What is Non-recurring engineering ?
Definition of Non-recurring engineering
Non-recurring engineering refers to the cost of product which is incurred just one time in the manufacturing of the product. This cost may include research, design, development and testing of a new product.
Brief Explanation of Non-recurring engineering
- As it includes elements of cost like research and testing of new product, the NRE can be really high and uncertain to be recovered if the experiment is not successful.
- Hence, when budgeting is considered to check if the new product is going to be profitable or not.
- NRE can be considered as initial investment as it directly relates to the product invention.
- Hence this NRE needs to be recovered through either the cost or sale volume of the product.
- When setting the price of profit margin of product, such initial investment needs to be considered.
- Research cost, if successful can be included in the cost of product and later can be amortized.
- It can also be paid upfront.
- NRE can be different from product to product and industry.
- It is different for manufacturing and Services Company.
- NRE cost can be reduced by having proper planning and strategy before execution and actual manufacturing of the product.
NRE cost can be reduced with the help of following steps:
Increasing number of layers or dimensions. This would also help in re planning and rectification of product at the point where it goes wrong.
Increasing volume of manufacturing or order quantity. By performing same steps again and again, discrepancies can be removed, new and efficient ideas are generated and experience is gained.
NRE can also be reduced if the product is launched and is expected to run for a long period resulting in repeat orders and high volume.