Category Archives: Product Management

Social Networks Will Change Product Innovation

But not always for the better.

A recent post over on the HBR blogs declared that “social networks will change product innovation” because the new communication channels [will] actually force material changes not just in the way companies market their products but in the strategies and operations they use to develop and build those products.

This will happen because it is very difficult and costly to maintain a unified voice across all channels and to control information flows to the outside world. As a result, companies will need to adust to a 24/7 dialogue with consumers, investors, and other stakeholders.

This, in turn, will require changes in product strategy since the focus will have to be on products that will cut through the noise on the channels the consumers, investors, and other stakeholders are on.

But since products take money, development will be steered towards what developers think investors will want, which will, in turn, be driven by what investors say on the channels the company is following. But just like not all investors are fans of social media (even though most of the tech investors seem to be these days), not all investos are users of social media, so development is going to be steered towards the interests of a sub-group of potential investors who are regular users of social media. And if these investors are not in the target market of the product, who knows if the target market will be served at all.

For example, let’s say the target market is the average joe who makes 40K a year in a blue-collar job. This is not your aveage investor, who’s rich and able to drop 10 times that on an investment on a whim. Thus, they’re not going to be a buyer and should not be driving your development decisions, especially if their preferences add cost as a bule collar Joe making 40K a year doesn’t have a large disposable income after paying the mortgage, the bills, and feeding the family. So while the investor might like to see the intelligent toaster made out of titanium, the average Joe would be happier with more affordable aluminum.

So, at least for now, social networks aren’t the silver bullet that will change product innovation for the better.

Is It Really APS If It Uses EOQ?

While I’m not an expert in MPS, I am an expert in optimization, so, needless to say I was taken aback by a statement in this recent TEC bog post on “Sorting Through the ERP, Lean MFG, APS, and MES Clutter” that quoted experts as saying that ERP and APS systems force companies to make runners in EOQs. Now, while I am quite sure that your average ERP will apply EOQ to production scheduling, even though it’s often dead wrong to do so, I would think that a true APS would not be so foolish.

For those of you who aren’t manufacturing experts, here’s a brief guide to the terminology:

APS: Advanced Planning and Scheduling – a system or methodology designed to plan plant floor operations to maximize throughput and resource utilization
EOQ: Economic Order Quantity – the inventory level expected to minimize total inventory holding and ordering costs
ERP: Enterprise Resource Planning – a system used to coordinate all planning and production processes
Lean MFG: Lean Manufacturing – a production practice that attempts to eliminate all waste from the production process
MES: Manufacturing Execution Systems – a set of systems used to control the manufacturing process on the shop floor
MPS: Manufacturing Planning Systems – a set of systems used to plan the manufacturing process with the intent of creating a manageable schedule
runner: a product that accounts for the majority of manufacturing workload; on average, 6% of products create 50% of the work
WIP: Work in Process – refers to all (raw material) inventory that is currently in the production process

Given that so few products account for so much workload, you would think that these systems would recognize that

it’s a must that each production run produce enough of a runner product to meet the total demand for the production period, but
producing more runner product adds no relevant value unless enough product is produced to cover the next set of orders (as the line would need to be set up again anyway and it takes time to set up and tear down a production line) and
EOQ, which is a measure designed for buyers, is not guaranteed to produce a number anywhere close to an appropriate value, even when order costs are replaced with production-line set-up costs.

As the article states, runners must be produced in optimal order quantities, as this is the only way to maximize the amount of time free to produce the remaining 94% of product. Other products can be scheduled based on a modified EOQ, as order quantities in any given period might not be sufficient to guarantee a profitable run otherwise, but runners and other high-volume runs must be treated differently. And if an “APS” system cannot differentiate between the two types of products, and optimize the run for each type appropriately, I’d argue it’s not an APS at all!

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Reverse Logistics Tips from World Trade Magazine

A recent article in World Trade Magazine, “Reverse Logistics: Money Tree or Money Pit?”, had some good suggestions on how to streamline your reverse logistics supply chain to reduce costs and increase customer satisfaction. Quoting a recent study from the Aberdeen Group that found that best-in-class firms reduce return times by over 75%, increase customer satisfaction by 15%, and reduce repair costs by 10%, the article noted that companies best-in-class in reverse logistics have a few things in common.

Standardized Return & Repair Processhodge-podge processes drive up costs
Ability to Recover Costs from Suppliersa contract that allows for the recovery of costs is one thing, the ability to recover those costs is something else
Real-Time Information Retrievalwhen a customer calls, it is imperative to be able to provide them with an update on their return status
Multi-Channel Visibilityreturns can be initiated in the store, on the website, or over the phone, and can be shipped from the store, a reseller, or the home

This leads to the following best practices:

Multi-Channel Visibility

Customers expect a seamless experience. The ability to return an item ordered online to a store or an item bought at a store over the phone if the store is far away is critical. This requires the returns system to be integrated across all of the channels.

Centralized Returns Facility

Reverse logistics goes more smoothly through a dedicated facility which is set up to allow for sorting, testing, repackaging, and shipping of goods to repair centres or supplier distribution centres. These facilities can provide a way of visually identifying common problems quickly and efficiently. Consider the example of the weed whacker manufacturer who was able to identity the reason for a 266% increase in returns by noticing that the switches were white instead of blue, which was the colour of the approved switch.

Quick Problem Identification

Considering that 70% of goods returned as defective actually work, it’s imperative to quickly determine which goods are truly defective and need to go to the repair centre and which goods can be repacked for resale. In addition, with many of today’s products being (built-in) battery powered, many times the problem is just a bad battery, and the repair is as simple as swapping out a defective battery for a good one — something that can be done in the returns depot, saving an expensive return to the repair centre.

Since even the best efforts to improve quality won’t eliminate defects entirely, and since customers will continue to return products that aren’t really defective (or that just need a new battery), it’s important to have a streamlined reverse logistics process to ensure customer satisfaction stays high while costs stay low.

Does Your CSM System Provide Multiple Product Views?

A recent white paper by Dassault Systemes on Product Lifecycle Management (PLM) hit the nail on the head when it asked, near the back of the paper, if your Component Supplier Management system supported multiple views? Specifically, the paper on “Component Supplier Management” (CSM) identified three views that your PLM / CSM system has to support if you want it to be adopted across the organization and utilized across the product lifecycle:

system (logical)to enable distributed and cross-organization design activities
physical (EBOM: engineering bill-of-materal)to enable component identification, selection, and standardization
financial (BOM: manufacturing bill-of-analysis)to enble supplier identification, selection, management and (strategic) sourcing activities

The reality is that PLM is a very involved process that not only touches most of the orgnization, but impacts most of the organizational functions. As a result, it needs to either support most of those functions or capture the data required by those functions and/or integrate with other organizational systems that capture the necessary data and/or accomplish the relevant functions in order to be useful, because PLM is not a function that can be siloed into any one organization. Keep this in mind when selecting your next PLM system.

Quality DOES NOT Equal Risk Management

Every now and again I see a headline that causes me to foam at the mouth. One of the most recent examples is a recent article in Industry Week titled “Quality Equals Risk Management”. While I’m generally a fan of this publication, I can’t stand it when a headline makes such an erroneous claim.

Quality is a by-product of proper Risk Management. Quality Control is an aspect of proper Risk Management. But even Quality Control does not equal Risk Management! Risk Management is a broad initiative that looks at, and attempts to mitigate, all of the risks in your physical, financial, and information supply chains. This includes managing financial risks around currency exchange, commodity prices, and economic instability. Environmental risks around natural disasters, climate change, and accidents involving hazardous materials. Political risks involving terrorism, the proliferation of Weapons of Mass Destruction (WMDs), failing states, and crime. Compliance and Regulatory risks stemming from globalization, expansion and restriction of trade, and regional instability. Workforce risks from infectious and chronic diseases, pandemics, and liability regimes. And other product risks from lack of raw materials, transportation breakdowns, and theft. Quality is just one aspect of risk — and quality control is just one aspect of risk management!

All quality suggests is that you have good quality control programs in place — but it doesn’t even guarantee that! It might mean you have a high quality supplier who takes pride in their work and goes the extra mile to insure quality despite your shoddy practices. And while the article is right in that quality is the most powerful when it is engaged to prevent defects instead of detecting them after the fact, it is still only one aspect of a well rounded risk management program.