Category Archives: Product Management

Product Portfolio Management Mistakes in a Down Economy

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A recent article in Industry Week on “portfolio management in a down economy” did a great job of summarizing all the mistakes dumb companies make in a down economy in blind efforts to conserve cash. As I have said before, and as the author clearly notes, companies that cut research-and-development during a downturn “don’t have anything new in their product portfolio that is of interest to their customers” when better times eventually return. This means that if you think times are bad now, they’ll only get worse when the up-swing starts and your competitors, who didn’t cut R&D, are introducing new, in-demand, products while you’re trying to push the same old, same old from two, three, five years ago.

While it’s understandable that R&D funding might have to be (slightly) reduced, there are right ways and wrong ways to go about it. The right way is to key (in) on the projects that exhibit new technology, gain entry into new markets, or are of greater interest to your customers. Similarly, a great technology without a current market should also come under scrutiny. Maybe development should be delayed to when you have more spare dollars to throw at it (as all great technologies will eventually find a market). And avoid these common mistakes outlined in the article:

  • Failure to reconcile the portfolio with resources.Make sure you can support the key portfolio projects to the full extent they need to be supported.
  • Failure to look outside the four walls. There are broad external forces that will ultimately decide which products will sell when the market up-swings and which won’t.
  • Failure to innovate. Some companies get complacent with an existing portfolio and focus only on product extensions rather than disruptive innovations.
  • Failure to understand the customer. If you can’t satisfy your customer, someone else will.
  • Failure to utilize common business sense. Yesterday’s metrics and data don’t tell the whole story about today, and definitely don’t tell the whole story about tomorrow. Don’t overlook the knowledge and experience your sharp people will provide and blindly rely on an unproven tool. Tools optimize scenarios … they don’t create them.

Broaden Your PLM Footprint for Kick-Ass ROI

A recent Industry Week article, that noted that “adoption of product lifecycle management (PLM) technology is reaching record levels” and that the PLM market experienced a stronger-than-expected 13.5% growth rate to reach an estimated 24.3 Billion in 2007, also reported that implementations can quickly develop returns on investment of 100% to 300%. Considering the needs for manufacturers to find every savings opportunity possible with record-high commodity costs and a global economic down-turn on the horizon, this is one opportunity your manufacturing organization should not miss.

As I noted last year in my post on PLM for trends based industries, a PLM systems, which enables the process of managing the entire life-cycle of a product from its conception, through design and manufacture, to service and disposal, will provide:

  • complete process visibility compared to the limited process visibility that is the norm without a PLM solution
  • a centralized, usually web-based, point of control compared to a lack of control point without a solution
  • one version of the product status and truth
  • workflow management
  • unparalleled control over the product life-cycle
  • an integration point for the various systems used in the various stages of product design, development, and merchandising

In addition, as per the Industry Week article, the broader scope of today’s PLM solutions enables manufacturing managers to collaboratively reach upstream into the early stages of portfolio management as well as downstream into the integration with manufacturing. In other words, enhanced productivity of existing resources is the result of PLM’s ability to integrate the various value chains. This is because, with PLM, multiple views of the product can be quickly and easily shared among different people of the organization in real time and the collaboration features allow people to communicate, share ideas and interact dynamically around a particular product.

Furthermore, PLM is not just for manufacturers — it’s for any organization that buys a lot of manufactured parts, especially if a good percentage of those parts are custom. The best results often come from innovation that arises as a result of collaboration between the buying organization that has the expertise in new product design and the custom manufacturer that has the expertise in product manufacturing. So where should you look for these solutions? I’d start with some of the companies I covered here on this blog in the past, which include Akoya, Apriori, Arena, Co-exprise, and MFG.com. Each of their solutions can help you identify and realize cost-savings opportunities when properly applied in your product life-cycle. And a couple of them can even help you manage your product life-cycle – so check them out, move forward, and see if you can’t get yourself some of that 100% to 300% ROI!

Commodity Structures Are Not “One Size Fits All”

Today’s guest post is from Bernard Gunther of Lexington Analytics.
He can be reached at bgunther <at> lexingtonanalytics <dot> com.

Over the last 15 years, I have had hundreds of discussions about commodity structures with CPOs. Invariably, I am asked, “What is the right commodity structure to use?” Or, “Use the UNSPSC structure. It’s an international standard, so it must be the right one.” Or, “You’ve been doing this for years, why haven’t you figured this out by now?”

Once we work with clients for a while they realize that there is no “one size fits all” commodity structure. You can leverage existing structures, but every client has to make some adjustments to any structure based on:

  • What industry they are in (and therefore the products and services they buy),
  • How their business works (how they are organized internally),
  • What vendors they use,
  • How they want to manage your spending, and
  • Past experiences on what works and doesn’t work.

Take the simple cardboard box. Let’s use the example of a 1.2 square-foot, folding box with a removable lid, used largely for the storage of old files. These get used in many different ways at different companies.

The right UNSPSC code for these boxes appears to be: 44111515 “File storage boxes or organizers”. This places this item within the following hierarchy:

  • 44 00 00 00 Office Equipment and Accessories and Supplies
    • 44 11 00 00 Office and desk accessories
      • 44 11 15 00 Organizers and accessories
        • 44 11 15 15 File storage boxes or organizers

The UNSPSC code for an item is useful but, because companies use this box differently, the general classification of the item may also be different as well as its place within the hierarchy

Type of Company Use of Box Top Level Classification
Company with office records (most companies) Storage of files General Office supplies or Records Management supplies
Office supplies company Box is bought from a converting plant and sold to customers Cost of Goods Sold – purchased items
Manufacturer Store parts in the assembly line MRO
Paper company Manufactured for customers Cost of Goods Sold
Records management / warehousing company Sold or provided to customers Cost of Goods Sold – or – Production Parts used in delivery

So even for something as simple as a cardboard box, there is no single commodity structure that is “right” for all companies. You need to think about the structure in terms of what is right for your organization. The last thing you want to hear from users is, “The data jocks in Purchasing have a commodity structure, but it’s just not right.”

Things You Should Know Before You Launch a Project That Depends on IT

A month or so ago, on a busy day, I came across this ZDNet article on the “Top 5 issues your IT staff wants to address but is afraid to tell you” that I think everyone should read — twice — before embarking on any system modernization that will require the involvement of IT. For some of you, it might be a real eye-opener!

  • There is no history of the code.
    If your current application has been in place for five or more years, it has probably evolved substantially as a result of regular vendor upgrades and in-house customizations to meet your business needs. As support needs increased, and response times took priority over change management, tracking the changes (and who was responsible for them) fell by the wayside and the process of unraveling the underlying code is now likely as challenging as building the application from scratch.
  • We don’t know exactly how many applications we have or how they all work together!
    Applications make their way into organizations through procurement overrides, departmental purchases, trials, upgrades and, of course, open source. This treasure trove of technology makes an aerial view of the infrastructure nearly impossible to create. Chances are many departments don’t even know how many applications they are using or how they all interact. I can’t remember a single instance as a technology architect or consultant where I’ve asked for “all of the applications this product interacts with” or “all of the applications your department uses” and received a complete list the first time. Sometimes it’s only in the final phases of an RFQ when I’m building a list of detailed integration requirements and I’ll ask “so, where does this data get pushed to” only to find out that there’s yet one more application that has to be added to the list!
  • We’re actively seeking a new job.
    As the article points out, the average IT turnover rate is 22%. If you’re counting on a single resource to pull a project off, you’re in trouble! Also, there is probably a lack of interest among the millennium generation to work on older technologies just as there is often a lack of interest among the old-timers, only a few years away from retirement, to learn another new-fangled language that’s probably not going to reach the critical mass necessary to still be around in five years.
  • If you can’t prove the ROI, we’re not on your side.
    Your IT staff knows that faster, stronger, cheaper are BS marketing terms. Before they commit their overworked behinds to yet another project, they want to see real benefits in terms of skills, cost savings, and time savings using before and after metrics generated by a third party on similar projects at other firms.
  • We’re not mind readers … you need to share you vision.
    Your IT people are not going to accept that this resulted from long-term planning that was designed to anticipate the next three, five, or seven years of the organization’s technology needs just because you told them it would. Remember, they are the experts in technology, not you. If you want them to share your vision, and get behind the project, you need to involve them in the strategy discussions. They can help you build the right infrastructure for your business, but only if you let them.

Why is the Perfect Order So Difficult?

Reading the latest research, you’d think that finding the Holy Grail would be easier than filling a perfect order. According to “Benchmarking the Perfect Order”, a recent study by Kate Vitasek of Supply Chain Visions and Karl Manrodt of Georgia Southern University that was commissioned by the Vendor Compliance Federation, the Perfect Order Index for 2007 was a measly 27.2%, assuming that every order was damage free (due to data unavailability for a proper estimate). Let me say it again — 27.2% at best! That means that three out of every four orders was flawed. That’s performance so bad, that it’s three times worse than the US aviation industry, the poster child for poor performance, where, on average, only one out of four flights was delayed.

After all, how hard should it be to deliver an order:

  • on-time,
  • complete,
  • damage free, and with
  • correct documentation

Think about it:

  • you know the delivery date when you agree to the order,
    and you shouldn’t be agreeing to anything you can’t deliver on
  • you know, line item by line item, what you have to deliver,
    as well as how many units are required
  • you know the fragility of your products,
    and should be packaging and handling them accordingly, and
  • you have to know the documentary requirements, especially if you’re exporting
    as failure to know can result in seized and destroyed shipments at your expense

So what’s the problem?

Well, obviously, you are!

But Why?

That’s the Billion, if not Trillion, dollar question, isn’t it? And the answer is, ultimately, that you’re not prepared for it. Why not? Although it’s hard to say in any individual case, it’s most likely because you haven’t shifted your focus from internal performance to customer delivery. In essence, you haven’t prepared for it. Instead of abondoning outdated software, processes, and metrics that focus on you for newer software, processes, and methods that focus on the customer, and allow you to get everything that really matters right, you’re still using the software, processes, and metrics that you were using 20 years ago during the quality revolution.

Let me explain.

With regards to on-time, most of you are probably still tracking “on-time” as shipped on-time with respect to whatever internal production and distribution schedule you devised. When you ship is irrelevant if the stores need it by Monday for a promotion on Tuesday that’s expected to generate tens of thousands of sales. If on-time to your system is “shipped four days before due date”, but you’re shipping by truck from Texas to Alaska, you’ve got a problem! With limitations on how many hours a driver can drive in a day and border delays, you ain’t gonna make it. You need logistics management software that understands minimum, average, and worst case delivery time requirements (by season) and you need to schedule each shipment to a different location in a large order separately.

With regards to complete, you can’t tackle it on a line-item by line-item basis, split across half a dozen shipments on two different carriers and wash your hands of it when the system says everything’s shipped. It’s only complete if it arrives complete. This means that you have to have an extensive shipment and delivery tracking system in place to insure that everything in a disaggregated order hits the checkpoints that need to be hit when they need to be hit so that part of an order doesn’t get lost. Again, just shipping it “complete” doesn’t make it “complete” if you’re breaking the order up across shipments – because then all shipments have to arrive by the designated date and time for the order to be complete. You need a web-based supply chain visibility solution that can be utilized by your partners to update progress as it happens.

With regards to damage-free, you can’t just package it in accordance with minimally acceptable padding, check a box, dust your hands, and call it a day. You have to ensure that all third parties in your distribution network that handle the product do so with the necessary care and that it passes through each checkpoint undamaged. If one of your distributors screws up and breaks something, you need to get a replacement shipment out, and maybe even expedited, before it arrives broken and useless at the customer site. Again, you need a web-based supply chain visibility solution that can record the order status as it clears each checkpoint.

With regards to correct documentation, you need to make sure that all of the documentation required by each check-point is included before it leaves your facility. These days, if you’re importing or exporting, this requires a Global Trade Management Solution, because it’s almost impossible to manage the dizzying array of requirements otherwise.

In short, unless your key metrics have been defined to be 100% customer-focussed, and you have the proper logistics management, supply chain visibility, and / or global trade solutions in place, you’re not going to be able to achieve the perfect order the majority of the time, and the perfect order will continue to be a “holy grail” when, in actuality, it should be a common occurence. The solution, like the problem, rests with you.