Negotiating DFM Concessions with Customers

Design for Manufacturing (DFM) is an extensive and multifaceted set of processes in which the design-of or process-to-make components and products are adjusted, primarily to ease manufacturing requirements and costs. This is often an iterative refinement, simplification, and adjustment that removes burdens that aren’t beneficial to the process or product. These steps in a product or process can be as simple as tolerance changes, material substitutions, part and assembly redesigns, or part aggregations enabled by process changes. DFM can:

1. Facilitate better and more accurate predictive cost modeling.
2. Reduce and eliminate complexities and production problems.
3. Enable flexible and modular designs.
4. Eliminate unnecessary, over-complex, over- (or under-) precise requirements, and wasteful aspects/process choices.
5. Suppress supplier costs by improving flow and simplifying assembly.

What Are DFM Concessions?

DFM concessions can be looked at as protecting the design integrity, challenging the designers’ competence, and reducing the pain of manufacture. This is deeply counterproductive and cements a conflict that is antithetical to both an optimized product and effective relations.

There are good methods to forge an agreement and avoid conflict. These guidelines are largely generalized and can be read as negotiation tools in any deal:

1. Flag Your Concessions

When you’re offering a concession, make its scale and significance clear. This might, for example, entail explaining the financial or effort cost it represents to you, and the benefit it offers. One negotiation tactic that you may use is to minimize or ignore any apparent concession. You can simply prevent the deliberate (or accidental) confusion of your offer by making the cost/benefit of your offer clear. Try not to over-express the costs to you or the benefits to the client of the concession. Stay close to the facts, so this does not become a potential value debate.

2. Express the Project’s Needs

The key to an effective negotiation is clarity. If the client understands your guidance and can clearly see the reasoning behind your cost/benefit recommendations in terms of DFM adjustments to the product, you’re standing on firm ground. You probably won’t achieve agreement on all issues, and sometimes there will be function and design factors of which you weren’t fully aware. Concede where the evidence dictates that it’s necessary.

There are rules as to how you should flag the nature and purpose of a concession in a negotiation. Make it very clear that what you are giving up represents a cost to you and a real value to the client.

3. Induce Reciprocity

Avoid the impression that you’re making demands that are only to your benefit. Make it clear,  with diplomacy, that you require acknowledgment of and reciprocity for concessions. Some DFM discussions are about cost savings and the need for the client to fund the effort that those cost savings require. Perhaps the client suggests that your cost estimates are unreasonably high; you feel strongly that your numbers reflect reality, in light of the effort that your DFM-related advice and revisions demand. If you have room to move and make a concession on price, express this as: 

“This is harder for us because of X, Y, and Z. We can make some adjustments in price if our DFM concerns can be answered. We are ready to help with these changes, for the benefit of the project.”

Staking your position as a champion of the project's needs, first, sets the tone that demands support from the client. Doing this in a conflict-free, supportive, and reasoned way empowers you in the negotiations and breaks down the defensive barriers that might otherwise prevent productive compromise.

4. Make Concessions Contingent, Not Unilateral

A mark of a strong working relationship is that parties don’t try to thin slice for pennies over concessions. Where each side makes an effort to understand the motivations, interests, and concerns of the other and offers tangible efforts toward achieving joint gains, a better outcome will result.

Unfortunately, creating this reciprocal atmosphere and mutual understanding is not always possible. Design owners are often running on fumes by the time they get to the margins of production. You can suggest that resiling from a requested DFM change is impossible under the current agreement, but possible if other conditions are met. The other conditions might be additional responsibility and control—opportunities to improve margin by taking over aspects of the product delivery, which might fund the effort that the missing DFM alterations impose. 

5. If/When You Give Ground, Do So In Hard-Fought Steps

Giving up some must-have DFM requirements that turn out to be nice-to-haves should be staged as a sequence of concessions. However, make sure you clearly flag the downside that results for the project, at each step in the process. Staged concessions are also a good tactic to let the client know that you’re not holding back—particularly when you are! Giving too much away in one step makes it seem like your requirements were more frivolous than fundamental.

This staging also helps you in making the case that DFM is a necessary and beneficial tool that helps the client in the longer (and often the shorter) term. You may find that giving up the smaller issues enables you to win over the client on the bigger issues that you really need to effect—for the benefit of the product, the client, and yes, your own team.

A well-forged pathway through the implementation of the best possible DFM process is an important responsibility for the assembly/manufacturing supplier, so negotiating the best outcome is in everyone's interests. Help your client to understand your perspective, by showing support, product optimization, and improvement in terms of margins, throughput, and yield. This in turn will benefit your client and you so you can successfully serve and deliver for the long term.