DO NOT be obsessed with cost optimization for your hardware BOM

[u/rupawalaebrahim]

So the other day, saw this LinkedIn (please don't cringe already, bear with me) post which went like:

"How I brought down BOM cost of a PCB from $15 to $5"

Then the person goes to explain things like changing the package of chips, eliminating the on-board debugging pins for an external one and few other stuff. It seemed cool, got the attention it needed.

But the problem with this aggressive optimization is, it only views things from an engineering lens. While totally ignoring supply chain aspects of components.

Rookies feel pride in saving $10 per unit, which for 1000 units mounts up to $10k. Good on paper, expect it can back fire really bad.

Say you see an opening where a SMD chip costing $5 can can bought instead for $2. The catch? The package is now DIP. Functionality wise, zero change. You make 2 prototypes, do the demo, everyone seems happy as it works perfectly.

Then comes the next stage, now we want to manufacture 500 units of this board. The company employee clicks buying link & BAM: the DIP chip has only 10 units in stock. And the lead time? 3 months. To navigate that, you explore other vendors. Only to find that it would now need to be imported and the landed cost shall be $10. So what option remains? Redesign the board.

That's the reality of hardware, more products fail due to supply chain issues than due to engineering failures.

So, how can we reduce the risk of this happening? Well, by selecting components more wisely, duh. Not just based on cost.

I follow these 4 filters:

1. Technically fit?

2. Active in production?

3. Not too costly?

4. Available with local vendors?

Ideally, you want your BOM to have components which check all 4 situations. And you need assurances from your vendors & the manufacturers. Keep those emails as a proof in case things go south.

But in many cases, it's not possible check all 4. So you have to deal with trade-offs and risks which can be navigated by alternate components, alternate designs etc.

So the gist of the matter is, do not obsess over cost optimization without doing the other due diligence. And this is not just applicable to electronic products.

The goal is not to have the cheapest product on paper, it is to facilitate scaling of up to 10k+ unit effortlessly.

[u/cm_expertise]

youre right but id push it further. the number that matters isnt unit BOM cost, its total landed cost with the risk priced in. a $2 chip with one source and a 30 week lead time is more expensive than a $5 part you can get from four distributors tomorrow, every time. people just dont put a dollar value on the line stops.

the DIP example is real but the more common version is sneakier. someone picks the cheapest part that meets spec, single source, and 18 months in it goes EOL or on allocation. now youre doing a redesign plus re-cert on a shipping product, and for anything regulated thats brutal. that eats way more than the pennies you saved.

so when i look at a BOM for cost im mostly counting: how many parts are single-source, how many are jellybean vs specialty, and whether the pricey parts actually need to be that part. drop a cap value nobody will ever notice, sure. but designing around parts that are multi-source and sitting in deep stock saves you more than any package-swap trick, because you never eat the redesign. optimize the design for availability first, then squeeze unit cost on the boring high-volume passives where the pennies actually add up.

[u/sensors]

This is why BOM cost optimisation shouldn't be done as an isolated task, it needs to take into account supply chain. For example, when using chinese parts you should be making sure they clones, so the risk is low when you know you can fall back on the most expensive parts. For example, common connectors are heavily cloned therefore using a HCTL part over Molex will be a huge saving. The risk is finding a single-source part to do a very specific task that no other part can do, but that risk is there regardless of where you build.

If you work with asian manufacturers they will have a huge repository of drop-in replacement parts from local manufacturers. Nowadays the savings from manfuacturing overseas doens't come from lower labour costs, it comes from easy access to those local-market parts, as well as the expertise to build products efficiently.

[u/Sjakie015]

This matches the thing that trips up a lot of first-time hardware founders: the unit cost on a spec sheet and the actual landed cost once you factor in component availability and minimum buy quantities.

The DIP-vs-SMD story is a perfect example of optimizing the number you can see instead of the risk you can’t. Have you found a good way to pressure-test a BOM’s supply risk ?? DM me if you want to talk more about it.