Catch Solution: March 2014

What is Markets and Marketing for Product Development ?

Marketing is concerned with the interaction between the corporation and the customer.Customers are the people or organizations that purchase products. However, we need to differentiate between the customer and the user of the product. The corporate purchasing agent is the customer in so far as the steel supplier is concerned, for she negotiates price and contract terms, but the design engineer who developed the specification for a highly weldable grade of steel is the end user (indirect customer), as is the production supervisor of the assembly department. Note that the customer of a consulting engineer or lawyer is usually called a client.

Markets

The market is an economic construct to identify those persons or organizations that have an interest in purchasing or selling a particular product, and to create an arena for their transactions. We generally think of the stock market as the prototypical market.

A quick review of the evolution of consumer products is a good way to better understand markets. At the beginning of the Industrial Revolution, markets were mainly local and consisted of close-knit communities of consumers and workers in manufacturing companies. Because the manufacturing enterprise was locally based, there was a close link between the manufacturers and the users of their product, so direct feedback from customers was easily achieved. With the advent of railroads and telephone communication, markets expanded across the country and very soon became national markets. This created considerable economy of scale , but it required new ways of making products available to the customer. Many companies created a national distribution system to sell their products through local stores. Others depended on retailers who offered products from many manufacturers, including direct competitors. Franchising evolved as an alternative way of creating local ownership while retaining a nationally recognized name and product. Strong brand names evolved as a way of building customer recognition and loyalty.

As the capability to produce products continued to grow, the markets for those products expanded beyond the borders of one country. Companies then began to think of ways to market their products in other countries. The Ford Motor Company was one of the first U.S. companies to expand into overseas markets. Ford took the approach of developing a wholly owned subsidiary in the other country that was essentially selfcontained. The subsidiary designed, developed, manufactured, and marketed products for the local national market. The consumer in that country barely recognized that the parent company was based in the United States. This was the beginning of multinational companies . The chief advantage of this approach was the profits that the company was able to bring back to the United States. However, the jobs and physical assets remained overseas.

Another approach to multinational business was developed by the Japanese automakers. These companies designed, developed, and manufactured the product in the home nation and marketed the product in many locations around the world. This became possible with a product like automobiles when roll-on / roll-off ships made low-cost transportation a reality. Such an approach to marketing gives the maximum benefit to the home nation, but with time a backlash developed because of the lost jobs in the customer countries. Also, developing a product at a long distance from the market makes it more difficult to satisfy customer needs when there is a physical separation in cultural backgrounds between the development team and the customers. More recently, Japanese companies have established design centers and production facilities in their major overseas markets.

It is very clear that we are now dealing with a world market . Improved manufacturing capabilities in countries such as China and India, coupled with low-cost transportation using container ships, and instant worldwide communication with the Internet, have enabled an increasing fraction of consumer products to be manufactured overseas. In 2005, manufacturing jobs in the United States accounted for only one in nine jobs, down from one in three in 1950. This is not a new trend. The United States became a net importer of manufactured goods in 1981, but in recent years the negative balance of trade has grown to possibly unsustainable proportions. The reduction in the percentage of the U.S. engineering workforce engaged in manufacturing places greater incentive and emphasis on knowledge-based activities such as innovative product design.

Market Segmentation

Although the customers for a product are called a “market” as though they were a homogeneous unit, this generally is not the case. In developing a product, it is important to have a clear understanding of which segments of the total market the product is intended to serve. There are many ways to segment a market. Table 2.1 lists the broad types of markets that engineers typically address in their design and product development activities.

One-of-a-kind installations, such as a large office building or a chemical plant, are expensive, complex design projects. With these types of projects the design and the construction are usually separate contracts. Generally these types of projects are sold on the basis of a prior successful record of designing similar installations, and a reputation for quality, on-time work. Typically there is frequent one-on-one interaction between the design team and the customer to make sure the user’s needs are met. For small-batch engineered products, the degree of interaction with the customer depends on the nature of the product.

For a product like rail cars the design specification would be the result of extensive direct negotiation between the user’s engineers and the vendor. For more standard products like a CNC lathe, the product would be considered an “off-the-shelf” item available for sale by regional distributors or direct from catalog sales.

Raw materials, such as iron ore, crushed rock, grain and oil, are commodities whose characteristics are well understood. Thus, there is little interaction between the buyer’s engineers and the seller, other than to specify the quality level (grade) of the commodity. Most commodity products are sold chiefl y on the basis of price.

When raw materials are converted into processed materials, such as sheet steel or a silicon wafer, the purchase is made with agreed-upon industry standards of quality, or in extreme cases with specially engineered specifications. There is little interaction of the buyer’s and seller’s engineers. Purchase is highly influenced by cost and quality.

Most technical products contain standard components or subassemblies that are

made in high volumes and purchased from distributors or directly from the manufacturer.

Companies that supply these parts are called vendors or suppliers , and the

Table 1 Markets for Engineered Products, Broadly Defined.

companies that use these parts in their products are called original equipment manufacturers (OEM). Usually, the buyer’s engineers depend on the specifications provided by the vendor and their record for reliability, so their interaction with the vendor is low. However, it will be high when dealing with a new supplier, or a supplier that has developed quality issues with its product.

All products contain parts that are custom designed to perform one or more functions required by the product. Depending on the product, the production run may vary from several thousand to a few million piece parts. Typically these parts will be made as castings, metal stampings, or plastic injection mouldings. These parts will be made in either the factory of the product producer or the factory of independent parts - producing companies. Generally these companies specialize in a specific manufacturing process, like precision forging, and increasingly they may be located worldwide. This calls for considerable interaction by the buyer’s engineers to decide, with the assistance of purchasing agents, where to place the order to achieve reliable delivery of high-quality parts at lowest cost.

Luxury consumer products are a special case. Generally, styling and quality materials and workmanship play a major role in creating the brand image. In the case of a high-end sports car, engineering interaction with the customer to ensure quality may be high, but in most products of this type styling and salesmanship play a major role. After-sale maintenance and service can be a very profitable market for a product producer. The manufacturers of inkjet printers make most of their profit from the sale of replacement cartridges. The maintenance of highly engineered products like elevators and gas turbine engines increasingly is being done by the same companies that produced them. The profits over time for this kind of engineering work can easily exceed the initial cost of the product.

The corporate downsizings of their staff specialists that occurred in the 1990s resulted in many engineers organizing specialist consulting groups. Now, rather than using their expertise exclusively for a single organization, they make this talent available to whoever has the need and ability to pay for it. The marketing of engineering services is more difficult than the marketing of products. It depends to a considerable degree on developing a track record of delivering competent, on-time results, and in maintaining these competencies and contacts. Often these firms gain reputations for creative product design, or for being able to tackle the most difficult computer modelling and analysis problems. An important area of engineering specialist service is systems integration . Systems integration involves taking a system of separately produced subsystems or components and making them operate as an interconnected and interdependent engineering system.

Having looked at the different types of markets for engineering products, we now look at the way any one of these markets can be segmented. Market segmentation recognizes that markets are not homogeneous, but rather consist of people buying things, no two of whom are exactly alike in their purchasing patterns. Market segmentation is the attempt to divide the market into groups so that there is relative homogeneity within each group and distinct differences between groups. Cooper suggests that

four broad categories of variables are useful in segmenting a market.

State of Being

A. Sociological factors—age, gender, income, occupation

B. For industrial products—company size, industry classification (SIC code), nature of the buying organization

C. Location—urban, suburban, rural; regions of the country or world

State of Mind— This category attempts to describe the attitudes, values, and lifestyles of potential customers.

Product Usage— looks at how the product is bought or sold Heavy user; light user; nonuser Loyalty: to your brand; to competitor’s brand; indifferent

Benefit Segmentation— attempts to identify the benefits people perceive in buying the product. This is particularly important when introducing a new product. When the target market is identified with benefits in mind, it allows the product developers to add features that will provide those benefits.

Functions of a Marketing Department

The marketing department in a company creates and manages the company’s relationship with its customers. It is the company’s window on the world with its customers. It translates customer needs into requirements for products and influences the creation of services that support the product and the customer. It is about understanding how people make buying decisions and using this information in the design, building, and selling of products. Marketing does not make sales; that is the responsibility of the

sales department.

The marketing department can be expected to do a number of tasks. First is a preliminary marketing assessment, a quick scoping of the potential sales, competition, and market share at the very early stages of the product development. Then they will do a detailed market study. This involves face-to-face interviews with potential customers to determine their needs, wants, preferences, likes, and dislikes. This will be done before detailed product development is carried out. Often this involves meeting with the end user in the location where the product is used, usually with the active participation of the design engineer. Another common method for doing this is the focus group. In this method a group of people with a prescribed knowledge about a product or service is gathered around a table and asked their feelings and attitudes about the product under study. If the group is well selected and the leader of the focus group is experienced, the sponsor can expect to receive a wealth of opinions and attitudes that can be used to determine important attributes of a potential product.

The marketing department also plays a vital role in assisting with the introduction of the product into the marketplace. They perform such functions as undertaking customer tests or field trials (beta test) of the product, planning for test marketing (sales) in restricted regions, advising on product packaging and warning labels, preparing user instruction manuals and documentation, arranging for user instruction, and advising on advertising. Marketing may also be responsible for providing for a product support system of spare parts, service representatives, and a warranty system.

Elements of a Marketing Plan

The marketing plan starts with the identification of the target market based on market segmentation. The other main input of the marketing plan is the product strategy , which is defined by product positioning and the benefits provided to the customer by the product. A key to developing the product strategy is the ability to define in one or two sentences the product positioning, that is, how the product will be perceived by potential customers. Of equal importance is to be able to express the product benefits . A product benefit is not a product feature, although the two concepts are closely related. A product benefit is a brief description of the main benefit as seen through the eyes of the customer. The chief features of the product should derive from the product benefit.

EXAMPLE

A manufacturer of garden tools might decide to develop a power lawnmower targeted at the elderly population. Demographics show that this segment of the market is growing rapidly, and that they have above-average disposable income. The product will be positioned for the upper end of the elderly with ample disposable income. The chief benefit would be ease of use by elderly people. The chief features to accomplish this goal would be power steering, an automatic safety shutoff while clearing debris from the blade, an easy-to-use device for raising the mower deck to get at the blade, and a clutch less transmission.

A marketing plan should contain the follow information:

A. Evaluation of market segments, with clear explanation of reasons for choosing the target market

B. Identify competitive products

C. Identify early product adopters

D. Clear understanding of benefits of product to customers

E. Estimation of the market size in terms of dollars and units sold, and market share

F. Determine the breadth of the product line, and number of product variants

G. Estimation of product life

H. Determine the product volume/price relationships Complete financial plan including

Discuss Organization for Design and Product Development.

The organization of a business enterprise can have a major influence on how effectively design and product development are carried out. There are two fundamental ways for organizing a business: with regard to function or with respect to projects.

A brief listing of the functions that encompass engineering practice is given in Fig. 1. At the top of this ladder is research, which is closest to the academic experience, and as we progress downward we find that more emphasis in the job function is given to financial and administrative matters and less emphasis is given to strictly technical matters. Many engineering graduates find that with time their careers follow the progression from heavy emphasis on technical matters to more emphasis on administrative and management issues.

Fig 1 Spectrum of engineering functions.

A project is a grouping of activities aimed at accomplishing a defined objective, like introducing a particular product into the marketplace. It requires certain activities: identifying customer needs, creating product concepts, building prototypes, designing for manufacture, and so on. These tasks require people with different functional specialties. As we shall see, the two organizational arrangements, by function or by project, represent two disparate views of how the specialty talents of people should be organized.

An important aspect of how an enterprise should be organized is concerned with the links between individuals. These links have to do with:

1) Reporting relationships: A subordinate is concerned about who his or her supervisor is, since the supervisor influences evaluations, salary increases, promotions, and work assignments.

2) Financial arrangements: Another type of link is budgetary. The source of funds to advance the project, and who controls these funds, is a vital consideration.

3) Physical arrangement: Studies have shown that communication between individuals is enhanced if their offices are within 50 feet of each other. Thus, physical layout, whether individuals share the same office, floor, or building, or are even in the same country, can have a major impact on the spontaneous encounters that occur and hence the quality of the communication. The ability to communicate effectively is most important to the success of a product development project.

We now discuss the most common types of organizations for carrying out product development activities. As each is presented, examine it with regard to the links between people.

Fig 2 Example of a functional organization.

A Typical Organization by Functions

Figure 2 shows an organization chart of a typical manufacturing company of modest size organized along conventional functional reporting lines. All research and engineering report to a single vice president; all manufacturing activity is the responsibility of another vice president. Take the time to read the many functions under each vice president that are needed even in a manufacturing enterprise that is modest in size.Note that each function is a column in the organizational chart. These reporting chain columns are often called “silos” or “stove pipes” because they can represent barriers to communication between functions. A chief characteristic of a functional organization is that each individual has only one boss. By concentrating activities in units of common professional background, there are economies of scale, opportunities to develop deep expertise, and clear career paths for specialists. Generally, people gain satisfaction from working with colleagues who share similar professional interests. Since the organizational links are primarily among those who perform similar functions, formal interaction between different functional units, as between engineering and manufacturing, is forced to the level of the unit manager or higher.

Concentrating technical talent in a single organization produces economies of scale and opportunities to develop in-depth technical knowledge. This creates an efficient organization for delivering technical solutions, but because of communication problems inherent in this structure it may not be the optimum organization for effective product development. It may be acceptable for a business with a narrow and slowly changing set of product lines, but the inevitable slow and bureaucratic decision making that this type of structure imposes can be a problem in a dynamic product situation. Unless effective communication can be maintained between engineering and manufacturing and marketing, it will not produce the most cost-effective and customer-oriented designs.

Organization by Projects

The other extreme in organizational structure is the project organization, where people with the various functional abilities needed for the product development are grouped together to focus on the development of a specific product or product line (Fig. 3). These people often come on special assignment from the functional units of the company. Each development team reports to a project manager, who has full authority and responsibility for the success of the project. Thus the project teams are autonomous units, charged with creating a specific product. The chief advantage of a project organization is that it focuses the needed talents exclusively on the project goal, and it eliminates issues with communication between functional units by creating teams of different functional specialists. Thus, decision-making delays are minimized. Another advantage of the project organization is that members of a project team are usually willing to work outside of their specialty area to get the work done when bottlenecks arise in completing the many tasks required to complete a design. They do not have to wait for some functional specialist to finish her current assignment to work on their project. Therefore, working in a project team develops technical breadth and management skills.

A product created by a project organization is not as economical in its utilization of scarce technical expertise as the functional organization. While an autonomous project team will create a product much more quickly than the functional team, it often is not as good a design as would be produced by the functional design organization.7 The problem arises when the project team really believes that it is an independent unit and ignores the existing knowledge base of the organization. It tends to “reinvent the wheel,” ignores company standards, and generally does not produce the most cost-effective, reliable design. However, the project organization is very common in start-up companies, where indeed, the project and the company are synonymous.

Fig 3 A simplified project organization.

In large companies a project organization often is time limited; once the goal of the project is achieved, the people are reassigned to their functional units. This helps to address a major disadvantage of this type of organization: that technical experts tend to lose their “cutting edge” functional capabilities with such intense focus on the project goal.

Hybrid Organizations

Midway between these two types of organizations is the hybrid organization, often called the matrix organization, which attempts to combine the advantages of the functional and project organizations. In the matrix organization each person is linked to others according to both their function and the project they work on. As a consequence, each individual has two supervisors, one a functional manager and the other a project manager. While this may be true in theory, in practice either the functional manager or the project manager predominates.8 In the lightweight project organization the functional links are stronger than the project links (Fig. 4(a)). In this matrix the functional specialties are shown along the y-axis and the various project teams along the x-axis.

Fig 4 (a) A lightweight project organization; (b) a heavyweight project organization.

The project managers assign their personnel as required by the project teams. While the project managers are responsible for scheduling, coordination, and arranging meetings, the functional managers are responsible for budgets, personnel matters, and performance evaluations. Although an energetic project manager can move the product development along faster than with a strict functional organization because there is one person who is dedicated and responsible for this task, in fact he or she does not have the authority to match the responsibility. A lightweight matrix organization may be the worst of all possible product development organizations because the top management may be deluded into thinking that they have adopted a modern project management approach when in effect they have added one layer of bureaucracy to the traditional functional approach.

In the heavyweight matrix organization the project manager has complete budgetary authority, makes most of the resource allocation decisions, and plays a strong role in evaluating personnel (Fig. 4(b)). Although each participant belongs to a functional unit,10 the functional manager has little authority and control over project decisions. However, he continues to write his people’s reviews, and they return to his organization at the end of the project. The functional organization or the lightweight project organization works well in a stable business environment, especially one where the product predominates in its market because of technical excellence. A heavyweight project organization has advantages in introducing radically new products, especially where speed is important. Some companies have adopted the project form of organization where the project team is an organizationally separate unit in the company. Often this is done when they plan to enter an entirely new product area that does not fit within the existing product areas. Sometimes this has been done when embarking on a major defense project that requires special security procedures apart from the commercial business.

We have mentioned the concern that an empowered product development team may get carried away with its freedom and ignore the corporate knowledge base to create a fast-to-market product that is less than optimum in some aspects such as cost or reliability. To prevent this from occurring, the product team must clearly under-stand the boundaries on its authority. For example, the team may be given a limit on the cost of tooling, which if exceeded requires approval from an executive outside the team. Or, they may be given an approved parts list, test requirements, or vendors from which to make their selections, and any exceptions require higher approval. It is important to define the boundaries on team authority early in the life of the team so that it has a clear understanding of what it can and cannot do. Moreover, the stage-gate review process should provide a deterrent to project teams ignoring important company procedures and policy.

Concurrent Engineering Teams

The conventional way of doing product design has been to carry out all of the steps serially. Thus, product concept, product design, and product testing have been done prior to process planning, manufacturing system design, and production. Commonly these serial functions have been carried out in distinct and separate organizations with little interaction between them. Thus, it is easy to see how the design team will make decisions, many of which can be changed only at great cost in time and money, without adequate knowledge of the manufacturing process.

Starting in the 1980s, as companies met increasing competitive pressure, a new approach to integrated product design evolved, which is called concurrent engineering . The impetus came chiefly from the desire to shorten product development time, but other drivers were the improvement of quality and the reduction of product life cycle costs. Concurrent engineering is a systematic approach to the integrated concurrent design of products and their related processes, including manufacture and support. With this approach, product developers, from the outset, consider all aspects of the product life cycle, from concept to disposal, including quality, cost, schedule, and user requirements. A main objective is to bring many viewpoints and talents to bear in the design process so that these decisions will be valid for downstream parts of the product development cycle like manufacturing and field service. Toward this end, computer-aided engineering (CAE) tools have been very useful. Concurrent engineering has three main elements: cross-functional teams, parallel design, and vendor partnering.

Of the various organizational structures for design that were discussed previously, the heavyweight project organization, usually called just a cross-functional design team or an integrated product and process product development (IPPD) team, is used most frequently with concurrent engineering. Having the skills from the functional areas embedded in the team provides for quick and easy decision making, and aids in communication with the functional units. For cross-functional teams to work, their leader must be empowered by the managers of the functional units with decision-making authority. It is important that the team leader engender the loyalty of the team members toward the product and away from the functional units from which they came. Functional units and cross-functional teams must build mutual respect and understanding for each other’s needs and responsibilities. The importance of teams in current design practice is devoted to an in-depth look at team behavior.

Parallel design, sometimes called simultaneous engineering, refers to each functional area implementing their aspect of the design at the earliest possible time, roughly in parallel. For example, the manufacturing process development group starts its work as soon as the shape and materials for the product are established, and the tooling development group starts its work once the manufacturing process has been selected. These groups have had input into the development of the product design specification and into the early stages of design. Of course, nearly continuous communication between the functional units and the design team is necessary in order to know what the other functional units are doing. This is decidedly different from the old practice of completely finishing a design package of drawings and specifications before transmitting it to the manufacturing department.

Vendor partnering is a form of parallel engineering in which the technical expertise of the vendor for certain components is employed as an integral member of the cross-functional design team. Traditionally, vendors have been selected by a bidding process after the design has been finalized. In the concurrent engineering approach, key suppliers known for proficient technology, reliable delivery, and reasonable cost are selected early in the design process before the parts have been designed. Generally, these companies are called suppliers, rather than vendors, to emphasize the changed nature of the relationship. A strategic partnership is developed in which the supplier becomes responsible for both the design and production of components, in return for a major portion of the business. Rather than simply supplying standard components, a supplier can partner with a company to create customized components for a new product. Supplier partnering has several advantages. It reduces the amount of component design that must be done in-house, it integrates the supplier’s manufacturing expertise into the design, and it ensures a degree of allegiance and cooperation that should minimize the time for receipt of components.

What is Product and Process Cycles ?

Every product goes through a cycle from birth, into an initial growth stage, into a relatively stable period, and finally into a declining state that eventually ends in the death of the product (Fig 1). Since there are challenges and uncertainties any time a new product is brought to market, it is useful to understand these cycles.

Stages of Development of a Product

In the introductory stage the product is new and consumer acceptance is low, so sales are low. In this early stage of the product life cycle the rate of product change is rapid as management tries to maximize performance or product uniqueness in an attempt to enhance customer acceptance. When the product has entered the growth stage, knowledge of the product and its capabilities has reached an increasing number of customers, and sales growth accelerates. There may be an emphasis on custom tailoring the product by making accessories for slightly different customer needs. At the maturity stage the product is widely accepted and sales are stable and are growing at the same rate as the economy as a whole. When the product reaches this stage, attempts should be made to rejuvenate it by the addition of new features or the development of still new applications. Products in the maturity stage usually experience considerable competition. Thus, there is great emphasis on reducing the cost of a mature product. At some point the product enters the decline stage. Sales decrease because a new and better product has entered the market to fulfill the same societal need.

Fig 1 Product life cycle

During the product introduction phase, where the volume of production is modest, expensive to operate but flexible manufacturing processes are used and product cost is high. As we move into the period of product market growth, more automated, higher-volume manufacturing processes can be justified to reduce the unit cost. In the product maturity stage, emphasis is on prolonging the life of the product by modest product improvement and significant reduction in unit cost. This might result in outsourcing to a lower-labour-cost location.

If we look more closely at the product life cycle, we will see that the cycle is made up of many individual processes (Fig. 2). In this case the cycle has been divided into the premarket and market phases. The former extends back to the product concept and includes the research and development and marketing studies needed to bring the product to the market phase. The investment (negative profits) needed to create the product is shown along with the profit. The numbers along the profit versus time curve correspond to the processes in the product life cycle. Note that if the product development process is terminated prior to entering the market, the company must absorb the PDP costs.

Technology Development and Insertion Cycle

The development of a new technology follows an S-shaped growth curve (Fig. 3 (a)) similar to that for the growth of sales of a product. In its early stage, progress in technology tends to be limited by the lack of ideas. A single good idea can make several other good ideas possible, and the rate of progress becomes exponential as indicated by a steep rise in performance that creates the lower steeply rising curve of the S. During this period a single individual or a small group of individuals can have a pronounced effect on the direction of the technology.

Fig 2 Expanded view of product development cycle.

Gradually the growth becomes more nearly linear when the fundamental ideas are in place, and technical progress is concerned with filling in the gaps between the key ideas. This is the period when commercial exploitation flourishes. Specific designs, market applications, and manufacturing occur rapidly in a field that has not yet settled down. Smaller entrepreneurial firms can have a large impact and capture a dominant share of the market. However, with time the technology begins to run dry, and improvements come with greater difficulty. Now the market tends to become stabilized, manufacturing methods become fixed in place, and more capital is expended to reduce the cost of manufacturing. The business becomes capital-intensive; the emphasis is on production know-how and financial expertise rather than scientific and technological expertise. The maturing technology grows slowly, and it approaches a limit asymptotically. The limit may be set by a social consideration, such as the fact that the legal speed of automobiles is set by safety and fuel economy considerations, or it may be a true technological limit, such as the fact that the speed of sound defines an upper limit for the speed of a propeller-driven aircraft.

Fig 3 (a) Simplified technology development cycle. (b) Transferring from one technology growth curve (A) to another developing technology (B).

The success of a technology-based company lies in recognizing when the core technology on which the company’s products are based is beginning to mature and, through an active R&D program, transferring to another technology growth curve that offers greater possibilities (Fig. 3(b)). To do so, the company must manage across a technological discontinuity (the gap between the two S-curves in Fig. 3(b), and a new technology must replace the existing one (technology insertion ). Past examples of technological discontinuity are the change from vacuum tubes to transistors and from the three- to the two-piece metal can. Changing from one technology to another may be difficult because it requires different kinds of technical skills, as in the change from vacuum tubes to transistors.

A word of caution. Technology usually begins to mature before profits top out, so there is often is a management reluctance to switch to a new technology, with its associated costs and risks, when business is doing so well. Farsighted companies are always on the lookout for the possibility for technology insertion because it can give them a big advantage over the competition.

Process Development Cycle

Most of the emphasis in this text is on developing new products or existing products. However, the development process shown in Fig. 2.1 can just as well be used to describe the development of a process rather than a product. Similarly, the design process described in Sec. 1.5 pertains to process design as well as product design. One should be aware that there may be differences in terminology when dealing with processes instead of products. For example in product development we talk about the prototype to refer to the early physical embodiment of the product, while in process design one is more likely to call this the pilot plant or semi works.

Process development is most important in the materials, chemicals, or food processing industries. In such businesses the product that is sold may be a coil of aluminium to be made into beverage cans or a silicon microchip containing hundreds of thousands of transistors and other circuit elements. The processes that produced this product create most of its value.

When focusing on the development of a manufacturing process for a discrete product, as opposed to a continuous flow process like sheet steel or gasoline, it is convenient to identify three stages in the development of the manufacturing process.6 Production systems are generally classified as job shop, batch flow, assembly line, or continuous flow. Generally these classes are differentiated based on the number of parts that can be handled in a batch.

1) Uncoordinated development : The process is composed of general-purpose equipment with a high degree of flexibility, similar to a batch process. Since the product is new and is developing, the process must be kept flexible.

2) Segmental: The manufacturing system is designed to achieve higher levels of efficiency in order to take advantage of increasing product standardization. This results in a high level of automation and process control. Some elements of the process are highly integrated; others are still loose and flexible.

3) Systemic : The product has reached such a high level of standardization that every process step can be described precisely, as on an assembly line. Now that there is a high degree of predictability in the product, a very specialized and integrated process can be developed.

Process innovation is emphasized during the maturity stage of the product life cycle. In the earlier stages the major emphasis is on product development, and generally only enough process development is done to support the product. However, when the process development reaches the systemic stage, change is disruptive and costly. Thus, process innovations will be justified only if they offer large economic advantage.

We also need to recognize that process development often is an enabler of new products. Typically, the role of process development is to reduce cost so that a product becomes more competitive in the market. However, revolutionary processes can lead to remarkable products. An outstanding example is the creation of microelectromechanical systems (MEMS) by adapting the fabrication methods from integrated circuits.

What is Product Development Process ?

A generally accepted model of the product development process is shown in Fig 1. The six phases shown in this diagram generally agree with those proposed by Asimow for the design process (see Sec.1.5) with the exception of the Phase 0, Planning, and the omission of Asimow’s Phases VI and VII.

FIGURE 1 The product development process.

Note that each phase in Fig 1. narrows down to a point. This symbolizes the “ gate ” or review that the project must successfully pass through before moving on to the next stage or phase of the process. This stage-gate product development process is used by many companies in order to encourage rapid progress in developing a product and to cull out the least promising projects before large sums of money have been spent. The amount of money to develop a project increases exponentially from Phase 0 to Phase 5. However, the money spent in product development is small compared to what it would cost in sunk capital and lost brand reputation if a defective product has to be recalled from the market. Thus, an important reason for using the stage-gate process is to “get it right.”

Phase 0 is the planning that should be done before the approval of the product development project. Product planning is usually done in two steps. The first step is a quick investigation and scoping of the project to determine the possible markets and whether the product is in alignment with the corporate strategic plan. It also involves a preliminary engineering assessment to determine technical and manufacturing feasibility. This preliminary assessment usually is completed in a month. If things look promising after this quick examination, the planning operation goes into a detailed investigation to build the business case for the project. This could take several months to complete and involves personnel from marketing, design, manufacturing, finance, and possibly legal. In making the business case, marketing completes a detailed marketing analysis that involves market segmentation to identify the target market, the product positioning, and the product benefits. Design digs more deeply to evaluate their technical capability, possibly including some proof-of-concept analysis or testing to validate some very preliminary design concepts, while manufacturing identifies possible production constraints, costs, and thinks about a supply chain strategy. A critical part of the business case is the financial analysis, which uses sales and cost projections from marketing to predict the profitability of the project. Typically this involves a discounted cash flow analysis with a sensitivity analysis to project the effects of possible risks. The gate at the end of Phase 0 is crucial, and the decision of whether to proceed is made in a formal and deliberate manner, for costs will become considerable once the project advances to Phase 1. The review board makes sure that the corporate policies have been followed and that all of the necessary criteria have been met or exceeded. High among these is exceeding a corporate goal for return on investment (ROI). If the decision is to proceed, then a multifunctional team with a designated leader is established. The product design project is formally on its way.

Phase 1, Concept Development, considers the different ways the product and each subsystem can be designed. The development team takes what is known about the potential customers from Phase 0, adds its own knowledge base and fashions this into a carefully crafted product design specification (PDS). This process of determining the needs and wants of the customer is more detailed than the initial market survey done

in Phase 0. It is aided by using tools such as surveys and focus groups, benchmarking, and quality function deployment (QFD). The generation of a number of product concepts follows. The designers’ creative instincts must be stimulated, but again tools are used to assist in the development of promising concepts. Now, having arrived at a small set of feasible concepts, the one best suited for development into a product must be determined using selection methods. Conceptual design is the heart of the product development process, for without an excellent concept you cannot have a highly successful product. These aspects of conceptual design are covered in this blog/

Phase 2, System-Level Design is where the functions of the product are examined, leading to the division of the product into various subsystems. In addition, alternative ways of arranging the subsystems into a product architecture are studied. The interfaces between subsystems are identified and studied. Successful operation of the entire system relies on careful understanding of the interface between each subsystem. Phase 2 is where the form and features of the product begin to take shape, and for this reason it is often called embodiment design . 1 Selections are made for materials and manufacturing processes, and the configuration and dimensions of parts are established. Those parts whose function is critical to quality are identified and given special analysis to ensure design robustness. Careful consideration is given to the product-human interface (ergonomics), and changes to form are made if needed. Likewise, final touches will be made to the styling introduced by the industrial designers. In addition to a complete computer-based geometrical model of the product, critical parts may be built with rapid protyping methods and physically tested. At this stage of

development, marketing will most likely have enough information to set a price target for the product. Manufacturing will begin to place contracts for long-delivery tooling and will begin to define the assembly process. By this time legal will have identified and worked out any patent licensing issues.

Phase 3, Detail Design, is the phase where the design is brought to the state of a complete engineering description of a tested and producible product. Missing information is added on the arrangement, form, dimensions, tolerances, surface properties, materials, and manufacturing of each part in the product. These result in a specification for each special-purpose part to be manufactured, and the decision whether it will be made in the factory of the corporation or outsourced to a supplier. At the same time the design engineers are wrapping up all of these details, the manufacturing engineers are finalizing a process plan for each part, as well as designing the tooling to make these parts. They also work with design engineers to finalize any issue of product robustness and define the quality assurance processes that will be used to achieve a quality product. The output of the detail design phase is the control documentation for the product. This takes the form of CAD files for the product assembly and for each part and its tooling. It also involves detailed plans for production and quality assurance, as well as many legal documents in the form of contracts and documents protecting intellectual property. At the end of Phase 3, a major review is held to determine whether it is appropriate to let contracts for building the production tooling, although contracts for long lead- time items such as polymer injection molding dies are most likely let before this date

Phase 4, Testing and Refinement, is concerned with making and testing many preproduction versions of the product. The first (alpha) prototypes are usually made with production-intent parts . These are working models of the product made from parts with the same dimensions and using the same materials as the production version of the product but not necessarily made with the actual processes and tooling that will be

used with the production version. This is done for speed in getting parts and to minimize the cost of product development. The purpose of the alpha test is to determine whether the product will actually work as designed and whether it will satisfy the most important customer needs. The beta tests are made on products made from parts made by the actual production processes and tooling. They are extensively tested inhouse and by selected customers in their own use environments. The purpose of these tests is to satisfy any doubts about the performance and reliability of the product, and to make the necessary engineering changes before the product is released to the general market. Only in the case of a completely “botched design” would a product fail at this stage gate, but it might be delayed for a serious fix that could delay the product launch. During Phase 4 the marketing people work on developing promotional materials for the product launch, and the manufacturing people fine-tune the fabrication and assembly processes and train the workforce that will make the product. Finally, the sales force puts the finishing touches on the sales plan.

At the end of Phase 4 a major review is carried out to determine whether the work has been done in a quality way and whether the developed product is consistent with the original intent. Because large monetary sums must be committed beyond this point, a careful update is made of the financial estimates and the market prospects before funds are committed for production.

At Phase 5, Production Ramp-Up, the manufacturing operation begins to make and assemble the product using the intended production system. Most likely they will go through a learning curve as they work out any production yield and quality problems. Early products produced during ramp-up often are supplied to preferred customers and studied carefully to find any defects. Production usually increases gradually until full production is reached and the product is launched and made available for general distribution. For major products there will certainly be a public announcement, and often special advertising and customer inducements. Some 6 to 12 months after product launch there will be a final major review. The latest financial information on sales, costs, profits, development cost, and time to launch will be reviewed, but the main focus of the review is to determine what were the strengths and weaknesses of the product development process. The emphasis is on lessons learned so that the next product development team can do even better.

The stage-gate development process is successful because it introduces schedule and approval to what is often an ad hoc process. 3 The process is relatively simple, and the requirements at each gate are readily understood by managers and engineers.It is not intended to be a rigid system. Most companies modify it to suit their own circumstances. Neither is it intended to be a strictly serial process, although Fig.1 gives that impression. Since the PDP teams are multifunctional, the activities as much as possible are carried out concurrently. Thus, marketing will be going on at the same time that the designers are working on their tasks, and manufacturing does their thing. However, as the team progresses through the stages, the level of design work decreases and manufacturing activities increase.

Factors for Success

In commercial markets the cost to purchase a product is of paramount importance. It is important to understand what the product cost implies and how it relates to the product price. More details about costing can be found in blog. Cost and price are distinctly different concepts. The product cost includes the cost of materials, compo-

nents, manufacturing, and assembly. The accountants also include other less obvious costs such as the prorated costs of capital equipment (the plant and its machinery), tooling cost, development cost, inventory costs, and likely warranty costs, in deter-

mining the total cost of producing a unit of product. The price is the amount of money that a customer is willing to pay to buy the product. The difference between the price and the cost is the profit per unit.

Profit = Product Price - Product Cost ( equation )

This equation is the most important equation in engineering and in the operation of any business. If a corporation cannot make a profit, it soon is forced into bankruptcy, its employees lose their positions, and the stockholders lose their investment. Every-one employed by a corporation seeks to maximize this profit while maintaining the strength and vitality of the product lines. The same statement can be made for a business that provides services instead of products. The price paid by the customer for a specified service must be more than the cost to provide that service if the business is to make a profit and prosper.

There are four key factors that determine the success of a product in the marketplace.

1 The quality, performance, and price of the product.

2 The cost to manufacture the product over its life cycle.

3 The cost of product development.

4 The time needed to bring the product to the market.

Let’s discuss the product first. Is it attractive and easy to use? Is it durable and reliable? Does it meet the needs of the customer? Is it better than the products now available in the marketplace? If the answer to all of these questions is an unqualified Yes, the customer may want to buy the product, but only if the price is right.

FIGURE 2 Increased sales revenue due to extended product life and larger market share.

Equation above offers only two ways to increase profit on an existing product line with a mature market base. We can increase the product’s price, justified by adding new features or improving quality, or we can reduce the product’s cost, through improvements in the production process. In the highly competitive market for consumer products the latter is more likely than the former.

Developing a product involves many people with talents in different disciplines. It takes time, and it costs a lot of money. Thus, if we can reduce the product development cost, the profit will be increased. First, consider development time. Development time, also known as the time to market, is the time interval from the start of the product development process (the kickoff) to the time that the product is available for purchase (the product release date). The product release date is a very important target for a development team because many significant benefits follow from being first to market. There are at least three competitive advantages for a company that has development teams that can develop products quickly. First, the product’s life is extended. For each month cut from the development schedule, a month is added to the life of the product in the marketplace, generating an additional month of revenues from sales, and profit. We show

the revenue benefits of being first to market in Fig. 2. The shaded region between the two curves to the left side of the graph is the enhanced revenue due to the extra sales.

A second benefit of early product release is increased market share. The first product to market has 100 percent of the market share in the absence of a competing product. For existing products with periodic development of new models it is generally recognized that the earlier a product is introduced to compete with older models, without sacrificing quality, reliability, or performance and price, the better chance it has for acquiring and retaining a large share of the market. The effect of gaining a larger market share on sales revenue is illustrated in Fig. 2. The crosshatched region between the two curves at the top of the graph shows the enhanced sales revenue due to increased market share.

FIGURE 3 The team that brings the product first to market enjoys an initial price advantage and subsequent cost advantages from manufacturing efficiencies.

A third advantage of a short development cycle is higher profit margins. Profit margin is the net profit divided by the sales. If a new product is introduced before competing products are available, the corporation can command a higher price for the product, which enhances the profit. With time, competitive products will enter the market and force prices down. However, in many instances, relatively large profit margins can be maintained because the company that is first to market has more time than the competitor to learn methods for reducing manufacturing costs. They also learn better processing techniques and have the opportunity to modify assembly lines and manufacturing cells to reduce the time needed to manufacture and assemble the product. The advantage of being first to market, when a manufacturing learning curve exists, is shown graphically in Fig.3. The manufacturing learning curve reflects the reduced cost of processing, production, and assembly with time. These cost reductions are due to many innovations introduced by the workers after mass production begins. With experience, it is possible to drive down production costs.

Development costs represent a very important investment for the company involved. Development costs include the salaries of the members of the development team, money paid to subcontractors, costs of preproduction tooling, and costs of supplies and materials. These development costs can be significant, and most companies must limit the number of development projects in which they invest. The size of the investment can be appreciated by noting that the development cost of a new automobile is an estimated $1 billion, with an additional investment of $500 to $700 million for the new tooling required for high-volume production. For a product like a power tool, the development cost can be one to several million dollars, depending on the features to be introduced with the new product.

Static Versus Dynamic Products

Some product designs are static, in that the changes in their design take place overlong time periods through incremental changes occurring at the subsystem and component levels. Examples of static products are automobiles and most consumer appliances like refrigerators and dishwashers. Dynamic products like wireless mobile phones, digital video recorders and players, and software change the basic design concept as often as the underlying technology changes.

Static products exist in a market where the customer is not eager to change, technology is stable, and fashion or styling play little role. These are markets characterized by a stable number of producers with high price competition and little product research. There is a mature, stable technology, with competing products similar to each other. The users are generally familiar with the technology and do not demand significant improvement. Industry standards may even restrict change, and parts of the product are assembled from components made by others. Because of the importance of cost, emphasis is more on manufacturing research than on product design research.

With dynamic products, customers are willing to, and may even demand, change. The market is characterized by many small producers, doing active market research and seeking to reduce product cycle time. Companies actively seek new products employing rapidly advancing technology. There is high product differentiation and low industry standardization. More emphasis is placed on product research than on manufacturing research.

A number of factors serve to protect a product from competition. A product that requires high capital investment to manufacture or requires complex manufacturing processes tends to be resistant to competition. At the other end of the product chain, the need for an extensive distribution system may be a barrier to entry.4 A strong patent position may keep out competition, as may strong brand identification and loyalty on the part of the customer.

Variations on the Generic Product Development Process

The product development process (PDP) described at the beginning was based on the assumption that the product is being developed in response to an identified market need, a market pull situation. This is a common situation in product development, but there are other situations that need to be recognized

The opposite of market pull is technology push . This is the situation where the company starts with a new proprietary technology and looks for a market in which to apply this technology. Often successful technology push products involve basic materials or basic process technologies, because these can be deployed in thousands of applications, and the probability of finding successful applications is therefore high.

The discovery of nylon by the DuPont Company and its successful incorporation into thousands of new products is a classic example. The development of a technology push product begins with the assumption that the new technology will be employed. This can entail risk, because unless the new technology offers a clear competitive advantage to the customer the product is not likely to succeed.

A platform product is built around a preexisting technological subsystem. Examples of such a platform are the Apple Macintosh operating system or the Black & Decker doubly insulated universal motor. A platform product is similar to a technology push product in that there is an a priori assumption concerning the technology to be employed. However, it differs in that the technology has already been demonstrated in the marketplace to be useful to a customer, so that the risk for future products is less. Often when a company plans to utilize a new technology in their products they plan to do it as a series of platform products. Obviously, such a strategy helps justify the high cost of developing a new technology.

For certain products the manufacturing process places strict constraints on the properties of the product, so product design cannot be separated from the design of the production process. Examples of process intensive products are automotive sheet steel, food products, semiconductors, chemicals, and paper. Process-intensive products typically are made in high volume, often with continuous flow processes as opposed to discrete goods manufacturing. With such a product, it might be more typical to start with a given process and design the product within the constraints of the process.

Customized products are those in which variations in configuration and content are created in response to a specific order of a customer. Often the customization is with regard to color or choice of materials but more frequently it is with respect to content, as when a person orders a personal computer by phone, or the accessories with a new car. Customization requires the use of modular design and depends heavily on information technology to convey the customer’s wishes to the production line. In a highly competitive world marketplace, mass customization appears to be one of the major trends.