9/7/2006 9:37 AM Page 25 Integrated product development is a concept of product development that integrates all the people, resources, control and communication systems, business methods, and program organizations around the product. It differs from most traditional approaches in that it focuses on and is organized around the product being developed rather than the disciplines required to produce the product. This integration concentrates resources and knowledge. It also provides employees with the sense of product ownership required for on-time delivery at the lowest cost.* The Design Process and Procurement Design is an interative process that results from the progression of an abstract notion to something concrete that has function and a fixed form. This form can be described so that it can be produced at a designated quality. (Describing requirements is discussed in Chapter 3.) The design stage is frequently the only point at which a major portion of the cost of producing an item can be reduced or controlled. If costs are not controlled at this time, they may be built into the item permanently resulting in an expensive, noncompetitive product. General Motors states that 70% of the cost of manufacturing truck transmissions is determined at the design state .4 The design stage is the point at which the desired levels of quality and reliability must be engineered into the item. Quality is the basic nature or degree of excellence that an item possesses. Reliability is the degree of confidence or probability that an item will perform to requirements a specified number of times under prescribed conditions. J. M. Juran, a widely published authority in the field of quality, indicates that 20-40% of the field failures experienced by durable goods manufactured in America originate during development and design. This chapter's opening case study showed how faulty purchased material drove manufacturing costs up on one of the company's previous production items. Had All American Test Equipment not had excellent test procedures in its manufacturing process, products containing faulty purchased components would have been sold to customers. Eventually, field failures would have occurred, resulting in postsales costs and customer dissatisfaction. Profitability and even a firm's survival require increased attention to the quality and reliability of its products from the earliest phase of the design stage. The Investigation Phase The design process, as illustrated in Exhibits 2-1, 2-2, and 2-3, begins with the investigation phase. The entire new product development process starts with a focus statement, usually called the product innovation charter or ''blueprint,'' which gives the new product development team direction as to what to pursue. 6 First, the team develops a statement of needs, desires, and objectives. Needs and *Reference Guide to Integrated Product Development, Lockheed Corporation, Calabasas, Calif., 1993, p. 1. Used with permission. 9/7/2006 9:37 AM Page 26 desires are based on Marketing's perception or knowledge of what customers want balanced against the organization's objectives and resources. Identified needs that are potentially compatible with the firm's objectives (profit, potential sales volume, payback period, etc.) and resources (people, machines, and management) are then considered for product or engineering development. Next, the product objectives, including performance, price, quality, and market availability, are developed. These needs, desires, and objectives then are transformed into criteria that guide the subsequent design, planning, and decision-making activities. Alternative approaches to satisfying the needs and objectives are evaluated against these criteria. In Exhibit 2-1 these approaches are referred to as alternative conceptual solutions. Sound discipline by both design engineering and management is required to ensure the development of alternative approaches. There is an unfortunate tendency to accept and proceed with the first approach that appears to meet the need. In many instances, less obvious alternatives may yield more profitable solutions. These alternative approaches should be evaluated on the basis of suitability, producibility component availability and economy, and customer acceptability .7 The Laboratory Phase In the next stage of the design process, the laboratory phase (see Exhibit 2-2), approaches are reviewed in detail for feasibility and likely risk. During this phase, efforts are taken to reduce risk to acceptable levels in all areas through the development and testing of prototypes for high-risk items. After tests demonstrate that risk has been reduced to an acceptable level, the most attractive alternative is selected. When quality is a critical factor in designing a product for the marketplace, engineering should develop a quality map that describes the detailed design logic required to achieve the desired quality. This design logic starts with each desired end-product characteristic. It then identifies the characteristics of purchased materials and process steps that collectively contribute to building the desired attribute into the product. The quality map shows engineering, manufacturing, and purchasing specialists how the customer's expectations will be fulfilled. It details key relationships between (1) customer expectations; (2) specifications of raw materials, parts, and assemblies; and (3) relevant steps in the production process. There is an understandable tendency on the part of many design engineers to develop truly advanced products that incorporate the latest developments or that push the state of the art forward. Although this tendency may advance the development and implementation of technology, it is frequently needlessly expensive. Not only does such an approach result in a proliferation of components to be purchased and stocked, but frequently items whose production processes have not stabilized are incorporated. Quality problems, production disruptions, and delays frequently result .8 Putting the product designer's logic into the form of a quality map serves several purposes. One is to invite purchasing specialists and suppliers to comment on the probability of obtaining the desired level of quality in purchased materials. Another is to allow Quality Assurance to review the design logic. This 9/7/2006 9:37 AM 9/7/2006 9:37 AM Page 27 Exhibit 2-1. The design process-investigative phase. 1 Purchasing and suppliers should provide a window to new supplier-developed components, knowledge of which may allow marketing and engineering to identify new product possibilities. 2 Purchasing and suppliers are the key source of information on the cost, performance, market availability, quality, and reliability of supplier furnished components that may be incorporated in the new product. 9/7/2006 9:37 AM 3 Purchasing provides input on the economy and availability of the materials and subassemblies to be purchased under each approach. review ensures that the quality specified by Marketing will result if Purchasing and Manufacturing each comply with the design criteria. Consideration should be given to the desirability of using standard items or "shelf items" during the laboratory phase and carrying them over into the manufacturing phase. Many hidden costs are associated with an unnecessary variety of production items or purchased components: excess paperwork; short, 9/7/2006 9:37 AM Page 28 Exhibit 2-2. The design process-laboratory phase. 9/7/2006 9:37 AM 1 Purchasing provides value analysis suggestions from suppliers. These suggestions may reduce cost, enhance performance, or both. 9/7/2006 9:37 AM 2 Purchasing participates in the design reviews and provides information on the impact of specifications and availability of items that are standard production for-and/or are inventoried by-suppliers. 9/7/2006 9:37 AM Page 29 needlessly expensive production runs; higher inventory costs; higher unit costs of small quantities of purchased materials; additional order processing costs; higher inspection and materials handling costs; additional quality problems; and an increased probability of stock outages. The use of standard materials, production processes, and methods resulting from standardization programs can greatly reduce the cost of designing and producing an item. The Manufacturing Phase In the manufacturing phase, detailed specifications, the manufacturing plan, and the procurement plan (frequently in the form of a bill of materials) are finalized. As shown in Exhibit 2-3, numerous tests take place throughout the manufacturing phase. Any time there is an unacceptable degree of risk or uncertainty about the performance of a component, subassembly, or the item itself, appropriate tests are conducted. These tests pinpoint failures in one or more of the following areas: the design, the supplier, the assembly and handling procedures, or the test equipment and test procedures. Engineering Change Management Any changes in components required to manufacture a product or in the product itself may have profound effects on its cost, performance, appearance, and acceptability in the marketplace. Changes, especially at the component or subassembly level, can have a major impact on the manufacturing process. Thus, unless changes to the configuration of an item or its components are controlled, manufacturers may find themselves in one of several undesirable states. They may possess inventories of unusable raw materials or subassemblies resulting in excessive material expenditures. They may possess materials that require needlessly expensive rework to be adapted to a new configuration. Or they may produce an end item that will not meet the customer's needs or that may otherwise be unacceptable in the marketplace. Engineering change management (ECM), a discipline that controls engineering changes, has been developed to avoid such problems.* The need for and degree of application of ECM to an item will depend on many factors and will be a matter of managerial judgment. But, for most modern technical items, ECM is a necessity. In some cases, it will be imposed on the manufacturer by the customer. Under ECM, the functional and physical characteristics of an item and its components are identified. Any changes to these characteristics must be controlled and recorded. Any proposed changes to the item's characteristics are relayed to Marketing and all departments or groups involved in the purchase, control, and use of purchased materials, who then comment on the impact of the proposed change. Such control and coordination is especially important when *Engineering change management is the management of change to a product's design, specifically, its form, fit, and function. It is also a requirement of ISO 9000 certification as discussed in Chapter 12. The term "document control" is sometimes used as part of engineering-change management. 9/7/2006 9:38 AM Page 30 Exhibit 2-3. The design process-manufacturing procurement phase. 1 Purchasing and suppliers provide input on the material cost and availability implications of a change in the item's configuration. 2 As a result of its early involvement in the design process, Purchasing has developed contingency plans These plans allow Purchasing to satisfy the firm's requirements for selected purchased components. Purchasing has worked with Design Engineering to select the appropriate type of purchase description. The appropriate plans are now formalized and implemented. production scheduling and the release of purchase orders are controlled by a material requirements planning system. Many organizational approaches to the responsibility for ECM exist. Ideally, an ECM board should be established with Engineering, Manufacturing, Marketing, Production Planning and Inventory Control, [...]... availability and economy are primarily Purchasing' s responsibility Customer acceptability considers likely acceptance of an item by potential customers This is primarily a Marketing responsibility 9/7 /20 06 9:39 AM 8 See Kaoru Ishikawa, What is Total Quality Control?: The Japanese Way translated by David J Lu (Englewood Cliffs, N.J.: Prentice-Hall, 1985); and David A Garvin, Managing Quality: The Strategic. .. delay delivery result in delivery of obsolete items, and sharply increase inventory carrying costs The use of design specifications may create a costly storage and distribution system for items that are not generally commercially available There are several advantages and disadvantages in using design specifications Advantages * The purchasing organization avoids having to purchase on a sole-source basis... correspondingly low maintenance costs) and relatively low initial price Toyota was and still is considered by many experts as a "best buy" when considering customer demands American automobiles (Saturn is a good example) and several European cars have improved greatly over the last five to six years, but they still suffer from some reliability problems when compared to Toyota and Honda's autos Purchasing plays the... balanced between technical and functional considerations, manufacturing considerations, marketing implications of customer acceptance, and the procurement consideration of economy and availability All too frequently the design engineer attempts to address all these issues without obtaining the input and assistance of representatives of Marketing, Manufacturing, Quality Assurance, and Purchasing Many... Standard specification Facilitate communication Avoid cost of developing design specification Wide competition Facilitates standardization program Readily available materials State of the art-in some cases Available test data Specifications may be dated May require expensive manufacturing processes High test costs Purchaser has responsibility for suitability of purchased i Standardized material may conflict... according to the above classifications can facilitate rapid computer printouts to give direction to purchasing research assignments It helps the purchasing department focus activities to achieve the highest payoff It also helps to explore the questions of simplification and standardization to avoid too many unnecessary requirements and/or slight variations adding little or nothing to value The basic question... items are to be purchased and quality requirements are not a significant factor Advantage * Use of samples is a very simple method of communicating what is required * It is almost mandatory when purchasing materials requiring a specific color, feel, finish, or look, such as painted printed surfaces, fabric, style, film, packaging, signs, letterhead stationary, and the like Disadvantages * Detailed... firm's standardization program, resulting in savings in purchase price, inspection, materials handling, and inventory carrying costs 9/7 /20 06 9:39 AM * Standardized items tend to be more readily available * Designs developed by professional societies are often state of the art and thoroughly tested 9/7 /20 06 9:39 AM Page 43 Disadvantages * Standard specifications may be dated Accordingly, the buyer may not... Trade Name 9/7 /20 06 9:39 AM The use of a brand name is the simplest way to describe what to purchase A brand name is used by a manufacturer to distinguish a product and to aid in its 9/7 /20 06 9:39 AM Page 41 promotion Brand names ensure that the goodwill developed in satisfied customers is credited to the product Such goodwill requires that the manufacturer provide consistent quality Using a brand name... engineer has a far better understanding of the role and responsibilities of Purchasing Such individuals greatly facilitate the integration process No Dead End Streets, If You Please! Purchasing is an ideal point of transition for an engineer who desires to advance into general management Several forward-looking organizations do not look at Purchasing as an end assignment Carefully selected employees are . decision-making activities. Alternative approaches to satisfying the needs and objectives are evaluated against these criteria. In Exhibit 2- 1 these approaches are referred to as alternative conceptual. potential sources (usually with the assistance of quality assurance), and for participating in value engineering and value analysis. Engineers Temporarily Assigned to Purchasing Several organizations. Ishikawa, What is Total Quality Control?: The Japanese Way translated by David J. Lu (Englewood Cliffs, N.J.: Prentice-Hall, 1985); and David A. Garvin, Managing Quality: The Strategic and Competitive