Through purchase-based crowd-funding, manufacturers can now develop products using funds procured through advance payments. While developing prototypes has become easier and more cost-effective, mass production still carries with it traditionally steep costs.
There are few cases where funds raised through these initiatives cover the entire expenses of development up through shipment of the product. This therefore perforce requires additional fundraising, such as through approaching venture capitalists. Companies must also consider possible cases where sales of the product once it reaches the market only serve to recoup the costs of development.
Not only is it difficult to assess how much mass production will cost, but there are often many additional parameters not in the initial plan. This causes cost estimates to often be overly optimistic.

Development costs

Personnel

As seen in the early Arduino and Raspberry Pi products, physical prototypes, functional prototypes, and demonstration prototypes require a range of specialized knowledge and technical capabilities at various intervals. While the skillset required for development varies by the product in question, the personnel or outsourcers generally needed are as follows:

 

・Machinery engineers

・Electronics engineers

・Assembly engineers

・Product designers

・Software engineers

・Business side (management)

Development

When going through crowd-funding or showing at an exhibit, the external look and function of the product must be close to that of a finished product. This requires that prototypes be made with high-spec 3D printing and machining (numerical control) to produce housings and internal assemblies that function as intended.

 

Mass production costs

Housing (mold casting)

The bulk of initial costs associated with mass production go to production of molds.
Designing a housing with insufficient knowledge of mold casting can cause repeated re-dos in the design and manufacturing (a mass production prototyping phase) stage, causing many molds to be produced and driving costs up. In addition, machining the finish on the product and decorative embellishments exactly as visualized adds further steps to the process.

Printed circuit boards (PCBs)

BOM (component) purchase

CM Profit Margin

Assembly

*Includes costs of shipping parts from each plant to assembly plant

Packaging

Instruction manual

Testing, evaluation, approval

 

Defects/
defect rate

Logistics costs

 

Logistics and marketing costs
・Customs

・3PL
・Freight

・Returns

・Rate of returns

・Return freight

 

Management costs

・Customer support

・Additional development

・Personnel

・New products/version upgrades

 

Use the tool below to perform a cost simulation.

 

hardware_calcuraltor