LOW-COST PRODUCT DEVELOPMENT:
REMOVE COUNTERPRODUCTIVE POLICIES
Cost Reduction Strategy (home page) Seminars Consulting Articles Books Site Map
Half the challenge to implement new methodologies may be getting rid of existing counterproductive policies. For product development, here are some of the worst:
Don’t bite off more than Engineering can chew when planning product portfolios, which drastically decreases the success rate of all products. The book, Fast Innovation, (by Michael L. George, et al., 2005, McGraw-Hill; p. 167) presents a case study at Motorola which clearly shows how too many projects diminish the chances of project success.
In 2002, Motorola’s Computer Group tried to develop 120 products, but resources were spread so thin that no products were introduced at all! The next year they cut the workload was reduced to 22 projects and they were able to introduce eight products in 24 to 28 months. In 2004, as they got more focused on only 20 projects, they were able to launch 14 products in 12 months. Thus they were able to successfully launch almost twice as many products in half the time!
The Motorola case study also correlated project success with the total number of products being sold: The year when they had no products introduced, this division had to support the sale of 3500 existing products, which a burden on manufacturing people (who should be helping teams develop new products) and also a burden on design engineers (who get drained away to help figure out how to build "products revived from the dead"). After the number of products sold dropped to 2,000, they were able to launch eight products. After Motorola dropped the number existing products to one seventh (500), they were able to launch 14 products. This shows the value of Product Line Rationalization, which not only improves product development but also several elements of corporate performance:
The results of focusing product development and rationalizing away most existing products during a three year period was that manufacturing productivity tripled, early life failures decreased by 38 times, customer satisfaction rose from 27% to 90%, revenue increased by 2.4 times, and operational earnings increased from -6% to +7%.
Don’t allow Sales to “take all orders” and “acceptall customizations” (or, worse, encourage them) and
pollute operations with low-volume, hard-to-build products that drain resources
away from product development and other improvement programs.
Rationalize Product Lines to eliminate or
outsource high-overhead products.
Don’t “manage” product development with deadline management (track progress meeting deadlines and then putting on the pressure if any deadline is late) for the illusion of “early progress.” This can counterproductive if poorly set deadlines don’t encourage thorough up-front work.
Don’t quantify only labor and part cost and then allocate (average) all other cost (overhead) over all products, good or bad. Instead quantify total cost.
Don’t offshore manufacturing, which makes it hard to do Concurrent Engineering when there are no manufacturing people around to be “concurrent” with. In many offshoring situations, people in engineering and manufacturing are not even working at the same time.
Don’t try remove cost after the product is designed, which is so hard to do that is a waste of resources.
Don’t go for the low bidder on custom parts, which precludes vendor/partnerships and, thus, prevents those vendors from helping the company design the parts.
Companies that practice the above three will have to devote a very high percentage of product development resources of their time to:
• make change orders to try to implement DFM (because it couldn’t be done with Concurrent Engineering);
• try to take cost out after the product is designed with change orders; convert documentation for outsourcing;
• get outsourcers up to speed;
• deal with quality and delivery problems, and so forth and so on.
In his travels, the author of this site, Dr. David M. Anderson, has encountered several companies that spend two-thirds of product development resources on the above three activities which really puts their future in doubt if that future depends on new product development. Ironically, these attempts thwart six of the eight Half-Cost strategies, for reasons presented at the beginning of the offshoring article.
After DFM training, one large company that has pioneered many of these,
needed to launch an initiative called "DFM vs policy" to correct current
counterproductive policies for their first product development team to utilize
these new methodologies.
|Call Dr. Anderson at 1-805-924-0100 to discuss implementing these techniques or e-mail him at email@example.com with your name, title, company, phone, types of products, and needs/opportunities.|
Dr. David M. Anderson, P.E., fASME, CMC
Copyright 2017 by David M. Anderson
Cost Reduction Strategy (home page) Seminars Consulting Credentials Client List Articles Books Site Map