What is NRE? The term NRE cost (non-recurring engineering) refers to any cost that needs to be spent as a one-off cost on a new product development project. These up-front expenses are the cost of getting a product from a conceptual idea to the point it can start production.
These costs will need to be planned and budgeted for in the project plan and include project staff wages, all materials for prototypes, production of prototypes, manufacture of test products, testing the products, and any jigs and fixtures dedicated to testing.
👉 Related: Listen to this podcast episode about NRE costs for more detailed information as we take a deep dive into these one-time expenses (investment) that you need to pay in order to get your product into production:
What is a typical non-recurring engineering charge?
NRE costs also include all pre-production activities and requirements such as production line tooling, jigs and fixtures, production tooling like injection molding tools or die casting tooling, any test rigs that need to be developed to ensure quality control measures are in place throughout mass production. It also covers all the electronics and software development, and not forgetting factory visits to suppliers to ensure they are capable of producing the components you subcontract out for manufacture.
How are costs factored into a new product development project?
All these up-front costs in a new product development project must be factored into every project as there will be zero revenue from this project until products start to sell as a result of bringing the product to production. In fact, there will not be any profit until the project hits the breakeven point. This can be seen in the New Product Development cash flow curve graph below:
If you are unsure what NRE fees you need to include in your project planning, you can contact us to discuss your project and we can help you generate a project plan and identify potential non-recurring engineering costs.
Further reading…
Read even more on this topic in this blog post: What Are Your Non-Recurring Engineering Costs for Production in China?
