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.

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