A recent article over on Industry Week on “What [You Need] To Know About Product Safety Challenges in European Business” pointed out something very important that U.S. business that want to expand into Europe need to know — U.S. product safety regulations are not enough if you want to sell your wares over in Europe. As per the article, if you want to sell in the 27 member states of the EU, you need to meet the “made in Brussels” European legal regulations (that set an identical standard throughout the entire EU). Before a product can be sold in the EU, it must have a CE mark that verifies that the manufacturer has ensured that the product conforms with the essential requirements of the EC directives. It must also have a declaration of conformity that includes the manufacturer details (name, address, etc.), requisite EC standards and performance data, relevant id number of any notified body, characteristics of compliance, and a legally binding signature. And if the more stringent requirements are not met, your product cannot be sold.
Category Archives: Product Management
Project Assurance: Pre-empting ERP/SCM System Failure
ERP/SCM projects fail all the time. The reasons include, but are not limited too, lack of top management commitment, unrealistic expectations, poor requirements definition, improper package selection, gaps between software and business requirements, inadequate resources, underestimating time and cost, poor project management, lack of methodology, underestimating impact of change, lack of training and education, and, last but not least, poor communication. In other words, human factors cause these projects to fail much more often than they should.
However, as per a recent article in Supply & Demand Executive on “preempting ERP/SCM failure through project assurance”, there is a way to minimize the risk. It begins with a blueprint of strategic project assurance at critical points in the implementation project’s evolution. It establishes clear understanding of expectations among all people involved — from the executives, to the business and IT management, to the software vendors and end users.
A Project Assurance plan, that
- identifies the real issues,
- sets realistic timeframes,
- aligns the work streams
- looks beyond the indicators for early warning signs,
- manages the expectations,
- seeks objectivity,
- communicates the expectations, and
- measures progress regularly
reduces the risk of failure by
- trakcing milesontes,
- controlling costs, and
- minimizing surprises.
It requires a lot of up-front planning, and a willingness to be realistic at all times, but is worth the effort. For details on how to create one, see Rob Prinzo’s No Wishing Required that will hep you identify six critical points in every project and get you on your way.
Why Should You Include Simulation In New Product Design?
As per this recent article in Industry week that proclaims that “the computer-aided-engineering revolution is here”, proper utilization of simulation in New Product Development:
- creates products that are more sustainable and energy efficient,
- enhances performance and ergonomics,
- improves value and affordability,
- provides options for differentiation, and
- considerably reduces NPD timelines as simulations can be created and run much faster than prototypes can be built and tested.
It’s a great article, and simulation is a great counterpart to optimization, which will allow you to optimize costs and supply before the product is finalized.
Tompkins Associates and the Next Generation Supply Chain, Part III.1
In Monday’s post, we brought your attention to Tompkins Associates’ recent white paper on “Leveraging the Supply Chain for Increased Shareholder Value” which nicely complements CAPS Research and A.T. Kearney’s study on “Value Focussed Supply: Linking Supply to Competitive Business Strategies” and echos our cry for Next Generation Sourcing methodologies. A cry which has been taken up not only by The MPower Group (and spearheaded by Dalip Raheja who has declared that Strategic Sourcing is Dead and invited you to the The Wake for Strategic Sourcing) but by BravoSolution (who are rallying the battle cry for High Definition Sourcing and who have given us A Futuristic Look at High Definition Sourcing). We told you how they declared the need for a new Supply Chain Value Creation Framework and a renewed focus on business value in the supply chain, outlined three supply chain objectives — Profitable Growth, Margin Improvement, and Capital Efficiency, and described six primary types of value enabling actions to achieve the objectives before telling you that we would spend the next four posts discussing some of these actions and why Tompkins Associates’ white paper on “Leveraging the Supply Chain for Increased Shareholder Value” should definitely be on your reading list as you outline your Next Generation Sourcing strategy.
So, today, we are going to discuss the objective of Margin Improvement.
There are three fundamental ways that a company can improve margins:
- Reduce COGS (Cost of Goods Sold)
- Improve Speed and Productivity
- Practice Tax Effective Supply Chain Management
Reducing COGS involves taking cost out of the supply chain mega process of Plan – Buy – Make – Move – Store – Sell – Return. Thus, the supply chain has lots of opportunities to reduce cost as each stage has multiple costly inputs.
Plan
While the white-paper skips over this step, there are lots of opportunities to take cost out in the planning stage. Without going into much detail they are:
- Understand true spend
and identify where the organization is spending money and ask if it needs to be spending money there? Maybe it’s paying for twice as much warehouse space as it ever uses, maybe it’s buying office supplies off-contract at double the contract rate, and maybe it hasn’t even analyzed it’s energy spend. - Understand true demand
as better forecasting takes cost out of spend across the board, as the organization won’t overbuy (and tie up working capital in inventory) and won’t underbuy (and lose marketshare to the competition) - Understand true 3rd party needs
and know exactly what skills and equipment are needed by the third party component manufacturers, 3PLs, etc.
Buy
Not only can the organization reduce cost by designing the supply chain for the optimal goal — be it lowest TCO / highest TVM, best quality, greatest availability, or maximum agility — depending on the product or service being sourced, but it can should-cost model before the buy to understand precisely what it should be paying (and why) and then apply decision optimization to understand how all of the different cost drivers interact, which will enable it to negotiate the best overall deal.
Make
There are a large number of opportunities to take cost out of the production stage, and go lean, including the following seven opportunities identified in the white paper:
- eliminate overproduction
- reduce waiting time (between steps)
- reduce transport (of raw materials)
- remove unnecessary processing steps
- eliminate excess inventory
- reduce unnecessary motion
- reduce the defect rate
Move
Similarly, there are a large number of opportunities to take cost out of the transportation stage, especially if you redesign your logistics network, and the following seven opportunities identified in the white paper are a great start:
- develop core carrier programs
- implement a TMS (Transportation Management System)
- take control of inbound freight
- outsource various (non-core) transportation management functions
- identify shipment planning and execution opportunities
- rationalize fleets
- improve controls
Store
Inventory represents a huge opportunity to reduce costs, especially since most organizations make a number of inventory management mistakes on a daily basis. In many operations inventory accounts for over 20% of the overall product stock. The white-paper identifies a number of opportunities every company has to improve inventory management and lower costs. The following ten opportunities identified in the white paper are great ways to obtain profitable growth through better storage management:
- strategic positioning of inventory
- product protection
- seasonal buys
- special deals
- quality assurance
- postponement
- value-added services
- returns management
- freight spend reduction
- growth management
Sell
Margin can be improved by improving the perfect order rate and by planning and implementing profitable, differentiated, service programs. A company can create a differentiatd service program by:
- segmenting markets and product groups
- identifying key value points by customer
- identifying consolidation opportunities around the customer
- identifying and creating common processes and systems
Return
The supply chain can take cost out of the return stage by:
- reducing the number of returns (which can be as high as 20% in electronics)
- reducing the cost per RMA (Return Material Authorization)
- improving the return velocity
- capturing residual product value
- deriving value from sustainability initiatives
- standardizing the process
- recovering costs from suppliers (who do not meet defect rate targets) and
- multi-channel visibility
The white-paper provides five great approaches for reducing the number, and rate, of returns and four great suggestions for capturing the residual value of products that should not be missed.
For more information on designing the supply chain for the optimal goal (best price/TCO, best quality, best availability, and agile supply base); improving production, transportation, and storage; creating differentiated service programs, and improving the returns process, see Tompkins Associates’ white paper on “Leveraging the Supply Chain for Increased Shareholder Value”. For more information on decision optimization or Should-Cost Modelling, see various posts here on Sourcing Innovation and the e-Sourcing Wiki.
In tomorrow’s post we’ll discuss the other two strategies for margin improvement: improving speed and productivity and tax-efficient supply chain 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.