Budgeting
Engineering organizations, like most other types of organizations, develop cost budgets that include all the resources they can track such as money, people hours, calendar time and space; both as initial investments and recurrent operational costs or future commitments (Gilb, 1997). However, according to Gilb, engineering organizations face unique challenges because it is often impossible to estimate a step cost budget until the following is known about a particular step:
The design ideas to be used, and their costs
The functionality to be changed, and their costs
The process for acquiring the step content, and its cost
The process for integrating and testing the step content, and its cost
The process for deploying the step content to the recipient, and its cost
Some organizations ignore costs while others attempt to deal with these unknowns in the budget process by turning to techniques such as design to cost (DTC) and cost as an independent variable (CAIV).
Often, product cost considerations are an afterthought in engineering (Crow, 2000). Costs are recorded and used as the basis for determining the product's price. However, Crow states that this approach leaves a company vulnerable to more budget savvy competitors. In other engineering organizations, cost receives greater consideration, but not until late in the development cycle. Projected costs of production are estimated based on...
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