PREREQUISITE FOR HALF-COST PRODUCE DEVELOPMENT:
CORRECT COUNTERPRODUCTIVE POLICIES

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 development load to 22 projects and were able to introduce eight products, which took 24 to 28 months. In 2004, as they got more focused with only 20 projects, they were able to successfully launch almost twice as many products in half the time!
    During this span, 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%.
    Further, the Motorola case study also correlated project success with the total number of products in the portfolio: The year when they had no products introduced, this division had 3500 products in its portfolio. After this dropped to 2,000, they launched eight products and after it dropped to 500, they were able to launch 14 products. The effect of the entire portfolio on product development effectiveness is discussed in the next point.

Don’t allow Sales to “take all orders” (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 to death with arbitrary early intermediate deadlines that compromise the critical up-front work just for the illusion of “early progress.”

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.

 

Dr. David M. Anderson, P.E., fASME, CMC
www.HalfCostProducts.com
phone: 1-805-924-0100
fax: 1-805-924-0200
e-mail: anderson@build-to-order-consulting.com