a car or an iPhone, but it is already being used to make specialist parts for cars and customised covers for iPhones. Although it is still a relatively young technology, most people probably already own something that was made with the help of a 3D printer. It might be a pair of shoes, printed in solid form as a design prototype before being produced in bulk.

OK, I agree, 3D printers, an other rapid prototyping are very popular in product development.

Star Trek Replicator… or is it a 3D Printer?

It is just that the article makes it sound like we now have the technology in manufacturing that has made the beloved Star

Trek replicator (a device that on the show that could create food and other objects ex nihilo). Then we have this quote about engineering materials:

The materials being used to make things are changing as well. Carbon-fibre composites, for instance, are replacing steel and aluminium in products ranging from mountain bikes to airliners. And sometimes it will not be machines doing the making, but micro-organisms that have been genetically engineered for the task.

Well, yes, but as I look around my office, my house, and the neighborhood in general, I don’t see a lot of stuff made from these exotic materials. Why? Because THEY ARE REALLY EXPENSIVE! Their quote actually is correct, but they don’t explain that these are high end performance materials and from a Product Cost Management perspective should be avoided if at all possible.

The Economist does a much better job when reporting on the world’s financial situation than manufacturing, BUT I in no way mean to discourage The Economist. Would that they would write more about product development and manufacturing! And, I hope that they are right that we are entering a 3rd Industrial Revolution, especially for American Manufacturing. The author’s last sentence, hopefully, will be the truest:

The wheel is almost coming full circle, turning away from mass manufacturing and towards much more individualised production. And that in turn could bring some of the jobs back to rich countries that long ago lost them to the emerging world.

Amen, I hope so.

Eric

p.s. now that I know the author’s level of manufacturing knowledge, I will see if I can convince him to do an article on my adamantium bonded bones and claws… ok, that was a little mean. Just kidding, Economist — a valiant attempt to promote the new coolness of manufacturing.