Category Archives: Product Management

Choose Your (Project Management) Metrics Appropriately

A recent article over on CIO.com highlighted recent findings from Forrester Research which found that “Common Project Management Metrics Doom IT Departments to Failure”. According to Forrester, the idea that a project must be on time, on budget, and deliver the initial requirements is problematic and sets up an IT project for failure.

According to Forrester, the problem with these metrics is that they perpetuate the idea that a project is only successful when it is completed according to the initial schedule, budget and requirements — and therefore, that anything less is a failure. Project requirements change for a variety of reasons, and schedules and budgets change during the lifetime of the project based on better information as to effort, complexity and interdependencies, and, thus, the initial plan should not be adhered to if additional information leads to a better understanding of how the project different from initial estimates.

The reality is that, as the project requirements are explored, complexity will increase or decrease, and, more importantly, requirements will change. Some features and functions will be determined to be unimportant while new features and functions will be discovered that have more value than the initial requirements. Thus, even if these cost more, if the ROI is greater than the ROI predicted by the original project plan, the plan should change. This holds true regardless of the application area — operations, CRM, or supply chain. When it comes to IT, the reality is that you never know exactly how long it is going to take, how much it is going to cost, or just how much benefit you’re going to find until it’s done. You can estimate, and if you have an expert help you, the estimate will usually be close, but it won’t be perfect — and this is why may projects fail, because those who don’t understand IT expect that perfect plans exist. There is no perfection in IT project planning. Accepting this is the key to success.

The metrics that should be used are the ones that identify fundamental issues that cause projects to fail: like lack of governance, unrealistic plans, and limited understanding on the part of management. Better metrics are how many milestones are hit (as long as the project plan is updated at each milestone based upon knowledge gained and lessons learned), what percentage of people are using the system at the end of each phase of the rollout (w.r.t. what percentage of people should be using the system), and how many executives are using the system (even if only for reporting purposes).

Furthermore, project management personnel must play a more active role in managing project sponsors’ and business stakeholders’ perceptions of success and failure. Forrester recommends that project management personnel take the following four measures:

  1. Keep Project Steering Committees on Task
    Insure that the steering committee makes decisions in a timely matter and addresses problems and issues as soon as they arrive.
  2. Improve Communication with Project Sponsors
    Keep the sponsors up to date with changes in requirements and the impacts these changes have on the budget and timeline to insure that they see progress and success and not failure.
  3. Improve the Reliability of Project Plans
    Establish best practices for developing plans with significant unknowns. This can help with setting sponsor expectations for reasonable project performance.
  4. Better Communicate Estimates of Cost, Schedule, and Resources
    … and how they are based on current business conditions, current requirements, and current assumptions — and that they could change as the project progresses and understanding is improved.

Design Cost Out with Akoya

Last year, I gave you a formal introduction to Akoya (acquired by I-Cubed) in my post Ahoya, Akoya and their unique solution for reducing direct material spend, which was described by their co-founder and president Brett Holland in his posts on “Getting Ahead of the Product Cost Management Curve” and “Taking Control of Cost Management for Engineered Direct Materials” over on Spend Matters. (With additional information to be found in their short paper on why “analytically derived should-cost information is critical for improving product margins”.)

When I was back in the mostly windy city recently, I had a chance to catch up with Akoya and discuss their new product offering, currently in beta with a few select customers, which is designed to complement their existing product offering and help organizations save even more on their manufactured part purchases.

Their current product offering, Category Workbench, allows a company to identify which parts it is likely paying too much for using a technique Akoya calls “competitive banding”. By extracting identifying features and product composition information from part designs, Akoya’s Category Workbench can automatically group parts into categories by common design elements and raw material composition and extrapolate average prices. Using this information and market costs, it can also statistically extrapolate expected prices for each part in a category and identify those parts that are currently being sourced at below market price, at market price, and above market price. This allows the company to identify those parts that present savings opportunities through re-sourcing, re-negotiation, or re-design. With this information in hand, a company not only knows where its sourcing teams should direct their sourcing efforts, but where it’s engineering teams should direct their redesign efforts. Considering that re-design and re-costing of even a simple part through a system like MTI Systems’ Costimator or Apriori’s Virtual Product Environment* can take a design engineer the better part of a day at the low-end, and a few days at the high end, and that their time is very expensive, this is very important as a company that sources thousands of direct parts can only attack a few hundred parts in a given year, and the wrong choice (based simply on a spend analysis by volume, supplier, or cost) can cost a company more money than the redesign effort will save.

Akoya’s next product, Designer Workbench, is going to allow a company to dive into those parts where the Category Workbench indicates a potential savings opportunity in a way that’s going to allow the company to determine the potential extent of the savings opportunity in minutes instead of hours, or even days. In addition to a number of new search, costing, and CAD data support features, which I plan to dive into at a later date after the product is generally available, one of the significant new features that this product is going to include is a new “What If” Analysis Tool. Using market pricing and price data from other products in the competitive band, this tool is going to allow an engineer to quickly create virtual variants with different features, treatments, processes, and raw materials and calculate estimated costs in real-time. In a matter of (less than 15) minutes (on average), a design engineer is able to iterate through a number of options and identify not only a lower cost alternative, but the high level design features that the lower cost alternative needs to have. In beta tests with an existing client, the estimated costs produced by the solution have been found to be accurate within 95% or more (when compared with detailed Costimator analyses which take an average of 6 hours for the customer in question). Needless to say, these are some amazing results, and I suspect that a forward thinking company that properly utilized this solution in conjunction with complementary solutions would see incredible returns. But that’s also a subject for a later post.

* Although re-design and re-costing through Apriori’s Virtual Product Environment can be done in a matter of minutes once the environment is configured and appropriate cost information entered, setting up one of these environments usually takes days, and often requires the assistance of Apriori personnel. 

Packaging – The Total Solution

A recent Spend Matters perspective asked a very important question: “Have You Got the Total Package?” This is important not only because packaging costs money and adds to total product costs, but also costs money by adding to transportation costs – twice, and, even more importantly, can cost sales by limiting how many units of a popular product you can have on the shelf at any one time, especially if poorly designed.

More importantly, as the perspective pointed out, you can save significantly if you attack the packaging category strategically, even when prices are rising across the board. Up to 20% savings are possible through better sourcing and requirements definition, and up to 50% are possible with re-design. The key, as with any other strategic category, is to understand what you’re buying, with whom, in what volume, and what you really need. Not only are there spend leverage opportunities, but there are often significant substitution capabilities simply by changing the specifications from “‘B Flute’ Cardboard box, 12″ by 6″ by 8″, Form Factor 2” to “Box: minimum 11″ by 5″ by 7″; maximum 13″ by 8″ by 12″; minimum weight capacity 15 lbs; maximum weight capacity 25 lbs;” … because this allows the supplier to offer you the product that is the most effective for them to make if multiple boxes will do equally well. No redesign necessary.

It also allows you to bypass the “crawl” phase of the “crawl – walk – run” maturation process for sourcing organizations presented in the perspective, which is important as this will significantly increase your chances of achieving big savings quickly, without requiring any significant involvement from engineering. All you are asking for is a specification of the requirements in a product neutral manner, which engineering would have defined before they selected the current standard packaging.

This allows you to get to the “run” phase faster, which is where significant savings opportunities are to be found, especially if you’re willing to go beyond simple material substitution and engage in a full packaging design process that will minimize package size, minimize raw material requirements and associated costs, maximize the number of units that can fit onto a pallet, and minimize the shipping requirements for the packaging itself. For example, just like a box generally allows for tighter packing than an odd shaped container, a tetrahedron often allows for denser packing than a cube while reducing the amount of packaging material required to achieve the same volume. Thus, just like tetrahedron containers make sense for certain liquids, they might also make sense for odd-shaped products (like pyramid-shaped ornaments) that would leave too much free space in a box (and increase the filling material requirement as well as waste).

And the sooner you’re running off to do package design optimization, which will could also help you get greener faster, the sooner you’re saving money on categories that would otherwise have price increases through the roof. So, Get Packing and save money!

The Complexities of Strategic Service Management

I first introduced you to Strategic Service Management in February of last year where I indicated that it was a proactive approach to making the customer satisfied and efficient while making a profit that balances strategy, resources, commitments, and pricing. It supports the integration, optimization, and efficient management of core business processes, adds to your overall business solution, and helps to differentiate your offering from that of your competitors. And it is a practice that is growing rapidly at many consulting firms as it is a topic that is now become common in many boardrooms that are feeling the squeeze in both directions on the product front: production costs are rising rapidly but prices need to remain flat in order to move any product at all.

For many companies, Strategic Service Management is now the only way to increase profits – as it not only allows premium prices to be charged for quality services that are perceived as valuable by the customers, but can also substantially reduce service costs when the right product is in the right place at the right time to be put in the hands of the right technician to do the job. The fact of the matter is that poor service often translates into real losses – which go beyond the financial penalties specified in your SLAs. If the product isn’t available or is priced too high when a customer wants it, that can result in a lost sale as well as dissatisfaction that may prevent the customer returning to you in the future. If your service team is unresponsive, not only will you lose repeat business, but your brand can take a hit. And if you price too low, you’re losing profit.

So what is involved in Strategic Service Management? As I covered in depth in my piece on Strategic Service Parts Management a few months ago, a lot of it revolves around parts and price management – having the right product available at the right place at the right time and at the right price – and this involves forecasting, inventory management, and price optimization, but it also involves having the right technician available to install the part and get the repair right the first time and making sure the technician has access to the knowledge she needs to do her job – and this involves workforce management, scheduling, routing, and knowledge management.

In other words, good strategic service management has to address all aspects of the entire service value chain (that may also include other suppliers, distributors, OEMs, dealers / value added resellers, and after market services) and not just the part or the price of the service. It also has to go beyond just the short term issues of problem diagnosis, replacement part location and delivery, technician scheduling and dispatch, and price optimization and address the long term issues of regular re-orders of parts when inventory reaches threshold levels, appropriate workforce training and staffing, and performance monitoring to insure that price levels and service remain at optimal levels.

Furthermore, the fact that this has to be done across geographies, diverse customer segments, product types, various types of SLAs, various levels of customer commitments, and both company-owned and third-party resources, should be enough to convince you that this requires a dedicated solution designed to address strategic service management. A spreadsheet (despite the fact that Aberdeen found that 91% of companies still use spreadsheets to plan and forecast parts and service levels in its report on “The Emergence of the Chief Service Officer”) is NOT enough. Furthermore, neither is your ERP.

An ERP was designed for inventory control, work order processing, basic product tracking, catalog management, simple case management, and, maybe, basic call center management. Enhanced add-ons may also handle inventory forecasting and planning, replenishment planning, exception monitoring and analysis, simple GANTT scheduling, and work order tracking, but this barely covers stage 2 (operational control) of SSM (where stage 1 is firefighting) and doesn’t even begin to address stage 3 on the optimization of performance management, and definitely doesn’t even hint at stage 4 where true integrated service management is reached and strategic service management acts as a growth engine for your company. To get there, you need the foundational capabilities that include parts optimization, integrated PLM, order planning and sourcing optimization, manpower planning and optimization, knowledge management for issue diagnosis and resolution, and performance analysis which then enable multi-enterprise collaboration, integrated part location and technician dispatch; integrated parts, labor, and pricing optimization, contract and market profitability analysis, and integrated service offerings – the ultimate key to successful strategic service management.

As my previous entries on Servigistics and MCA Solutions addressed strategic parts, pricing, and warranty management, my next two contributions to this series will cover workforce planning and knowledge management for service success, and, specifically, Servigistics’ new offerings in these areas.

(Manufacturing) Design For X

The April 1, 2008 issue of Theory and Practice from Manufacturing Insights had a great article on “Design For X” – the practice of incorporating different tangential factors into the design of a product that are intended to better integrate the new product with downstream activity. One of the more familiar DFX practices is, of course, DFM – Design For Manufacturing – where engineers strive to produce a product to be easier, safer and less costly to manufacture.

However, DFM is not the only DFX discipline that product companies need to consider. There is also DFSC – Design For Supply Chain, DFS – Design For Serviceability, DFC – Design For Compliance (& Sustainability), and DFW – Design For Warranty, and each of these is important. However, in today’s economy where costs are rising and discretionary spending is falling, probably the most important consideration in product design is the end cost of production. Since early interaction between design and supply chain is key to making the right build-versus-buy and material selection before design decisions, and associated costs, are locked in – I’d argue that DFSC should be on top of every company’s mind. Especially since, as the article points out, DFSC leads to further optimization and agility in the supply chain and reduces the impact of inevitable late changes and quality problems.

Of course, you cannot ignore DFS, DFC, and DFW. There are always going to be failures, and DFS evaluates design modularity and supply chain alternatives in order to maximize serviceability and enhance the customer ownership with inventory and reverse logistics operations in mind. A good design considers the complex dependencies between product design, reliability, service, inventory planning, and reverse logistics. The expected frequency of repairs and the type of parts that need to be replaced will determine the reverse logistics, depot repair, and part restocking requirements in the supply chain.

Similarly, if you actually want to be permitted to sell your products, you have to adhere to product compliance regulations such as RoHS and WEEE for the European electronics industry and the TREAD act for the American tire industry as well as corporate accounting regulations and overall social responsibility. Compliance cannot be an afterthought – it needs to be taken into account during design, manufacturing, shipment, servicing and decommissioning of products through a total life cycle approach. For example, in RoHS if even one separable component contains more than a minute trace of hazardous material, the entire assembly could be banned – leaving you with millions of dollars of inventory that cannot be sold.

Finally, you need to consider what reverse logistics and repair activities will exacerbate warranty costs and insure that tradeoffs are made to minimize those activities that will be most costly in the design process.

In short, DFX is a total lifecycle design practice that takes into account the costs and benefits of each and every design decision in the different life-cycle phases of a product, considering both the short and long term ramifications, from a Manufacturing, Supply Chain, Serviceability, Compliance, and Warranty viewpoint.