The Methodology

A development project's funding needs must initially be estimated by a detailed, analysis of the development project's anticipated requirements, the product's operational and servicing requirements, the anticipated technological and manufacturing risks and the market's expectations. Since there is always a limited amount of funds available to a development project, the first thing to do is determine where to emphasize the funding.

All costs of a development project can be broken down into Cost Categories (defined below) that can then be prioritized within the Quantity-Complexity Matrix as to their relative importance. The resulting prioritized Cost Categories are then associated with their corresponding Development Functions (defined below), which are the basic product development activities. The resulting 'financial hierarchy' will indicate which processes in the development project require more funding emphasis and which require less - all based on life cycle cost considerations of the product. One can essentially, then, recognize where the investment partitioning is most effective.

Definitions: Cost Categories

A product development process can be divided into activities based on direct, indirect and cyclic cost categories; following are some of the major (but not only) activities in each Cost Category:

• NRE (Non-Recurring Product Design & Engineering Costs): Conception, Research, Specification, Technology risk assessment, Design, hazardous substance minimization, ease of recycling, Tooling, Prototyping, Testing, Manufacturing risk assessment & Manufacturing set-up
• NPD (Non-recurring Process Design Costs): Research, Planning, Logistics, Supply Chain Management and Product Tracking, Team & Facility Set-up
  
  
• NRQ (Non-Recurring Qualification Costs): Legal, Regulatory / Industry Standards Compliance, Corporate, Environmental, quality system set-up, product validation
  
  
• RCM (Recurring Costs of Manufacturing and support): Assembly, Test, QA, Regulatory Compliance, Work In Process (WIP), Finished Goods Inventory (FGI), Purchasing, stocking, Vendor Control, Shipping, Product reuse and upgrade
  
  
• RPC (Recurring Promotional Costs): Marketing & Sales, Distribution, Training, Price Maneuvering
  
  
• RMC (Recurring Maintenance Costs): Warranty, Service, Tooling Maintenance, Recycling, Reclamation, Disposal
  
  
• PRM (Periodic Costs of Risk Management): State-of-the-art Maintenance, Cost Reduction, Vendor certification, Tooling Update/recycling, mitigating Acts of God & other encumbrances, product liability litigation, obsolete WIP & FGI

Note that the recurring cost categories are usually not part of the development process. However, the ramifications of all costs within the product lifecycle need to be considered during the development project planning to allow for analysis that will help save time and costs in the subsequent project efforts.