Directworks Case Study

1

NPI Success www.directworks.com

Sourcing and Supplier Management: NPI Success Through Early Involvement

As manufacturers seek to grow revenues while improving their bottom line performance, many have turned to expanding their product portfolios. At the same time, product life cycles are becoming shorter due to ever-changing buyer needs, more rapid technology innovation, and greater global product confi gurations. In this environment, new product introduction (NPI) success has never been more critical.

Unfortunately, industry research shows that fi fty percent of new product launches fail to achieve business goals. Product cost issues, being late to market, inventory shortages, and product quality issues are the leading causes for failure (Gartner, 2013). To address the high failure rate, progressive manufacturers are shifting their focus and resources to improve their NPI processes and drive greater success. One proven best practice that all manufacturers should adopt is engaging their sourcing and supplier management teams early in the NPI process. Their contributions can lead to lower costs, better quality, increased product innovation, and reduced supply risk.

To learn more about how our sourcing software can help you better manage direct material spend, call 724.933.1180

1

2© 2014 Directworks 2© 2014 Directworks

Let’s explore how the early involvement of sourcing and supplier management can help overcome fi ve of the top NPI challenges:

1. Product costs come in too high

Product cost issues are frequently cited as the number one reason for NPI failure. Often, product designs are conceived and developed without full visibility into the total cost of the bill of materials (BOM). The cost impacts of certain component choices are not well understood until it is too late to make design changes and correct the cost. Low margins result in a canceled launch or force tradeo� s in quality, features, or functionality that diminish the success of the product.

Sourcing and supplier management teams can help hit target costs by sharing early design concepts with suppliers and developing a more complete total cost picture for the bill of materials. From there they can work collaboratively with selected suppliers to identify cost improvement opportunities before fi nal product designs are locked in.

2. Product is late to market

Another signifi cant cause of NPI failure is being late to market. Launch dates are delayed by late-stage design changes, poor supplier readiness, and manufacturing challenges encountered when scaling up to full production. Time to market is crucial to success. Manufacturers who get their product to market early (and at the right price) can gain fi rst mover advantage and capture market share while maintaining pricing fl exibility.

Sourcing and supplier management teams can help prevent costly product delays by understanding future new product requirements and developing a capable supply base to support anticipated component needs. They can be prepared to introduce cost-competitive component suppliers who are capable of producing quality parts for planned new products.

3. Inventory shortages cause lost sales

In most cases, initial production and getting a new product into the market starts o� well. But as demand for the product increases and orders rise, tremendous pressures can begin to materialize all the way up the supply chain. Ironically, lean initiatives such as just-in-time production can have the unintended consequence of creating inventory shortages when demand unexpectedly takes o� . Inventory shortages lead to lost sales that can doom new product launches.

Sourcing and supplier management teams can help prevent inventory shortages by identifying a supply base with the production capacity to support a range of new product demand scenarios. They can identify a network of primary component suppliers as well as a group of alternate suppliers that can provide additional supply capacity to support sudden demand changes.

To learn more about how our sourcing software can help you better manage direct material spend, call 724.933.1180

3© 2014 Directworks

4. Product quality issues

Poor quality, whether detected in pre-launch testing or after a new product is in the market, is a show-stopper for any NPI e� ort. Performance expectations are higher than ever before and there is a low tolerance for products that fail to meet quality standards. The increasing complexity of today’s products introduces a greater opportunity for quality problems across the growing bill of materials.

Sourcing and supplier management teams can help prevent quality issues in new products by establishing a supply base capable of producing and delivering components that meet specifi ed quality requirements. They can ensure that suppliers clearly understand the technical specifi cations that impact quality and they can recommend existing component suppliers based on their current quality performance.

5. Lack of di� erentiation

Another driver of NPI failure is inside-out product design that results in limited product di� erentiation. New designs are often infl uenced by “what has worked in the past,” re-use of current product components, and a tendency to use entrenched suppliers who are under long-term contracts. Instead of promoting aggressive product innovation, manufacturers fall into the trap of creating new products that primarily cannibalize existing o� ers and o� er little in the way of di� erentiated value. The most e� ective manufacturers engage their suppliers for innovation, and collaborate constructively to produce di� erentiated product o� erings.

Sourcing and supplier management teams can help drive greater product profi tability by engaging their suppliers and making them an extension of a manufacturer’s innovation initiatives. Suppliers possess deep expertise about the parts they provide and can provide creative ideas to improve the end product – leading to greater profi tability for the company.

Conclusion

Manufacturers who excel at NPI typically engage in collaboration early and often within their own sourcing and supplier management teams – and especially with their suppliers. The results are powerful: more on-time product launches at the right cost and the right balance of risk.

About DirectworksDirectworks provides cloud-based software solutions purpose-built for manufacturers to improve supplier collaboration, total cost visibility, and the e� ciency of sourcing and supplier management activities. Leading manufacturers use Directworks to accelerate product launches, expand margins, and optimize their direct materials supply chain for cost, performance, and risk.

To learn more Call 724.933.1180 or Visit www.directworks.com

.

To learn more about how our sourcing software can help you better manage direct material spend, call 724.933.1180