Category Archives: Product Management

Strengthen Your Supply Chain

In yesterday’s blogologue I told you that your brand was a terrible thing to waste – and that the strength of your company’s brand ultimately lay in its supply chain, and not the latest fad dreamt up by your company’s marketing mogul. This means that, unfortunately, it’s up to you to protect the brand, and not the apathetic advertisers who lounge around all day being “creative“.

So how do you do that? The Industry article “Strengthen Your Supply Chain” that I referenced yesterday has some good starting points. It tells you to focus on five key elements that cover most of the basis. It’s key elements were:

  • traceability
    you should be able to track all products, components, and raw materials backwards and forwards through the manufacturing process
  • measurement
    basically, testing; identify the components and risk points (start with the hand-off points) and then have internal quality assurance personnel or an independent auditor test each component and at each risk point
  • certification
    certification programs set guidelines and involve an additional process of checks and balances: these usually fall into regulatory, industry self-regulation, and third-party certification
  • efficiency
    be sure to adopt a traceability and testing program that works with day-to-day supply chain operations
  • organizational buy-in
    successful supply chain management depends on the cooperation of employees at each and every level

To this I’d also add, at a minimum:

  • Visibility
    It’s important to not only know what goes into your products, but where each raw material, component, and product is at all times. Could they have been tampered with? And, if you are dealing with consumables, how long did they sit on the truck? Could they have gone bad?
  • Modeling
    In order to be sure you have the right process, including the right checks and balances, you need to be able to model the supply chain as it is, as it should be, identify the differences, identify what could go wrong, and insure an appropriate test is included for each hand-off point, risk, and exception.
  • Supplier Management
    You ned to insure that your suppliers understand the importance of the process, are following the process, and are reporting any and all problems that arise, including those that they are able to detect internally. (If too many problems arise internally, even if they are corrected before defective or contaminated goods are shipped, then they need help with their process as the risk of something slipping through the cracks is too great.)

Finally, I’d like to point out that as important as certification is, checking out the certifications is even more important. In some parts of the world, it’s quite easy to buy a faked certification document. Just because a new supplier sends you a certification document, that doesn’t mean they are actually certified. Be sure to check with the organization that issues the certification that the supplier in question was actually certified AND that the certification is still in effect. But don’t stop there – if the certification is one that is actually done by third parties, check out the reputation of the third party conducting the audits. Are there any complaints against them? If so, how many and how recent. In some places, it’s even easier to buy a successful audit then it is to buy a fake certification.

Design For Recycle

If you work your way through the posts on the automotive sector over on Supply Excellence [WayBackMachine], the top supply tips on topsupplytips.com (setup by Procuri, acquired by Ariba, acquired by SAP), and the virtues of contract management and dive into the Corporate Social Responsibility & Sustainability posts, you’ll find a gem hidden deep in the mine – and that gem is Design for Recycle (also known as Design for Disassembly). As highlighted in his posts “Sony to Turn Sustainability Into Money Maker” and “How Can You Do Good? Take a Page From HP’s Book”, Tim points out how recycling is turning out to be a huge success for HP and Sony, from a financial perspective as well as a corporate social responsibility and sustainability perspective.

Not only is this a gem, but we’re not too far from the point where it will be critical for this to be part of every product manufacturer’s supply chain. Why? First of all, skyrocketing demand for raw materials in the developing nations is causing serious inflation across the board – and you can’t just expect to pass that cost on to your consumers who expect your product to hit a certain price point and, more importantly, may not be able to afford your product if you miss this price point. Secondly, you’re going to start to see a lot more regulation coming into play globally with regards to not only restricted materials and environmental impact, but also on disposal regulations and what YOU are responsible for. Europe led the way with the End of Life Vehicles (ELV) Directive and the Restriction of Hazardous Substances (RoHS) Directives. Starting this year automotive manufacturers must provide free take-back for all vehicles they’ve put on the market and make sure this is a local drop-off center for such vehicle in every market they sell in. Computer and Electronics manufacturers are now banned from using dangerous chemicals, must be 100% transparent with what they do use, and conform to all chemical directives, such as those found in Registration, Evaluation, Authorization and Restriction of Chemical substances (REACH). Parts of Asia are now proposing similar regulations, and with 71% of voting-age Americans believing that corporate America’s reputation as a whole is either “not good” or “terrible”, it’s not going to be able to stay off of the political agenda for much longer. (“Is Your Corporate Reputation a Liability on Your Balance Sheet”, Directors & Boards, p 32)

Then, there’s probably the most pressing gap of all – the forthcoming talent crunch. At first glance, you might think these are two completely unrelated subjects, but that’s just not the case. If you’re hiring today, you’re not only looking for Generation X‘ers (born between 1964 and 1979), but Generation Y‘ers (born between 1980 and 2000) as well, and these generations are very concerned about the environment, sustainability, and the responsibility of the corporation to address these issues. So much so that it may not matter how big of a paycheck you’re offering, because Generations X and Y, although they expect a big paycheck in return for what they can offer you, also value other things and won’t take a job that does not fit in with their lifestyle – which is becoming more socially cognizant by the day. Thus, those corporations who Design for Recycle at the beginning of New Product Development will be much more likely to answer “Yes” when someone asks if they Got Talent? compared to their competitors, which could be fighting much harder to hold their own in the talent war.

In other words, if you don’t adopt Design for Recycle, or at least Design for Dissembly soon, in addition to plunging sales in markets where environmental impact and sustainability are on the minds of every consumer, you also stand to face skyrocketing material costs and a lack of fresh talent to bring those products to market. A grim future, especially since those companies who have already adopted it are not only increasing market share, controlling raw material costs, and attracting the best and brightest – but making money off the deal. How can you beat that?

As far as I’m concerned, we’re already paying too much!

The Benefits and Risks of Global Product Development

A few weeks ago, AMR published a thought-provoking piece by Jeffrey Hojlo, Michael Burkett, and Nigel Montgomery titled “Driving Global Product Development Excellence: A Guide To Balancing Benefits and Risks” in their free research section. (It will likely be locked to members only by the time this post goes up, so I will try to capture the most significant highlights.) In the article, the authors note that although it’s no surprise that the offshoring of Global Product Development (GPD) has become a $13B market, it is surprising that companies that consider New Product Development and Launch (NPDL) core to their businesses still outsource in developing regions despite the inherent risks, which include security, supplier qualification, low compliance standards, product quality, slow time to market, geopolitical unrest, and lack of regulation.

In a recent AMR survey, they found that 30% of organizations are outsourcing some aspect of their New Product Development and Launch (NPDL) processes, 40% plan to outsource some aspect of their NPDL processes over the next 12-24 months, and another 27% have captive development centers in place. The primary reason given is the shortage of affordable engineering talent in developed markets and, thus, despite the risks, the business demands it.

Most of these companies still keep the actual product design process within the four walls of the corporation, but are increasingly looking to outside partners and captive development centers to help with the front end (ideation) and back end (product launch). This can be good news for vendors in developing economies with the skill sets to assist in these processes.

The research brief points out that many of the risks – including product quality, supplier qualification, security, brand equity, slow time to market, disparate data, the right people, compliance, and geopolitical – can be mitigated, or at least managed, by way of appropriate strategies. To this end, it recommends starting with the following six strategies:

  • Product Road-Mapping and Portfolio Management
  • Iterative Product Development and Validation
  • Product Architecture and System Design across the Value Chain
  • Knowledge Management on the Front End of Innovation;
    Content Management, Product Data Management, and Search
  • Intellectual Property (IP) Security & Management, Authentication, and Authorization
  • Talent Management

And I would add the following:

  • The right Product Lifecycle Management – Sourcing Platform
    Since the goal is to lower costs while lowering risks and increasing quality and value. The right, integrated, platform will go a long way towards helping you implement the strategies above.

The brief concludes with an overview of the GPD opportunity, based on three technology gaps in GPD environments cited by end-users in the AMR study:

  • Concept Testing
  • Design Engineering and Prototyping
  • Needs Assessment / Idea Generation

It goes on to note that these are all areas that require robust decision support and notes some typical questions in a GPD scenario that developers and managers need to answer:

  • What are the risks I need to be aware of?
  • Open innovation: how open should I be with offshore partners?
  • Will my ideas resonate with my target audience in this particular market?
  • What are the operational cost tradeoffs to expanding the design performance or increasing the number of SKUs when offering additional product features?
  • How do the results of alpha-beta tests or recent market data affect a new product launch?
  • Do I have the right people working on the right projects?
  • How do local regulations and requirements affect the materials I need to source and the proof of compliance I need to provide to local officials?
  • What learning experience from past experimentation or failures (such as product or supplier quality issues) can be reused in future product development efforts?

It then concludes with some wrap-up recommendations for vendors of NPD(L) and Product Lifecycle Management (PLM) solutions and technologies.

  • Expand Your Services Practice
    There is a huge need for business process engineering, risk mitigation consulting, and training in developing countries.
  • Enable Postponement Strategies
    Extend postponement strategies from simply delaying the final assembly from sourced components to include sales configuration and design for supply.
  • PLM and Sourcing Unite
    One of the major risks with global sourcing is the variability due to inconsistent lead times and product quality. Tight integration between PLM technologies for Product Development and Sourcing technologies will help minimize the variability.
  • Don’t Forget About the People Component of GPD
    People Management is not a strong focus of PLM vendors. But why not incorporate more in-depth skill requirement, training, and talent management functionality in PLM technology for quick decision making on the right resources for a project?
  • Extend PLM to be a Risk Decision Support Platform
    There’s currently no platform to manage the various types of risk in GPD.

A Kick-Ass Direct Sourcing Solution for Manufacturers: Part II

In yesterday’s post, I indicated that I would introduce you to a solution for direct sourcing that was distinct from your standard sourcing suite and which was designed to manage your PLM-based sourcing needs from day one – and that is what I am going to do.

Believe it or not, the solution I’m referring to is the new solution being offered by Co-exprise (rebranded DirectWorks, acquired by Ivalua), a company that has been around since 1995, managed over 175B in customer spend since their inception, and which is probably still best known for its Co-exprise MarketPlace.

For the past few years, Co-exprise has been working hard to create what they hope will be an entirely new type of PLM-based direct sourcing solution for complex manufacturers – be they aerospace, automotive, defense, heavy machinery, high-tech, medical device, or diversified manufacturing – that directly attacks the trials and tribulations faced daily by the sourcing team who have to source assemblies of ever-increasing complexity while being crunched by continually decreasing product life-cycles. And the solution they have devised is un-like any I have ever seen.

In the situation where you have a lot of complexity to deal with, where you are sourcing complex assemblies of thousands of parts, where you have hundreds (or thousands) of design specification documents in dozens (or hundreds) of formats to deal with, and where you need to collaborate in real time with your engineering team and your supplier’s engineering team, it’s the best solution I’ve seen for the type of direct-sourcing problem they are solving.

The solution, which integrates RFx, auctions, project management, collaboration, PIM, PLM integration, dashboards, and tree-based navigation, also includes enhanced security, contextual-awareness, supplier qualification, and enhanced meta-data capabilities. The application understands over 1500 disparate file formats produced by CAD, CAM, and PLM software solutions and can automatically extract relevant meta-data and apply custom compression techniques (based on wavelet theory and fast fourier transforms) that achieve 50% to 99% compression ratios and allow for faster document transmission, which is very secure as the files are encrypted using 512 bit AE2 compression and access can be restricted at a very fine grained level – and to a specific individual or IP if needed.

The solution is project-based, and everything in the system is an object. This might not sound important, but this allows everything to be cloned, which means that any project, or portion thereof, can be copied and used as a template for a future project. Furthermore, collaboration works on any object in the system – a context can be created on any file, item, sub-assembly, assembly, or project – and a focussed discussion, logged and accessible at any time, can take place. These discussions are then integrated with the task management functionality and can be tracked accordingly. The RFx solution is more than adequate, the auction capability allows for real-time bidding at a latency of only 50 ms, and basic contract management capability is being built as you read this.

It doesn’t have spend analysis yet (though they have stated that they are working on a new type of spend analysis solution more appropriate to direct sourcing then your standard spend analysis solution, which intrigues me even though they are not yet ready to release details – especially since I want to know how they plan to one-up BIQ [acquired by Opera Solutions, rebranded ElectrifAI]), there’s no optimization, and no (third-party) e-procurement integration, but as discussed in yesterday’s post, spend analysis is usually a separate project in these types of direct sourcing projects, complex decision optimization is usually not required (or viable where you usually need a strategic relationship), and since everything in the system can be exported, it wouldn’t be hard to do a batch-based XML or CVS linkage to your current e-Procurement or e-Payment system, so it’s weaknesses are not significant for the problem it is addressing.

As I noted yesterday, there are other solutions out there, like the UGS solution, and you should look at any solution that appears to be relevant before making your selection, but, even though you probably haven’t heard of it, if you’re a manufacturer sourcing complex assemblies, I would not leave the new co-exprise solution off of the short-list when doing your evaluations.

I will be continuing discussions with the co-exprise leadership team (who have 200 years of combined experience in manufacturing and supply chain) and should have more to say in the future, but would like to note that they do plan to update their web-site and materials in the near future and this will help to shed some light on the uniqueness of their product. But in the meantime, if you’re a manufacturer in the market for a direct sourcing solution, give them a call or drop them an e-mail and they’ll be more than happy to give you a demo.

A Kick-Ass Direct PLM Sourcing Solution for Manufacturers: Part I

In this post I’m going to lay the foundation required to introduce you to a new direct sourcing solution if you’re a manufacturer – regardless of industry – who manufacturers, or outsources the manufacturing of, complex parts and assemblies. (In other words, if you’re in aerospace, automotive, defense, heavy machinery, high-tech, medical device, or diversified manufacturing, you may want to read these posts carefully.) This isn’t to say that it’s not useful for the sourcing of simple parts or assemblies, or that it can’t be used for indirect materials (with some caveats), just that the true power of this solution is not recognized unless you’re sourcing (at least moderately) complex parts and assemblies.

This is a distinct solution from the standard sourcing suites that is offered by the likes of Emptoris (acquired by IBM, sunset in 2017), Iasta (acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric), and Procuri (acquired by Ariba, acquired by SAP); the on-line marketplace solutions like Alibaba or the manufacturing focussed MFG.com; and even the PLM focussed solutions of Agentrics (acquired by NeoGrid) and UGS (acquired by Siemens). Not to say that these are not great solutions, the first set are great solutions for indirect materials and simple direct materials; the middle set are often perfect at identifying potential suppliers and, especially in the latter case, for sourcing simple parts or assemblies; and the latter set are really good for PLM management within your company, but in one way or another, all fall short when it comes to complicated manufacturing and the sourcing of complex parts and assemblies, especially when you’re global.

The reason that this is the case is that sourcing an assembly is not like sourcing a straight-forward commodity, raw-material, or service. It’s not just a matter of performing your market intelligence to come up with a should cost model, executing spend analysis to identify the potential savings opportunity, posting an RFI to identify potential suppliers, creating an RFP to qualify suppliers, sending out an RFQ to get initial bids, (potentially) running an auction to determine final bids and the suppliers eligible for an award, and using decision optimization to determine the final award, which is then contracted. Sourcing a complex part or an assembly is much more involved.

When you’re sourcing a complex assembly or part, both you and your suppliers have a lot of complexity to deal with. First of all, you need to know how many basic parts exist in the sub-assemblies and sub-parts, how many instances of those basic parts exist, and what raw materials and manufacturing processes are required to make those parts. Then you need to identify and find all of the specifications and drawings and make those available, in a secure and controlled way, to your potential suppliers in formats that they can understand and work with. Then you need to enable collaboration between your sourcing professionals, design engineers, the potential suppliers’ production engineers, and the potential suppliers’ sales professionals. The potential suppliers’ production engineers will invariably have questions on the design, process, and materials and require clarifications to determine what will be involved to make the part. Then the potential suppliers’ sales professionals will no doubt have questions regarding the precise specifications and quality requirements of the raw materials so that they can provide accurate quotes based upon the feedback they get from their engineering team. (Does the bolt have to be hardness 5, or will hardness 4 suffice?)

Then something will invariably cost more than you expect, or can afford to pay based upon what marketing thinks sales will be able to sell the product for, and your combined sourcing and engineering team will have to collaborate with the combined sourcing and engineering team of the (potential) supplier(s) likely to get the award to come up with a new design or manufacturing process that will meet costs. During this process, a plethora of new documents and versions will be created and need to be tracked in a manner that is instantly accessible by all parties as soon as they are available. Then you’ll actually have to collect the quotes at the basic part level and be able to automatically roll them up into quotes for the sub-assembly and assembly and be able to compare, at each level, across suppliers to determine which supplier gets the assembly, which suppliers get the sub-assemblies, and which suppliers get the basic parts. And if you are sourcing a complex assembly with hundreds, or thousands of parts, this is no easy feat.

Furthermore, this is not something you can easily do with a standard sourcing suite, even if its on-demand and even if it is augmented with an on-demand Product Information Management (PIM) solution such as that offered by Arena (even though this is a great solution for PIM – and works great even for complex parts during a joint design phase), marketplace, or traditional PLM solution.

This is because standard sourcing suites are not designed for the management of design drawings, CAD/CAM models, and PLM and also since very few handle complex bill-of-materials with hundreds or thousands of parts (as they are designed to handle events with small to moderate sized bundles well), marketplaces are not designed for complex sourcing, and traditional PLM is not designed to be collaborative on-demand over the web.

(You might point out the UGS solution, which I wrote about in this post back in March, and it’s a good solution, but when you get down to it, it’s a relatively weak integration between separate suites of products built at different times for different purposes with different toolsets on different platforms compared to a solution built from the ground up to tackle the direct PLM-based sourcing of complex assemblies head on. Considering the number of mergers and integrations the UGS solutions have gone through, it’s impressive that they took the solution as far as they have. Whereas the UGS solution model is good for those companies who already have one or more of the tools that have been integrated and need an easy stepping stone to get to the next level, the from-the-ground-up model is probably a better way to go for those innovative companies that do not have any of the solution sets or are willing to change the way they look at PLM and Sourcing and take a new, integrated, approach.)

Furthermore, when you are dealing with the sourcing of complex assemblies, it’s usually not the raw material costs you’re concerned about, since these are fairly constant around the globe, but the production costs – which usually boils down to the labor. Auctions have little value beyond the most basic components (such as screws, nuts, and bolts) since the only wiggle room the supplier will generally have is their margin. There are not a lot of (complex) constraints, as you don’t have a lot of leeway, so complex decision optimization is usually not required – it’s really just looking for the lowest landed cost, which is easily computed, while making sure any diversity or dual sourcing constraints are met. So, beyond RFx and (at most) simple optimization, for the most part, you don’t need complex sourcing functionality. And where you are concerned about raw material costs, you’ll do a spend analysis project outside of the individual assembly sourcing events to benchmark your expected costs, which will then be fed into each sourcing event. As for contract management, the contract is fairly simple – provide the required assembly in the designated quantity at the designated time – since all the details are in the appendices which consist of the design documents and CAD/CAM models. So, tracking the design documents, the award, and a single attachment that represents the standard terms generally accomplishes the required level of contract management. And the project management that is required is not really sourcing project management but PLM project management – sourcing project management is just a subset that consists of the quoting phase and final award selection.

Thus, if you are a manufacturer – be it aerospace, automotive, defense, heavy machinery, high-tech, medical device, or diversified – there is a good chance that your current solution for sourcing, if you have one, is likely not meeting all of your needs. Furthermore, to meet your more complex needs, you likely need a new type of direct sourcing solution that was designed to manage your PLM needs from day one. In part II, I will introduce this solution to you. Stay tuned.

(P.S. In order to prevent anyone from ruining the surprise, and to insure all related discussion is centralized in one place – in the forthcoming post II, I’ve disabled comments for this post. Thank you for your patience.)