McGraw-Hill/Irwin

5-1
Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5
New Product
Development

5-2

Key Concepts
The Design Process
The Investigation or Concept Formation Phase

The Development Phase

The Production Phase
Value Engineering Vis--vis Value Analysis

Engineering Change Management

How to Expand Supply Management's
Contributions
Design or Project Teams

Materials Engineers
Co-location

Buyers Supply Management Professionals Who

Interface Successfully with Engineers

5-3

Overview
Four Key Issues
Early supply management and supplier
involvement
Design and development process of new
products

Approaches to increasing supply

managements role in the new product
development process
Description of supply management
professionals who interface successfully with
engineers
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The Design Process

The Investigation or Concept Formation
Phase
The Development Phase

The Production Phase

Value Engineering Vis--vis Value
Analysis

5-5

Investigation Phase
Figure 5-1,
Upper Half

Define new product

Defining the New Product

Statement of Objectives

Set objectives: price, cost, performance,

market availability, quality, & reliability

Key Technology
No

Development of Alternatives

Is a key technology
involved?

Suitability
Produceaibility

Consider
Outsourcing

Yes
Develop alternative conceptual solutions

Component availability
Customer acceptability

Yes
Outsource

Study make-orbuy implications

No

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Investigation Phase Continued

Figure 5-1,
Lower Half

Development of
Alternatives
Make-or-Buy and
Outsourcing
Analysis
Select
Components,
Technologies, and
Supplies
Stress Testing and
Failure Analysis

Decision is to
make the product
Select components, technology, and
suppliers for most attractive
alternative concepts

Stress analysis

Failure analysis

No
Reconsider
Outsourcing

Meet
objectives?
Yes

To development phase
5-7

Questions to Ask Prior to Inviting a Supplier into

the Design Process
Will the supplier be able to meet our cost, quality,
and product performance requirements?
Does the supplier possess the required
engineering capability?

Will the supplier be able to meet our development

and production needs?
Does it have the necessary physical process and
quality capabilities required?
Does the supplier have both the resources and
the reputation of being able to overcome
problems and obstacles as they arise?
5-8

Questions to Ask Prior to Inviting a Supplier into

the Design Process
Is the supplier financially viable?
Are the supplier's short and long term
business objectives compatible with
ours?
If a long term relationship appears
desirable, are the technology plans of the
two firms compatible?

If a long term relationship appears

desirable, is it likely that we can build a
trusting relationship?
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The Development Phase

Figure 5-2,
Upper Half

Design and build prototype

Prototypes

Design review

Design Reviews
Qualification Testing
margin tests

Failure analysis

Failure Analysis
Value Engineering

Yes
Qualification testing

life tests

Meet Objectives?

No

Meet
objectives?

Potential
downstream
design
changes

Meet
technological
objectives?

No

Yes
To Value
engineering

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The Development Phase

Figure 5-2,
Lower Half

After
technological
objectives
have been
Yes
met?

Design Analysis
The Value
Engineering
Checklist
Viability

Value engineer

Design
changes

Qualification
testing
No

Financial
review

Cancel or
Redesign

Yes
To production phase
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Value Engineering
Value engineering is a systematic study of
every element of cost in a material, item of
equipment, service or construction project
to ensure that every element of cost fulfills
a necessary function and at the lowest
possible total cost
Value engineering is focused on the
design stage

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What is Value?
Value can be defined as the lowest end cost at
which the function can be accomplished at the
time and place and with the quality required
Some items/services/processes which cost less
than a similar item/service/process may
accomplish the function in a superior or equal
manner
Value cannot be determined exclusively by an
examination of the item/service/process being
evaluated
The value of any service, material, or product is
established by the minimum cost of the other
alternatives that will perform the same function
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Generalized Procedure for VA/VE

Figure 5-3, Adapted

What is it?
What does it do?
What does it cost?

Information Phase
Speculation Phase

Is the change better?

How much better?
Why?

Analysis Phase
Decision Phase

Audit effectiveness
Use experience
Provide feedback

How else can the job be

done?
At what cost?

Evaluation Phase

Review with depts and

suppliers
Select best alternative
Get approval
Prepare specifications

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Analysis of Each Component

Can any part be eliminated without impairing the
operation of the complete unit?

Can the design of the part be simplified to reduce

its basic cost?
Can the design of the part be changed to permit
the use of simplified or less costly production
methods?
Can less expensive but equally satisfactory
materials be used in the part?
Design simplifications frequently are more
apparent than is possible under the original
design
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The Value Engineering Checklist

1. Can the item be eliminated?

2. If the item is not standard, can a standard item

be used?
3. If it is a standard item, does it completely fit the
application, or is it a misfit?
4. Does the item have greater capacity than
required?
5. Can the weight be reduced?

6. Is there a similar item in inventory that could be

substituted?
7. Are closer tolerances specified than are
necessary?

5-16

The Value Engineering Checklist

8. Is unnecessary machining performed on the
item?

9. Are unnecessarily fine finishes specified?

10. Is "commercial quality" specified?
11. Can you make the item less expensively in your
plant? If you are making it now, can you buy it
for less?
12. Is the item properly classified for shipping
purposes to obtain lowest transportation rates?
13. Can cost of packaging be reduced?
14. Are suppliers contributing suggestions to
reduce cost?

5-17

The Production Phase

Manufacturing and
Production Plans

Figure5-4,
Upper Half
Finalize and implement manufacturing
and supply plans

Knowledge transfer

Process control

In-process testing

To Final Test

Knowledge
Transfer
Process Control
In-Process and
Final Testing
adjust or calibrate
the performance
eliminate defects
before much value
is added to the
product

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Production Phase Continued

Figure 5-4,
Lower Half

Final test

Meet
objectives?

Yes

Ship

No
Failure analysis
Yes
Purchased
components?

No

Equipment or
procedures?

Yes

Return
to Dev.

Revise
Manuf.
Plan

Supplier fault
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Engineering Change Management

Material control involvement:
provide input on the purchased materials
implications of a proposed change,
discuss the timing of proposed changes in
order to minimize costs associated with
unusable incoming materials,
to be aware of forthcoming changes so that
appropriate action can be taken with affected
suppliers.

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How to Expand Supply Managements

Contributions
Design or Project Teams
Materials Engineers
materials engineering and

supply management activities of sourcing,

pricing, and negotiating

Co-Location (Harley-Davidson)
Faster to market,
reduced total cost,
improved quality
5-21

Supply Management Professionals Who Interface

Successfully with Engineers
Early Supply Management Involvement is part of the
culture and policy of the firm
Formerly called Early Purchasing Involvement (EPI)
Often requires policy development from upper management to
ensure initial involvement

Engineers view Supply Management involvement as an

asset, not a nuisance
Supply Managers must acquire skills and knowledge
Learn how to read engineering drawings
Learn technical terms
Meet with suppliers sales personnel to review technical
information about products

Visit suppliers

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Concluding Remarks
The design stage provides the greatest
opportunity to reduce costs the life cycle
costs of products
Supply management and the firm's
suppliers have major contributions to
make during this process
Analysis of adding value is not limited to a
firms services and products, supply
managers themselves must add value to
the design process in order to become a
viable and lasting member of the design
team
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