How can production cost be reduced?

1. Let price point dictate production.While it seems logical to choose a product first, the production method second and the price point third, that’s not actually the best course of action. Instead, estimate the product’s market price -- what you can realistically sell it for -- and work backwards. Let’s say you’re a smartwatch manufacturer. You’ve done your homework and seen similar products selling for $ each. You’ll need to tailor production to keep costs lower than estimated revenues. So, while you might really dig that leather armband for your smartwatch, the budget might dictate that you choose plastic instead. Just be sure to consider all types of costs, including development, prototypes, certifications and manufacturing.2. Default to outsourcing.In-house production, while the obvious route, isn’t always the most cost-effective one. It’s important for entrepreneurs think about outsourcing instead of focusing too much on what they want to produce internally. Many people attribute this very strategy to Skype’s success.When the video communication startup launched, it outsourced development to an Estonian team that did such a great job that percent of the Luxembourgian company’s staff is now based in Estonia. Microsoft must have approved, considering it bought the company for $8.5 billion. No matter your business, there’s no reason to consider it a one-stop shop.

3. Experiment with the unexpected.People have come to expect gadgets to look and feel a certain way, which tends to stunt imagination. But the most successful products break the mold.When Swiss-based energy company Alevo received $1 billion to develop its innovative energy storage system, it certainly didn’t look to store-bought AAs. Instead, it turned shipping containers into large batteries, enabling energy producers to store grid energy that was previously wasted.It’s easier said than done, of course, but look past conventional materials and production methods. The most innovative paths are those that haven’t been trod before.4. Befriend local suppliers.Establish close relationships with regional manufacturers understanding of your goals and willing to innovate with you. It may cost more than working with a run-of-the-mill plant in China, but -- as thousands of entrepreneurs can attest -- it beats supply chain disruption. Local manufacturer relationships enable co-creation efforts, and they save money and headaches when problems arise. Dotcom Distribution saw the perks of staying local after it began doing business with a local shoe company. A hiccup due to poor planning could have corrupted the partnership, but the two were able to stand under the same roof and work through it.