If product development costs seem to be increasing with every project, you're not alone.

Many manufacturers assume the cost of developing a new product is driven primarily by labor rates, product complexity or project schedules. While these factors play a role, they are not always the biggest contributors to overall development costs.

In many cases, rising product development costs are the result of rework, engineering changes, repetitive tasks and inefficient processes. These issues consume engineering time and can delay product development.

Industry research suggests that 70–80% of a product's total lifecycle cost is determined during the concept and design stage, long before a single part is manufactured. This means one of the best opportunities to control the cost of developing a product is in the design process itself.

So, if you've ever asked, "How much does it cost to develop a product?" and gotten an answer that felt more like a guess, this is why. Let's break down what's driving product development costs and what leading OEMs do differently to keep them under control.

What drives product development cost?

When the cost of new product development increases, labor rates, material costs and part complexity get blamed first. But these rarely explain why a project needed 30% more engineering hours than the original estimate.

In most cases, the real cost driver is work that has to be revisited, repeated, or corrected mid-development. Late design changes, an extra prototype build, a delayed design review, none of these look significant in isolation. But together, they can add hundreds of engineering hours and quietly impact both the budget and the schedule.

Here are the few reasons, in more detail:

1. Late-stage design changes and rework

One of the biggest drivers of product development costs is design rework.

Some issues aren’t visible until detailed design, prototyping, or manufacturing. A part may not fit as expected. A customer requirement may change. In other cases, a design works on paper but is difficult to machine, fabricate, or assemble efficiently.

The later these issues are discovered, the more expensive they become to fix. What could have been resolved during an early design review may require multiple drawing updates, design revisions, and additional engineering effort later in the project.

2. Multiple prototype iterations

Building and testing prototypes is a normal part of product development.

The challenge is when multiple rounds of prototyping are needed before a design is ready for production. Each additional iteration requires more engineering time, testing, validation, and project resources.

Many of these costs can be reduced by identifying manufacturability and design issues earlier in the development process.

3. Engineering Change Orders (ECOs)

Engineering changes are expected during product development. Problems arise when they become frequent or occur late in the project.

Even a small change can affect CAD models, drawings, BOMs, purchasing activities, and manufacturing plans. As changes accumulate, engineering teams spend more time managing revisions and less time moving development forward.

4. Redesigning similar products

Many OEMs offer product variants, customer-specific configurations, or updated versions of existing products.

Without a structured approach to design reuse, engineers often find themselves solving the same problems repeatedly. Similar assemblies are redesigned, existing drawings are modified, and proven designs are recreated instead of being reused.

Over time, this repeated effort consumes valuable engineering capacity and increases the cost of new product development.

5. Manual CAD and documentation work

Many engineering teams spend a significant amount of time updating drawings, revising BOMs, and generating documentation.

Individually, these tasks may seem minor. Across multiple projects, they can consume a substantial amount of engineering time.

As product portfolios grow, reducing repetitive engineering work through standardization and automation can significantly improve efficiency.

6. Slow design reviews and approval cycles

Not every delay is caused by engineering work itself.

Projects often slow down while teams wait for design reviews, approvals, supplier feedback, or key decisions. During this time, progress stalls and project timelines continue to grow.

While these delays are often overlooked, they can have a significant impact on product development costs and time to market.

Cost Factor How It Impacts Development Costs How to Fix It
Late-stage design changes Every change after approval means redoing CAD models, drawings, and BOMs that were already finished. Catch issues earlier through design reviews, simulation, and tolerance analysis.
Multiple prototype iterations Each extra round adds build time, testing, and validation before a design is production-ready. Design with manufacturing in mind from the start.
Engineering Change Orders (ECOs) Even a small design change can affect drawings, BOMs, purchasing, and manufacturing. Define requirements earlier so fewer changes are needed once work is underway.
Redesigning similar products Engineers re-solve the same problems each time a similar product is designed from scratch. Treat proven designs as reusable assets instead of one-off work.
Manual CAD and documentation work Routine drawing and BOM updates seem minor but add up to real engineering hours across projects. Standardize designs first, then automate repetitive engineering tasks.
Slow design reviews and approvals Projects stall while engineers wait on approvals, then have to re-ramp once feedback arrives. Tighten review cycles and reduce back-and-forth bottlenecks.

Why product development cost estimation is often inaccurate

Cost factors like engineering labor and material costs can be estimated with reasonable accuracy. But the average cost of developing a product is harder to predict. Rework, late-stage changes, additional prototype cycles and approval delays are often difficult to anticipate and can significantly affect the final outcome.

That's the major problem with most product development cost estimation models. Most estimates consider planned engineering work but not the rework, design changes, delays, and additional effort that often occur during development.

As a result, two manufacturers developing similar products can end up with very different product development costs. The difference is often not engineering capability. It's how much time is spent moving the project forward versus fixing problems along the way.

Every hour spent on avoidable rework is an hour that can't be spent developing new products, improving existing platforms, or responding to changing customer requirements.

Is your product development process costing more than it should?

Most manufacturers can tell when product development costs are increasing. The harder question is understanding why.

In many cases, costs don't rise because of one major problem. They increase gradually as multiple issues across the development process begin to add up.

Over time, these issues can consume valuable engineering capacity, delay projects, and make it harder to keep up with new product development priorities.

A few signs that your product development cost may be higher than they should be:

  • Engineering hours continue to increase even when project requirements remain largely unchanged.
  • Similar products or customer configurations require nearly the same effort as a completely new design.
  • Manufacturing or assembly issues are discovered late in the development process.
  • Machines, tools, or production equipment are unable to manufacture the product as originally designed.
  • Projects regularly take longer than expected despite careful planning.
  • Engineers spend too much time revising existing work instead of moving new projects forward.
  • Engineering teams struggle to keep up with new development work because resources are tied up supporting existing projects.

If several of these signs sound familiar, the problem may not be a lack of your engineering team’s effort. It may be how that effort is being spent.

How to reduce product development costs

Manufacturers that consistently control product development costs aren't necessarily the ones with the largest engineering teams or budgets. They're the ones that spend less time repeating work and managing avoidable changes. Instead, they focus engineering effort on activities that move products forward.

Here are some of the steps leading OEMs take to reduce product development costs and improve engineering efficiency:

1. Validate designs earlier

A design can meet every requirement on paper and still fail during prototyping, testing, or assembly. By the time that happens, even a small fix can trigger a full round of model updates, drawing revisions and revalidation. Structured design reviews, simulation, tolerance stack-up analysis and cross-functional feedback from the manufacturing team can help catch these issues earlier.

2. Apply DFM (and Design to Cost) throughout the design process (not after it)

Cost and manufacturability shouldn't be addressed only during prototyping or production. Considering them early makes design changes easier and less expensive to implement.

Design for Manufacturing (DFM) helps identify potential manufacturing and assembly issues before they become costly problems. Many OEMs also apply Design to Cost (DTC), treating cost as a design requirement from the beginning rather than something to address later.

Material selection, fabrication methods, part counts and manufacturing processes are evaluated throughout development. In many cases, reducing excess material, simplifying fabrication, or eliminating unnecessary components lower product costs without affecting performance.

By making these decisions early, manufacturers can simplify production and control product costs more effectively.

Related case study: See how Sedin Engineering optimized a Battery Energy Storage System (BESS) container design to reduce material usage, lower fabrication costs and maintain structural performance.

3. Treat proven designs as reusable assets

Most manufacturers already have proven assemblies, standard components and validated sub-systems within their product portfolio. Yet engineering teams often spend time recreating work that has already been done.

Treating these proven designs as reusable assets allows OEMs to build on existing solutions where possible and focus engineering effort on the areas that truly require new development.

This allows engineers to spend more time on innovation and new product development rather than redesigning proven solutions. The result is faster development cycles, more consistent designs and a lower cost of new product development.

4. Control product complexity before it compounds

Product complexity often grows over time. A customer-specific feature becomes a standard option. A temporary configuration becomes part of the product line.

While each change may seem small, the combined impact can be significant. More complexity often means more engineering effort, more documentation, more testing, and more opportunities for errors.

Regular product reviews can help OEMs identify unnecessary complexity and standardize where possible. This reduces engineering effort and simplifies manufacturing, which further helps keep product development costs under control.ol.

5. Standardize before you automate

CAD automation is one of the highest-leverage tools available for reducing repetitive engineering hours. But it only works once there's something consistent to automate. If every product follows a different approach, automation can simply carry those inconsistencies forward.

That's why standardization should come first. Common parts, assemblies and design practices can be standardized before automation is introduced. This creates a consistent foundation for automating repetitive tasks such as drawing creation, BOM updates and product configurations.

Once these tasks are standardized and automated, engineering teams can complete routine work faster and spend more time on higher-value engineering activities.

6. Control design data and revisions

Engineering teams can't work efficiently when drawings, models and documentation are scattered across different locations or multiple versions exist for the same design.

Many engineers spend valuable time searching for the latest files, checking revisions, or confirming they are working with the correct information.

Maintaining a single source of truth for design data, clear revision control processes and consistent documentation standards can reduce this waste. This improves engineering efficiency and reduces errors throughout the product development process.

7. Reduce waiting, not just work

Not every delay comes from engineering work. Projects can slow down while teams wait for approvals, supplier feedback, design reviews, or updated drawings.

Streamlining review cycles and improving coordination between engineering, manufacturing and sourcing teams can help reduce these bottlenecks. This allows projects to move forward faster while reducing avoidable development delays.

Where should you start?

Most manufacturers don't need to fix everything at once. Start by identifying where engineering time is actually going:

  • Design changes keep delaying projects: Start with validation and DFM. The earlier an issue is caught, the less it costs to fix.
  • Similar work keeps getting repeated across projects: Design reuse is probably your biggest opportunity. Reusing proven designs directly lowers your average cost of product development.
  • New products consistently take longer than expected: Product complexity may be the real culprit. Review where custom features and one-off variations are adding hidden engineering effort.
  • Engineers spend too much time hunting for the right file: Stronger data management and revision control usually pays for itself faster than any other fix on this list.
  • Engineering can't keep pace with demand: Additional engineering capacity may be the right near-term answer, so critical programs keep moving without burning out your core team.

Start with whichever bottleneck is costing engineering productivity the most. Fixing one major issue is often enough to meaningfully reduce product development cost on its own. You don't need to hold everything at once to see the impact.

Looking to reduce your product development costs?

Product development costs often increase when engineering teams spend too much time on rework, repetitive tasks, design changes, product variants and avoidable delays. Identifying these bottlenecks can help reduce engineering effort and keep development projects moving.

Sedin Engineering supports OEMs and manufacturers with product design, DFM, CAD automation and new product development, helping engineering teams manage development workloads and reduce unnecessary effort.

Explore our new product development services.