Managing and minimising NRE costs
Non-recurring engineering (NRE) costs are one-time expenses incurred during the development, design, and implementation of a manufacturing process for a new product. For many original equipment manufacturers (OEMs), these costs can make up as much as 50% of the total expenses in small-batch production. Since OEMs must also cover recurring costs like material purchases and maintenance, it is essential for them to find ways to reduce NRE costs without sacrificing quality or efficiency.
Is it possible to achieve this goal? Read this article to discover a balanced approach to managing NRE costs.
Understanding the nature of NRE costs
NRE costs are a natural result of the preparation of a production process, which makes it impossible to eliminate them completely. Solder stencil design, machine programming, reflow over profiling, and production fixture development are only some of the necessary processes contributing to the NRE costs.
When managed properly, these tasks can reduce production inefficiencies and quality-related issues, while improving the cost-effectiveness of operations in the long term. On the other hand, poor NRE management can result in costly setbacks, including the need for expensive retooling or reprogramming, production delays, and product defects, which can greatly impact profitability and customer satisfaction.
Balancing BOM and NRE costs
Unlike the one-time nature of the expenses represented by NRE costs, the Bill of Materials (BOM) covers the direct costs of manufacturing the final product, including material expenses. Despite their differences, these two cost types are closely connected.
For example, using alternative components in product manufacturing may require more or less complex programming or testing systems to maintain the desired quality, which can have an influence on NRE costs.
Achieving a balance between BOM and NRE costs requires careful planning. By selecting components that align with both material cost and production requirements, enhancing the production process, and considering flexible manufacturing strategies, OEMs can streamline both BOM and NRE expenses. Standardising components, implementing efficient designs, and continuously improving processes further help manage these costs.
Best practices for minimising NRE costs
Early collaboration with an electronics manufacturing service (EMS) provider is key to optimising NRE costs. By working together from the outset, OEMs can leverage the EMS provider’s expertise to adopt design-for-manufacturability (DFM) and design-for-testability (DFT) approaches, which are essential for minimising the need for costly design changes later on.
One crucial strategy for trimming NRE costs is avoiding overengineering. This involves simplifying geometries, reducing the use of custom parts, focusing on essential features, and standardising components. Additionally, scalable prototyping and modular testing strategies, such as reusing test fixtures, can effectively reduce both NRE and production costs.
By planning for scalability from the beginning, OEMs can avoid costly retooling, ensuring that the product design remains flexible and cost-effective as production volumes increase.
Optimising NRE costs with your EMS provider
As mentioned above, a competent and experienced EMS provider plays a pivotal role in managing NRE costs effectively. Specialists like Poland-based Assel bring deep expertise in manufacturing and testing, utilising proven workflows to prevent errors and inefficiencies. From well-prepared, efficient production lines to robust quality assurance systems, their approach ensures that NRE costs become a foundation for long-term savings. To find out more about the benefits of collaborating with a contract manufacturer, visit asselems.com.