10 Reasons for Unnecessary Costs that Lead to Poor Value

There is little doubt that engineers and designers are well aware of the need to minimize cost, and in most instances, they are anxious to receive and use better cost information. However, there are other reasons why unnecessary cost occurs in the products they are specifying.

The most frequent reasons unnecessary cost is found in a product or system will normally fall into one or more of the following categories:

Lack of an Idea: Unnecessary cost can be built into a product or service  simply because of our failure to utilize creative ability in developing alternative solutions. In many cases, we accept the first workable solution that comes to mind.

Lack of Time: Speed to market demands often produce short product development cycles. Aggressive deadlines can sometimes prevent the optimum design from emerging. Decisions we are forced to make, perhaps due to an urgent delivery, or tight design, or product schedule, can force us to initiate a temporary circumstance or satisfy a requirement without regard to cost. Many times, these temporary measures become a fixed part of our product or service, resulting in unnecessary costs year after year.

Lack of Information: Lack of information on exactly what function we are trying to perform. Lack of information regarding what the customer wants or needs. Lack of information on new materials, products, or processes. Lack of cost information or what is necessary cost that is needed to generate a profit.

Reluctance to Seek Advice: Some people are not willing or able to look beyond the current horizon and are reluctant to seek or ask questions, feeling embarrassed or inadequate if they admit they do not know something. This often drives the inability to utilize new technologies and materials. The “Not Invented Here” syndrome does not allow people to tap into ideas from other outside sources.

Temporary Circumstances  or Emergencies: Most companies are faced with emergency measures at some time when a material, machine or supplier readily available is accepted as a temporary solution regardless of cost and continues in use after the emergency has been overcome.

Honest Wrong Belief: Unnecessary costs are often caused by decisions made on what is believed to be true, and not on the facts. We let ourselves believe that there is a good reason why we should not do something: The tools are too expensive; a particular material is not good to work with; that plastic is brittle. “Honest Wrong Beliefs” can stop a good idea that may provide a more economical product or service.

Habits or Inertial Thinking: Doing things almost by rote, each time a similar problem occurs that has been addressed before. We must face the fact that some of our habits need review. We must recognize that old habits can be changed, that new habits can be developed, and more importantly, if we are to eliminate the unnecessary costs, we will have to base our business decisions on fact and not on our habits and attitudes.

Negative Attitudes: Failure to recognize creativity or innovation.

Obsolete Specifications: Some specifications used today are outdated. Testing specifications, codes, material specifications, and specification from previous projects are used unquestioningly.

Poor Human Relations: Lack of good communication, misunderstanding, interpersonal relations between people are a frequent source of unnecessary costs.

These reasons for unnecessary cost probably apply to most aspects of human activity. They will and do occur in well-organized companies having skilled management and technical staff, and do not necessarily reflect on any one individual or group of individuals.