Sophia S February 9, 2022
If any big hurdle you need to overcome in project acquisition, is project cost estimation. It is the major reason behind the making or breaking of a product development project. Therefore, today, we are going to learn how to calculate a product design cost estimate.
Different Methods for a Product Design & Development Cost Estimate
In the engineering discipline, the following are the product design and development cost estimation methods.
- Expert Judgment
- Analogous Estimating
- Three-point Estimating
- Parametric Estimating
- Bottom-up Estimating
- Data Analysis (Alternative analysis/Reserve analysis)
- Project Management Information system
- Decision-making (voting)
Out of these methods, some are quick and dirty methods to carry out a product design and development estimation for any industry while some are with high accuracy and enough details. The following illustration describes how you can go from mere perception to fact with different project estimation methods.
Let’s check all these methods one by one in a short and sweet way.
Expert Judgment:
Expertise comes with extensive knowledge and some experience. Based on historical data, experts draw quick estimations of the product design and development project. The expert judgment also helps in deciding which methods in the combination will work for accurate product design and development estimation.
Analogous Estimate:
When you count project scopes, cost, budget, and various measures of scale (size, weight, complexities, etc.) from previous data, you are doing an analogous estimate. Its reliability depends on the similarity of the previous projects with the current ones.
Three-point Estimate:
- Most likely (M): It is based on realistic efforts for essential work and expenses.
- Optimistic (O): It is based on an analysis of the best-case scenario.
- Pessimistic (P): It is based on an analysis of the worst-case scenario.
- For triangular distribution, the formula for an estimate is E=(O+M+P)/3.
- For traditional PERT analysis or beta distribution, the formula for an estimate is E=(O+4M+P)/6.
Thus, it clarifies the uncertainty around the expected cost.
Parametric Estimate:
It uses an algorithm or statistical relationships between parameters to estimate the product design and development cost estimate. For instance, square feet in measuring area-like parameters. It offers greater accuracy than other methods.
Bottom-up Estimate:
Here, estimation is carried out on activity level. Based on the team and physical resources, we can develop different levels of the estimate, such as work packages, summary projects, and control accounts. This way we go from the bottom level to the top level of activities. Therefore, it results in the highest accuracy in the estimate.
What You Need to Consider While Doing a Product Design & Development Cost Estimate
There are some common things we need to consider while doing a product design cost estimate.
- Quantity: Number of items in each unit or production line.
- Material: Which material do you use in product development?
- Complexity: Intricacy in product design needs more work and more materials.
- Machining Technique: Machining technologies, tools, and techniques determine the cost.
- Packaging: Packing material, quantity, and technique influence the cost.
- Shipping: When you import materials in raw form and export finished products, some shipping and customs fees are there.
Which Stages Play Part in Doing a Product Design & Development Cost Estimate
There are four main stages in product design and development, which play important roles in cost estimation. Those stages are:
- Product Design Stage
- Product Prototyping Stage
- Production Stage
- Distribution Stage
Let’s see them one by one in brief.
Product Design Stage:
It is a stage where you begin to translate your imagery idea into a drawing. You can describe each component. Whether you draw a technical diagram or outline and describe them in a photo-realistic way. It is to show its different components in proportional shapes, sizes, and materials.
In some industries, the designing stage involves the preparation of wireframes and options to select the most appropriate one. This is the stage where Shalin Designs like a firm helps you to get a quantitative and qualitative estimation of each item needed in the production of an engineering product.
Product Prototype Stage:
Now, it is time to compute the product development cost estimation. Shalin Designs is a destination where you can get cost estimation of product prototypes. We have tools to count the prices of product prototyping within a fraction of a moment and prepare the product prototypes of your design through the prototyping services.
Production Stage:
It involves rolling out your product into the real market with the required steps to meet the actual needs of the targeted audience for the product.
In due course, product engineers count on the simplicity of products to meet the needs of the primary market. They also count the affordability, usability, and performance of the product at once. It is safe to run production for initial test samples and check the response of the market before large-scale manufacturing.
At this stage, you will have a cost estimation of the product per unit considering materials, design, and timing for preparation of each unit. It brings higher accuracy in production by obtaining per unit price.
Distribution Stage:
Now, it is time to accomplish cost estimation of packaging of the product, shipping, storage, and sales. There are different ways and channels to distribute your product in the market. You must select the best path/mode for your product distribution and estimate the possible costs. You also consider regional taxes, duties, or customs fees while counting product distribution costs.
You know very well that you alone cannot do such complex product engineering processes and project cost estimation. Shalin Designs is a place to get things done righteously. We have engineers from different faculties, such as:
- Civil engineers
- Architects
- Interior & Exterior building designers
- Electronic engineers
- Electric engineers
- Mechanical engineers
- Automotive and automobile engineers
Thus, the entire team can help you calculate product design and development estimates in any industry using their expertise and experience.
Do you have any idea about a product design project? feel free to reach out by submitting this form our expert team will get back to you within 24 hours.
