Non-recurring engineering

Non-recurring engineering (NRE) cost refers to the one-time cost to research, design, develop and test a new product or product enhancement. When budgeting for a new product, NRE must be considered to analyze if a new product will be profitable. Even though a company will pay for NRE on a project only once, NRE costs can be prohibitively high and the product will need to sell well enough to produce a return on the initial investment. NRE is unlike production costs, which must be paid constantly to maintain production of a product. It is a form of fixed cost in economics terms. Once a system is designed any number of units can be manufactured without increasing NRE cost. NRE can be also formulated and paid via another commercial term called Royalty Fee.[1] The Royalty Fee could be a percentage of sales revenue or profit or combination of these two, which have to be incorporated in a mid to long term agreement between technology supplier and the OEM.

In a project-type (manufacturing) company, large parts (possibly all) of the project represent NRE. In this case the NRE costs are likely to be included in the first project's costs, this can also be called research and development (R&D). If the firm cannot recover these costs, it must consider funding part of these from reserves, possibly take a project loss, in the hope that the investment can be recovered from further profit on future projects.

The concept of full product NRE as described above may lead readers to believe that NRE expenses are unnecessarily high. However, focused NRE wherein small amounts of NRE money can yield large returns by making existing product changes is an option to consider as well. A small adjustment to an existing assembly may be considered, in order to use a less expensive or improved subcomponent or to replace a subcomponent which is no longer available. In the world of embedded firmware, NRE may be invested in code development to fix problems or to add features where the costs to implement are a very small percentages of an immediate return. Chrysler found such a way to repair a transmission problem by investing trivial NRE dollars into computer firmware to fix a mechanical problem to save some tens of millions of dollars in mechanical repairs to transmissions in the field.[2]

NRE-concepts-as-financial-investments are loss control tools considered part of manufacturing profit enhancement.

List of NRE Costs (Focused on Electronics)

Here's a breakdown of the typical costs you will incur when doing research, design, development, and testing of a new electronic device.

Product Architecture

In this step, there should be intensive research to find the most suitable components and materials for your electronic device, what is commonly referred to as the BOM ,up to 60% of a unit cost will depend on the components and materials you choose during product architecture.

Industrial Product Design

The industrial designer has to do a lot of research on what is the best shape and look for your device that will both be easy to manufacture and attract customer's attention. Who is the end-user? How will they use the product? What are the key benefits they're looking for? All of these questions and more have to be answered in this stage.

Embedded Electronic Design

The adequate microcontroller needs to be selected; typical options are STM32 and PIC32. Particular attention should be placed on what is the best microcontroller for mass manufacturing. An experienced engineer will generally be the one to decide which is the best option, some electronics design and manufacturing companies claim that STM32 is the best option as it offers a lower unit cost and a shorter lead time.[3]

Mechanical Engineering

A mechanical engineer will have to do a lot of optimization on the design of the product to make sure it can be manufactured with the equipment available in the appointed manufacturing plant.

Embedded System Firmware Design

Probably one of the most complicated steps in the development of a new product, depending on how many features your electronic device requires, a firmware engineer will have to write hundreds or thousands of coding lines [4] to get the device to perform as required by the users.

Electronic Prototyping

Prototyping is crucial to test the reliability of your electronic device, throughout the whole product development process, there will be different versions of prototypes aimed at measuring the reliability of a product at various stages.[5]

Injection Molding Making

This is a highly sensitive process. A mold maker factory needs to be hired to create the molds that will be used to manufacture the enclosures of your product. A poorly constructed mold will result in molded parts with defects [6] such as burn marks, sink marks, flow marks, and others.

Pilot Production Run

After prototypes have been tested and they've proven to meet user's needs, it comes the time to set up a production line to do a pilot run. The purpose is to test whether it is possible to mass manufacture the device with the equipment at hand while keeping excellent quality standards. A pilot run is a must to ensure the success of a manufacturing project[7]

Testing and Certifications

Depending on the kind of product you're working on and the field where it will be operating, you'll need to apply for one or more certifications.[8] Certifications usually have a cost of US$10,000, and they only go up from there [9]

References
  1. Mark, Julian. "5 Things You Should Know About NRE". blog.optimumdesign.com. Retrieved 2020-05-21.
  2. "Update Required for Chrysler's 9-Speed Gearbox". The Car Guide. Retrieved 2020-05-20.
  3. "STM32 VS PIC32: Which MCU works better in manufacturing?". Titoma. 2019-07-09. Retrieved 2020-05-21.
  4. "Jack Ganssle's blog: Firmware costs - a scary story". www.ganssle.com. Retrieved 2020-05-21.
  5. "Prototyping Electronic Devices - Elhurt - EMS - contract manufacturing". Elhurt - EMS - Electronics Manufacturing Services. Retrieved 2020-05-21.
  6. Knack, Oliver. "11 Injection Molding Defects and How to Prevent Them". www.intouch-quality.com. Retrieved 2020-05-21.
  7. "Don't Skip the Pilot Run for Your New Product Made in China!". QualityInspection.org. 2017-01-24. Retrieved 2020-05-21.
  8. "Understanding Certifications for Electronic Hardware Products". Hackster.io. Retrieved 2020-05-21.
  9. Teel, John (2016-04-13). "The 10 Costs You'll Pay to Bring Your Hardware Product to Market". Entrepreneur. Retrieved 2020-05-21.
  • costs by Daniel Shefer - a short explanation of NRE


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