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John J. Civerolo

The key to competing successfully in the 21st Century will be flexibility or simply “speed” in meeting the customer needs. The competitive differential will be speed. Product quality and on-time customer delivery will be expectations and requirements to enter the tough competitive marketplace. Customers will demand that on-time performance and product quality be prerequisites before they will consider doing business with many manufacturing company.

Very simply, flexibility means the company must have the ability to react quickly to meet the marketplace needs. Flexibility will be required in many areas: product design, new technology, mix and volume changes, meeting customer needs, etc. The key to success will be a company's ability to succeed in the following three areas:

  • Reducing the lead time needed to get high quality, reliable new products to the marketplace on time. This process is usually called New Product Development (NPD).
  • Having the ability to react quickly to changes in the product mix and volume changes up or down without affecting delivery, cost, productivity, and quality.
  • Tailoring existing products to specific customer expectations quickly – making it “their” way.

This article will focus on the first area: New Product Development. New Product Development is not a new area of concern. It has been an area of concern for years.

A major problem that has plagued many manufacturing companies for years is a New Product Development process that is not well managed and is not under control.

A number of obstacles or problems have prevented the New Product Development process from being under control and from being well managed. Six companies recently participated in a New Product Development roundtable to discuss both problems and solutions. All the representatives in the group have been directly involved in the New Product Development process. During the roundtable discussion, the group identified many obstacles and problems that were grouped into five basic categories: They were:

  • Failure to assess customer needs accurately and in a timely manner.
  • Lack of good internal communication or teamwork.
  • Absence of a formal New Product Development process.
  • Lack of early customer/supplier involvement in the New Product Development process.
  • Failure to recognize the New Product Development process as a total company activity, rather than solely as a functional project or process.

What came out of the roundtable discussion was a consensus on nine critical issues to help guarantee success and improve the New Product Development process:

  • Customer expectations
  • Company expectations
  • Teamwork/communication technology
  • Product design
  • “Singles” versus “home runs” focus
  • Performance measurements
  • Milestones
  • Benchmarking

Lets review each in more detail:

Customer Expectations

This area was felt to be the weakest in the New Product Development process. The main reason was that the customer needs must come first, but in many companies, that has not been the case. One person was quoted as saying, “The root cause of our problems was how we looked at our product. We would say, ‘Gee, wouldn't it be nice to have one of those in our product line.’” Or, as another person said, “We only did new product introduction when the sales department told us our sales were off”.

The key to success in this area is defining the customer and the marketplace expectations. Doing this may require customer surveys, direct customer input in the new product design, Sales/Marketing information, marketplace intelligence, etc. No

single company at the roundtable had all the answers, but many felt focusing on the customer problems, not what the company wants, is one key to meeting customer expectations.

There is no clearly defined way to know what the customer expectations are, but to be successful in this area, all the channels of communication must be open. They must stay open to get a good reading and the most accurate information for future new product decisions so the customer needs can come first.

The key to success in this area is to listen to the voice of the customer.

Company Expectations

It is crucial to have clear communication to all the functional departments on the company's New Product Development strategy. This has been one of the biggest problems and obstacles preventing a well managed New Product Development process. To help solve this problem, many companies have established a New Product review board that includes the heads of each functional department. It is chaired by the Chief Operating Office.

The New Product review board ensures that strategic issues or functional disagreements are quickly addressed and resolved. Any problems in allocating the company's scarce resources can be addressed and resources allocated to the new products that pass the review board's “sanity check.”

Once a new product is authorized, it is included in the master scheduling process.

It is vital that New Product Development activities are discussed and reviewed in the monthly Sales & Operations Planning process.

A Rough Cut capacity plan representing product development capabilities is used to provide information for the Sales & Operations Planning process.

Teamwork and Communication

One of the biggest obstacles to having a well managed and controlled New Product Development process is teamwork and communication. In the past, each department has approached the company expectations from a very parochial and myopic view – usually their own. When “finished” with their part, it was usually “tossed” over the wall to the next group. Often, communication was kept to a minimum.

The new focus requires everyone throughout the company to view NPD as a company effort, not as the responsibility of a single function or department. This is why the old paradigm of “concurrent engineering” has been replaced by the new paradigm of “concurrent development”.

The new paradigm requires early involvement from all areas in the company. Getting the team together and focusing on the problems early in the process will improve the teamwork and communications. The team will require the following: a clear vision, defined expectations, guidance, allocation of resources, and the authority to make decisions.

Technology

One of the major problems with a successful New Product Development process is implementing, managing, and controlling new technology. There is an old axiom in mathematics about managing one variable at a time.

New technology may be required to meet the customer expectations and the marketplace needs. It must be addressed like any criterion (price, manufacturability, quality, sales, marketing, etc.) and must be well managed. This will prevent technology from getting out of control. As one company was quoted, “Ninety percent of our problems in the New Product Development process were caused by not doing a good job of managing the implementation of new technology”.

Product Design

In the past, the product design activities were viewed solely as the domain of Engineering. Once Engineering had designed the prototype, they tossed it over the wall to the next function and left it up to the rest of the company to figure out how to make the product.

Many companies are reviewing eleven critical issues to focus on the needs of all the functions throughout the company early in the New Product Development process. The eleven critical issues are:

  • Customer lead time versus manufacturing cumulative lead time
  • Level of detail to forecast, and at what level to master schedule
  • Where to keep the inventory investment
  • Customer order entry approach
  • Manufacturing process
  • Paperwork and transactions
  • Manufacturing cost
  • Bill of material quality structure and maintenance
  • Product design opportunities that address manufacturability and standardization as elements
  • Documentation requirements (drawings, test specifications, quality specs., methods, routings/process procedures, etc.)
  • The business needs

After the above eleven business issues have been discussed, it is important that consensus be reached on how to manage the business.

Addressing each of these critical business issues allows involvement in the process from all the functional areas, plus early involvement from key suppliers. This early involvement from the functional areas helps reduce the following problems: over-design, lack of manufacturability, lack of manufacturing process tie-in, lack of communication, lack of capacity, lack of standardization, material shortages, and unrealistic schedules.

“Singles” versus “Home runs” Focus

There must be a realistic balance between these two areas. “Singles” focus means the company is leveraging off old products and is looking for Continuous Improvement while meeting the customer expectations. “Home runs” focuses on entirely new products or technology. Without a realistic and well managed “home runs” philosophy, a company could find themselves outdistanced by their competitors.

There is no clear consensus on how to handle this area, but many companies feel most of the company's strategy should be focused on the “singles” strategy. Simultaneously, a New Product Development process should be developed that allows flexibility, both in manufacturing and NPD, to react quickly to get “home runs” into production as fast as possible.

Performance Measurements

An old paradigm of managing new products was to focus solely on product cost or Research and Development (R&D) cost as a percentage of sales, and to focus on coming in under budget. Having a narrow focus only on increasing or decreasing product cost is extremely dangerous.

It is critical that the overall company, product, and manufacturing strategy be reviewed. The key is to get as many profitable products to meet customer expectations as is possible.

The new paradigms for NPD measurements are:

  • Percentage of sales from new products
  • Time to market for new products compared to the past
  • Volume of bill of material changes on new products, both from Manufacturing and Engineering, and the root causes of why a change was required
  • Actual gross margin versus planned gross margin
  • Actual demand versus planned demand
  • Actual inventory versus planned inventory

The Sales & Operations Planning (S&OP) process is where the New Product Development (NPD) process is monitored and where the performance measurements are reviewed.

“Phases and Gates” Milestones

Identifiable milestones are needed in the New Product Development process. Milestones are essential to make sure the NPD process remains on schedule, is well managed, and is under control. Many companies use a “phases and gates” checkpoint monitoring process. This ensures that the external/internal customer expectations, required deliverables, and specific events are being achieved on time.

The phases and gates checkpoints are used to make go/no-go decisions. If the proper deliverables or specific events are not achieved, then corrective actions can

be taken to solve any problems that occur during the New Product Development process. Phases and gates allow for more objective (versus subjective) measurement criteria to help guarantee a reliable and high quality product that meets the external customer expectations in a timely manner.

Benchmarking

The purpose of benchmarking is to test the existing process against how other companies are managing their NPD process. Benchmarking helps a company find the “best” in the class, always searching for new and innovative approaches to help improve the company's New Product Development process.

What is the message for New Product Development? Old paradigms must be replaced by new paradigms. The old paradigms are:

  • It's solely Engineering's job.
  • New Product Development is viewed as a series of activities where each functional area tosses “their” information over the wall to the next functional area (internal customer).
  • The sole focus is on minimizing the Research and Development and product cost.
  • Suppliers bid and are chosen after the design phase.
  • The desire is to create technical marvels.

The new paradigms for New Product Development are:

  • It is a company job requiring good teamwork and communication.
  • There is a concurrent development process involving all the functions.
  • Products are developed that sell, are reliable, and are at a high quality level.
  • Key suppliers help in the design efforts. The are also involved early in the process.
  • The strategy is to develop what the customer wants and what meets the customer’s expectations.

The message is simple: Bringing new products to the marketplace quickly involves many people throughout the organization in a concurrent process. This will be critical for meeting the marketplace needs in the next century.

Bring new products to the marketplace faster in the 21st Century will be the difference in being the leader of the competitive race or finishing out of the running. Where will your company be? In front of the pack, or trailing it?

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If you have specific questions about this article or want to discuss it, call Chris Gray at 1 603 778-9211. 

 The Partners for Excellence specialize in helping companies set up comprehensive measurement programs and improving overall resource management performance.  Contact us at 1 603 528-0840 or emailThis email address is being protected from spambots. You need JavaScript enabled to view it..