Comprehensive methods of Competitive Product Development
Higher margins and shorter lead times with Competitive Product Development
How can you develop a product from the very start that is: competitive in the bidding
phase — can be produced efficiently — and can also be sold with a reasonable profit margin? The answer is a bit complicated, but important: you can do it with an intelligent combination of design-to-cost methods, focusing on construction and production improvements, as well as lean-development concepts, to optimize the entire development process. Together, they can reduce your resource use and shorten product development lead times. To describe this process, Ingenics using the term “competitive product development (CPD)” and recently it was successfully put to use for a French, tier-1 aerospace supplier.
Competitive Product Development (CPD) is a systematic method of making a company’s product development phase far more effective. It is therefore ideally suited for OEM’s, system and tier-1 suppliers, as well as companies using small series production. That’s because the development of attractive, competitive products is vital to these kind of suppliers. Seeing up to 80 % of a product’s final cost is established early in the development phase, here targeted cost optimization and controlling can lead to significant improvements.
But at the same time, Ingenics product development expert Alexandre Zisa warns against concentrating just on cost factors: “The systematic development of economically priced products also needs an all-encompassing, interdisciplinary approach. Because Competitive Product Development has to be applied in a number of different phases: during bidding with the submission of technically sound and economically attractive offers — during development to avoid unnecessary time delays or costs — and during the optimization of existing products to correct problems with production costs or low profit margins. That’s why all key departments need to participate and cooperate in a CPD project — from engineering to purchasing, production, logistics and of course sales. Recently, that was confirmed by a French aircraft manufacturer and supplier.”
This company is a tier-1 supplier for customers such as Airbus, Dassault, Embraer or Airbus Helicopter. And they turned to Ingenics for help in establishing a Competitive Product Development project. Their prime goal was: To win a contract against ten other competitors and at the same time ensure a fixed profit margin over the next 20 years.
“Naturally, we began by determining the entire cost structure,” explains Alexandre Zisa. “But we didn’t just focus on the manufacturing costs — the total project costs were examined, particularly those in the development phase.” As a result, the cost analysis and potential improvements usually target a department with technical alternatives — whose various costs can be immediately estimated and in cluded in pricing calculations. Only afterwards could all of the pricing oppions be prepared for the sales department.
The offer leads to success
In a second step, fine adjustments are made. “The prerequisite for successful Competitive Product Development is to create an efficient, transparent working framework for everyone involved,” adds the Ingenics’ expert. Here, this included meetings designed not only to inform, but also to make decisions on joint solutions. And after these meetings, to-do lists were no longer needed — because the work could start immediately. This required the weekly attendance of all participants during the first three months of the project. And all of them needed to be prepared and have the same information. Thanks to weekly cost-updates, including itemized listings of parts prices and close coordination of technical decisions, Ingenics was able to monitor the team’s progress at any time.
In this way, all cost variations could be controlled — even those due to last minute changes in the design concept or internal and external production planning. “By any companies however, the big problem is that errors during product development are seen — but not understood. That’s because it’s not clear why a product becomes so expensive or why the product’s development takes so long.” Here, Ingenics provides a fresh perspective – so that potential improvements can be identified by developers. For the aircraft manufacturer in this example however, the advantages of Competitive Product Development were immediately clear: Following design reviews, meetings between purchasing, production and logistics, as well as working sessions with the end-customer’s technical teams — the manufacturer’s overall performance was improved by roughly 40 %.
Following the successful implementation of Ingenics’ Competitive Product Development project, the new working methods with shorter development lead times will be adopted and additional lean-development principles will be introduced. This process will begin with team training sessions to show: how projects can be managed best, how to better understand the customer’s needs, and how to better control technical financial issues.
Customer benefits and value-added, that speak for themselves
Summary: By combining two related management methods — “design-for-excellence” at the product level and “lean development” at the product development level — every company’s profit ability can be significantly increased while dramatically shortening its product development lead times. A prerequisite here is the close cooperation of all departments including complete cost transparency. In this example, our consulting project paid off after only four months — with customer benefits and value-added, that speak for themselves.