In the late 1980s and early 1990s, many Western organizations began re-evaluating and re-engineering their new product development processes. The reality in many markets today is that 40 percent or more of revenues come from new products introduced in the prior year. Thus, unless supply chain partners can create a continuous stream of freshened and innovative technologies and products for customers, customers will take their business elsewhere. The combination of speed-to-market pressures and the need for product innovation forced many firms to experiment with new ways of bringing new products to market. The implications for manufacturing were significant. No longer was the production function notified after the product design was complete; instead, it would become involved throughout the process.
The results have been significant. Encouraging manufacturing’s input early in the new product development process has allowed new product development (NPD) teams to be cognizant of manufacturing’s current capabilities, capacities, strengths, and weaknesses when there is still time to do something about it.
Forgetting customers is one of the first dangers with this approach, however. In order to truly develop unique and exciting products, NPD teams must remember to include customers and suppliers! Customer integration is often limited to using the results of a market survey to identify “market niches” where the company could gain a foothold in a potential new market. An over-reliance on market surveys can be misleading, as such surveys do not always accurately depict what the customer really wants. In some cases, the customer does not know what they want, and the task of the team is to understand the “latent” need that is present.
Robert Lutz, the new product development czar at General Motors recognizes the importance of customer integration as well. To create successful new products requires innovative thinking, and truly listening to the customer, as well as being open to new ideas. In a memo to his employees, he emphasized that product portfolio creation is partly disciplined planning, but partly spontaneous, inspired all-new thinking that excites customers (1).
“A good planning process can be an excellent baseline tool, a means of generating solid data. But it cannot robotically create a good future portfolio. It will generate bunts, singles, walks, and the occasional double. But triples and homeruns come from people who say, “Hey, I’ve got an idea!! Listen to this!” Steven Spielberg does not do research in moviegoer needs segments. Needs-segment analysis can find a “small minivan” niche. It can’t find a PT Cruiser, or a new BMW Mini, or an H2!”
The second danger of forgetting customer involvement is internalizing the design process with an excessive focus on manufacturability. It has been argued that manufacturing awareness of the product from its conception might mean that what is actually produced at the end is more likely to resemble what the customer wanted in the first place. Further, manufacturing can offer “manufacturability” ideas about potential product features, given the existing facilities and technology. Given these intuitively appealing arguments for involvement of manufacturing in the new product development process, the rise in popularity and success of practices such as concurrent engineering should not be surprising.
Robert Lutz, in his memo to employees, warned about the dangers of putting too much stock on manufacturability at the expense of customer needs: “Standardizing options for the sake of simplifying the BOM, engineering and releasing effort, pricing, dealer stocks, etc. is very worthwhile. But it can be counterproductive if it reduces vehicle margins, i.e., the net revenue loss is greater than the demonstrated savings in the enabling disciplines” (2).
Another concept that has emerged as a central component of NPD teams is the effective integration of suppliers. Purchasing personnel are often able to identify the appropriate suppliers to involve, based on experience with similar projects and their demonstrated technological capabilities. In a manner similar to the integration of manufacturing discussed above, it was argued that involving the purchasing function and supplier representatives early in the process allowed for a smoother, less expensive, and speedier development process. This is true for the most part. However, the hidden danger here is ascertaining whether a supplier selected for integration has the available capacity, can ramp up production in time, and that the supplier’s suppliers are also capable of doing so. Tales abound of companies who thoroughly qualified a first-tier supplier, only to encounter problems due to a design or capacity problem with a second or third tier supplier.
In the long run, competitiveness is the result of an ability to nurture and develop, at a lower cost and faster than competitors, the core competencies that result in unanticipated, innovative products. Core competencies include a firm’s collective learning, especially its ability to coordinate diverse production skills and integrate multiple streams of technology, and across multiple enterprises in the supply chain. In many cases, this will require that multiple supply chain partners work together to align their individual technology roadmaps, in order to create innovative new products that combine their individual core strengths in a new and exciting way.
(1) Appeared in Autoweek Online on October 12, 2001.
(2) Appeared in Autoweek Online on October 12, 2001.