Cost Reductions - Watch Out for Traps

I believe that a company must continually reduce costs to remain competitive. I also think that it is easy to introduce a major error through the cost reduction process. The following is based on concerns which arise from basing individuals performance incentives (i.e. pay raises) on the amount of cost reductions achieved. This is not meant to be specific, but here goes . . .

It takes a team of planners and engineers months, even years, to develop a new design. In this effort, materials, designs, and manufacturing methods are based on design guides, competitive analysis, and any other collective experience the design & manufacturing team possesses. In this effort, megadollars may be spent on testing and prove out to a full design verification plan. (100K miles function cycling, environmental, heat, cold, etc).

Once a design is in the field, a cost cutting team may decide to explore a material change. This effort is usually backed up by a single short term test aimed at the primary function which the material imparts to the design. If the test passes, the team recommends the change and because it saves money, it usually goes through and the program savings are recorded but no one follows up to see the total cost to the system of each cost reduction. Typically, the duration of a cost reduction effort is accomplished in a very small fraction of the man-hours and total time of the original development.

Ok, maybe this is a simplification, but the major points are:
(1) The team approving the cost-save change is sharply reduced from the original design team
(2) The testing required for approval of the cost-save is extremely limited and tends to not look for interactions.
(3) There is no effort to predict or track the total cost to the system of a given change. (This should even include things like lower high mileage quality/reliability, lower resale value, etc)