R&D

Research and Development Costs
October 17, 2018 by
R&D
Eric Hazen

R&D, also known as research and development; is the work a business performs to innovate, introduce, or improve a product.  In our business, R&D is one of our largest expenses, as with various other companies in the aftermarket.  We wanted to take a moment in this blog to discuss R&D costs; which often go overlooked, unnoticed, or unrecognized.  For this particular blog I will be going over our fuel starvation door for the FRS/BRZ/GT86 and WRX.  I chose this part because it is one of the components that often customers think is expensive for what it is.

Verus R&D

For the record, I get it.  It is a small component, not terribly difficult to make, why does it cost $80?  Please read the following with an open mind and realize there may be some part of the product development cycle that may not have been considered previously.

Background:

Taking you back before the product existed, there was a common issue with high-g left-hand turns.  Multiple other, well qualified, companies had looked into this issue, attempt to solve it, and could not rectify the issue without an external surge tank.  These cars were suffering from fuel starvation at over 3/4 – 7/8 full, only getting a few laps in on track before starvation occurred.

Gathering the Puzzle:

To better understand the system as a whole, we had to purchase components.  We purchased a used gas tank for $300 from a local.  We purchased the fuel pump assembly for $100 from a salvage yard, and we purchased a WRX fuel basket for $60 from an online Subaru parts warehouse.  At this point, we’re about $460 into the project without putting any time and effort into figuring out what is going on to cause the fuel starvation.

Verus R&D


Daily Cost of Doing Business:

Before we dive into the time it took to solve the issue; let’s figure out roughly the cost of doing business day to day.  Rent with utilities comes out to roughly $625 per week.  CAD software is roughly $500 per week.  This does not include actual man hours.  With a modest salary of 36k per year, that comes out to $690 per week.  This comes out to a total of $1,815 per week.  Keep in mind that these costs are only the costs associated with this particular product, we also have costs for CFD/FEA software, scanning software, insurance, the list goes on; but to be completely transparent and bare bones, I am only including the costs of the software and the one person involved in this project.

Project Timeframe:

Believe it or not, this project took us 3 weeks to come up with the solution you have come to know today.  It is easy to say, “Why didn’t you see the door the first day you started messing with all of this?”  Well, none of the other companies did either and it is easy to say that after someone has figured out the solution.  Regardless, at the end of the day it took us roughly 3 weeks to find this location for a non-existent door that should have been there from the factory.  During these 3 weeks, we printed about a dozen possible solutions, as we initially were designing and building our own check valves that would go on the inlet into the pump basket.

After spotting this non-existent fuel door, we printed up a test piece and sent it to Neil @ TheRacersLine who said he could test it.  At that time, we could finally prove that our fix resolved the issues some track enthusiasts were seeing.

Total R&D Budget for the Fuel Door:

Including the printing time and cost of material, with the timeframe the project took, we were at about $6,000 in R&D cost before producing a single product.

Conclusion:

I hope that you can now see there may be another side of the story (or part in this case) that is not always prevalent when you look at the final product.  Some projects take significantly more time and effort and others take less.  That all has to go into final pricing of a product so that ultimately we can cover our costs and recoup our losses.

R&D
Eric Hazen October 17, 2018
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