Now that 2011 is ending and the New Year is upon us, you might be making New Year resolutions that include advancing your product to the next level of development. This could include creating a prototype of your product idea, taking your design into production tooling, or starting to make inventory that will be sold in 2012. No matter how you plan on advancing your product, it is important to consider these best product development tips for your 2012 development activities.
If you are creating a prototype from your product idea….
When working with outside suppliers and vendors to take your idea into manufacturing, there are many pitfalls that can hurt your chances as an Entrepreneur for a successful product introduction. Manufacturing a product is a process that must be followed with rigor. There are five common pitfalls that entrepreneurs encounter when taking their product into production. Review the advice below and improve your chances of a successful manufacturing introduction.
Take Ownership of the Design and Manufacturing Tooling
When working with outside suppliers to design and manufacturing a product, it is important that you maintain ownership of the product design as well as any manufacturing tooling. For example, the supplier might be hired to design and prototype the product per your specifications. If you are paying this supplier, it is important that you make it clear that you own the product design, intellectual property, and the entire computer aided design (CAD) files generated. Be wary when a supplier performs all the design work for free but will not allow you access to any of the original design files.
It is usually necessary to purchase production tooling in order to fabricate your product. This could include plastic injection molding tools or metal stamping tools. If this is the case for your product, be sure that any money you pay gives you full ownership of the tools and allows you to move them to another supplier if necessary. Supplier-owned tooling puts you at a severe disadvantage when negotiating the price of your product.
Sign off on all Manufacturing and Design Changes
One of the scariest situations in manufacturing is when changes are being made to the product without the client’s knowledge. Changes should only be made to resolve an issue or defect and change require a large suite of qualification prior to implementation. Therefore, it is necessary that all changes are approved by the client. Without knowledge of these changes, the client will most likely be surprised when new production units arrive.
Many times throughout prototyping and manufacturing, the supplier might say “We’ll solve that issue in the next batch of products” when discussing a current issue or defect. This isn’t an acceptable solution since there is no proof that the solution will resolve the issue. Be sure to make new prototypes with each change prior to kicking off a new order of production units.
Know the Price at all Order Quantities
Early in the relationship with a supplier, it is important that the client knows the product purchase price at all manufacturing quantities. Many times, a supplier will provide an enticing price quote for an extremely high quantity of products that is usually higher than the needs of the client. Chances are low that an entrepreneur’s first order will be a high quantity and therefore it is important to know the cost structure and supply chain costs at all order quantities. It is recommended that you get cost estimates at 1,000, 10,000, and 100,000 order quantities so you can get a good idea of the costs across all volumes. This will also give you an indication of the supplier’s ability and desire to supply low and high quantities. This will ensure that there are no surprises when you make your first orders.
Buy Only what is Necessary for Immediate Sales
Only buy as many products as you need to fulfill the immediate demand of your product. There is a high chance that changes will be required as you begin to sell you product so minimizing the number ordered will eliminate the expensive reworks or repairs required.
There are many entrepreneurs who are “up-sold” to higher quantity orders in order to get a lower price. There are some other entrepreneurs who are shocked to learn that a supplier is unwilling to take a low quantity order and will not work with the customer unless they order a higher quantity. It is important that you know the prices at all order quantities early in the relationship with the supplier. If the supplier is unwilling to fulfill low quantities in the range of 1,000 products, you probably should move to another supplier.
Don’t Pay until Quality is Confirmed
Finally, many suppliers will ask for 100% of the payment up front in order to start the product production. If you pay all the money up front, then you run the risk of having no recourse if the product does not meet your specifications upon receipt. It is more standard to pay 50% up front with the final 50% due upon receipt of your products.
You should also verify that the product meets all your specifications and quality levels upon receipt prior to paying the final 50% of the payment. Verify that the product meets all the specifications including product dimensions and materials as called out on the 2-dimensional prints and operational specifications as called out on the product specification document. With respect to verifying the materials, be sure to ask for Certification of Conformance on all the materials used in the product as it is important that no changes have been made since the prototypes were supplied.
When entering into manufacturing, be sure to own the design and tools, monitor all changes, know the pricing structure, buy only as many products as you need, and pay when quality is confirmed. This will ensure that you don’t fall into any of the pitfalls of manufacturing and successfully get your product into the hands of customers.
Need more information? Please contact us with any questions or contact me directly at joseph.donoghue ( at ) leardon.com
“Where to manufacture ?” If you’re doing product development, it’s a question that will come up sooner than later. Companies setting out to manufacture a new product often consider the following statements “We should manufacture locally so we don’t lose control over the product and support the local economy at the same time” or “We should manufacture overseas so we get the lowest possible product cost.” While these statements are valid under some circumstances, they don’t take into consideration all the variables involved in choosing the proper manufacturing location. When selecting a country to manufacture a product, answer the following questions and work through the process below to select the optimal manufacturing location.
List all the countries where the product will be sold and possibly manufactured
The objective of this task is to list all the places that the product will be sold and the countries that you could possibly manufacture the product. It is relatively easy to list all the countries where the product will be sold but more difficult to determine the countries where the product could be manufactured. The reason to list all these countries is to provide the finance team a list of potential countries of manufacture that will feed into their product cost calculations discussed in the last step below.
List all the manufacturing capability requirements
Every product has a unique set of fabrication requirements to successfully manufacture the product to the quality levels set by the product development team. The product could require special plastic fabrication techniques such as in-mold decorating or gas assist injection molding. The product could require assembly in a special clean room classifications and sterilization processes.
All the manufacturing capabilities required for the product should be listed by the engineering team. This list should then be cross referenced with the country list developed in the last step to determine if any of the countries should be crossed off as a potential place of manufacture. The team should ask themselves ‘Do the suppliers in each of these countries have the manufacturing capability required for the product?’ If none of the countries on the list has suppliers that have the capabilities, then it is necessary to research other countries that can fulfill the requirements. Perform sufficient research to determine where similar products are currently manufactured. For example, if the product being considered is a laptop or a printer, the country of manufacture is most likely China. This exercise will ensure that the remaining countries on the potential manufacturing list have the capabilities required.
Determine if adherence to country regulations is necessary
The next step in reducing the list of potential countries for manufacturing is to determine the special regulations that are required of your product. This could include manufacturing requirements, government regulations, or tax implications. Some examples of these regulations include:
The United States Trade Agreement Act that determines from where products for the U.S. General Services Administration can be procured.
Import restrictions and tariffs such as those in Brazil that make it most cost effective for Original Equipment Manufacturers (OEM) to manufacture locally.
Sensitive technologies such as military products that must be manufactured in the country of origin.
Hazardous or toxic substance regulations that cannot be shipped.
This list will then help you eliminate more countries from the list of potential locations.
Calculate the total landed cost for each country
After working through the first three steps of this process, a short list of potential countries for manufacturing exists. The next step is to set up a matrix that cross references the cost of manufacturing for each country of product sale.
It is important to estimate the product cost from the manufacturer as well as the actual total landed cost of the product to the country of sale. This is a detailed process which requires the finance and procurement team to identify potential suppliers in each potential country that have the capabilities to manufacture their product. Once the tangible cost estimates such as part cost, assembly, and shipping are provided, then the intangible costs such as product support costs and warranty must also be estimated. The resulting cost for each country can then be compared and a country can be selected based on input from the complete product development team.
Additional Resources:
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Change is sometimes the enemy of an efficient and cost effective product development process. While change is inevitable and necessary at times, minimizing unnecessary product change is important to keep the project on schedule and within budget while continuing to meet all the product specifications. There are three true and tried methods that, if implemented in a product development process, will result in a highly effective product change management process.
Communicate the Program Objectives to the Team
Product development can be summarized as a balancing act between the competing constraints of product cost, scope, and schedule. Thousands of decisions are made while a product is under development and the end result is typically a sub-optimal result of these decisions. Since optimization is impossible, it is necessary to prioritize the objectives of the project in order to ensure success. Without prioritization, the individuals working on programs will be pulled in opposing directions and will be continually redirected during the project, resulting in failure. Proper prioritization of product cost, scope, and schedule will result in successful change management.
The three objectives of a program are product cost, product scope, and program schedule.
Product Cost refers to the many financial metrics, including total budget, cost of goods sold, gross margins, or any other financial metrics used on the project.
Product Scope refers to the product features that will be designed into in the final product.
Program Schedule refers to the amount of time available to complete the project.
Unfortunately, it is impossible to change one of these objectives without affecting the others. The cost, scope, and schedule each act as constraints and therefore movement of one affects the others. Hence, to properly communicate the program objectives, a product development team should:
Determine which of the three program objectives is the most important. This chosen objective will be the first program priority that must be constrained and cannot change under any circumstance.
Choose one of the two remaining program objectives that can change but must be held within a range. The second priority should be thought of as an objective that can be modified but should always be kept as close to the goal as possible.
The outcome of the last program objectives will be accepted as is.
Some hard tradeoffs need to be made when prioritizing the program cost, scope, and schedule. By performing this exercise and communicating the priorities, the product development team will be given very clear objectives that allow the members to make their own decisions on the necessity of change knowing the overall program priorities.
The management of these three constraints is sometimes referred to as the project management triangle.
Two of three input factors must be prioritized
The video was produced by J Scott Christianson at http://thefreerangetechnologist.com/ – He has a lot of great project management tips and information on his site. Product Defects and Issues Drive Change
The product development team should work with the premise that product change is driven only by product defects and issues. The defects can be technical issues or issues raised by anybody on the cross-functional product development team. The technical issues found from the mechanical, electrical, software, firmware, manufacturing, or production teams are obviously product defects that need to be reviewed. Issues from other members of the cross-functional product development team such as marketing, sales, advertising, finance, or field sales need to be considered also. For example, if a new product was introduced in the market with very similar features to your team’s product, then it would be wise to raise a product issue to modify or improve some of the features to differentiate the product. If the product cost was too high and cost was a high priority for the program, it would be necessary to change the product design to minimize the cost. Defects and issues from all the cross-functional members of a product development team can influence change.
Defects and issues can be managed by a complex Product Lifecycle Management (PLM) system or a simple spreadsheet. Either way, it is important to document the root cause of the defect, proposed solution of the defect, method of solution verification, and implementation of the solution for completeness and traceability of the defect.
Establish Change Rules
The final method of ensuring a successful product change management solution is to establish rules of changes. If and when a product change is made depends on both the severity of the defect as well as when the defect is found in the product development lifecycle. Product defect severity can be broken down into four categories:
Low: Very limited customer impact.
Medium: Moderate customer impact.
Serious: High customer impact.
Critical: Safety or regulatory issue.
The program manager of the product meets with the cross-functional product development team to review each documented issues and defects. As a team, they categorize the defects as either low, medium, serious, or critical. Once the defects are categorized, the team must decide if a change should be made to the product to resolve the issue. The team should have rules in place that determine when the changes should be made depending on where the product lies in the product development lifecycle. Here are some rules of thumb on approving and allowing product changes to take place:
Critical defects should always drive an immediate change and the production line should be shut down if the product is in production.
Serious defects should be fixed as soon as feasible and rolled into prototype testing or production.
Medium severity defects should drive changes the early stages of the product development lifecycle but should not be resolved during production.
Low severity defects should only be fixed in the early prototyping phases and should be ignored in all later stages of the lifecycle.
If the product development team has a rigorous defect review process and change rules, then only necessary changes will result from the product change management system.
Need more information on product change or product development in general? Pleasecontact uswith any questions or contact me directly at joseph.donoghue ( at ) leardon.com
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