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Forum: Canon, Nikon, Sony, and Other Camera Brands
04-08-2014, 05:10 AM
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It might be worth looking at the kind of issues Nikon might have faced.
Manufacturers have to make predictions on future sales early on and decide carefully whether to redesign a failing product or accept higher warranty repair costs.
The wrong decision can cost them dear.
I have made some assumptions based on a hypothetical product manufactured in Japan and selling in the USA for $650, the true manufacturing cost turns out to be $200
Product manufacturing cost $200
add profit at 30% $260
add exporter profit $338
add export costs $358
add importer costs $465
add warehousing costs $480
add distribution costs $500
add retailer profit $650
expected sales over the lifetime of the product 50,000
expected profit over the lifetime 50,000 x 60 = $3,000,000
expected warranty repair costs over the lifetime of the product 10,000 x 200 = $2,000,000
cost of designing and tooling the product $100,000
expected gross profit from the product $900,000
operating costs -heating lighting wages R+D $500,000
expected net profit from the product $400,000
$400,000 net profit on the line is reasonable, but what happens if the line develops a major issue and just 4% extra warranty fails happen?
Possible cost of extra warranty repairs following unexpected failures 2,000 x 200 = $400,000
The profit on this line is now zero, and the return on investment is $0
The costs of a redesign of a major component and retooling to fix this fault is $50,000 which is now unjustifiable.
Potential losses due to not fixing the fault if significant failures happen 10,000 x 200 = $2,000,000
Do you redesign prematurely and it turns out there wasn't a major issue, do you redesign when its clear theres a problem but the profits have already been eaten up by early failures, or do you gamble that the worst is over and risk the loss of $2 million dollars downsteam if your wrong.
Its not easy being a manufacturer
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