Define · Add-on
Set a bill-of-materials cost target and protect it
In hardware, the parts list sets most of the cost of every unit you sell. Agree a target cost per unit early and check every design change against it.
About 2-5 daysEvergreenLast reviewed 5 November 2026
Who this applies to
- Skills it builds
- Commercial and business senseTechnical and AI fluency
- PM types
- Hardware or IoT
- Product types
- All
- Starting points
- All
- Ways of working
- All
- Experience
- All
- Size of organisation
- All
Steps, by experience
Beginner (under 1 year)
- Learn what a bill of materials (BOM) is: every part, material and sub-assembly in one unit.
- Work out the price customers will pay and the margin the business needs.
- Turn that into a target cost per unit, and write it into the product brief.
- Ask engineering for a first costed BOM and compare it with the target.
- Agree a rule: any change that adds cost needs your sign-off.
Intermediate (1 to 4 years)
- Set a target unit cost from price, margin and expected volume.
- Review the costed BOM with engineering and purchasing at each build.
- Track the gap to target and agree trade-offs before they reach the design.
Experienced (5+ years)
- Set cost targets across a product line, including packaging, freight and returns.
- Plan cost-down steps for later production runs.
- Make unit cost a standing measure in portfolio reviews.
Who can do this
Owner: Product manager
Can be delegated to
- Hardware / manufacturing engineer or Tech Lead or Architect: Produce and maintain the costed BOM
- Business Analyst or Data Analyst: Model price, margin and volume
Reviewed by: Hardware / manufacturing engineer, Tech Lead
Tool examples
- SharePoint / Word
- Keep the costed BOM in a shared spreadsheet with a change log.
- Google Docs
- Track the target and current unit cost on the first tab of the BOM sheet.
Definition of done
- Target unit cost agreed and written down
- First costed BOM compared with the target
- Rule for approving cost increases agreed
Common pitfalls
- Forgetting packaging, freight and returns
- Setting the target after the design is fixed
- Letting small additions pile up unchecked
If you lead the team
What good looks like: Each product has a target cost per unit, agreed early and protected through design changes.
Ask your PM
- What's our target cost per unit, and where are we against it?
- Which design changes have added cost?
Warning signs
- Cost is only checked when quotes arrive.
- Features are added without a cost check.