Executive Briefings

Special Issue: E-Business Best Practices -- Collaboration Gets New Products to Market Faster and Cheaper

Reducing time to market directly impacts the cost of development. Collaborative commerce means products, from concept to production, move quicker and with fewer changes.

Faster time to market, lower costs throughout a product's lifecycle, and more satisfied customers are the results of a best-practice implementation of Collaborative Product Commerce. CPC leverages the internet to enable geographically dispersed designers and engineers to more easily share complex product data among themselves and with suppliers and customers. New products move from concept to production more quickly with fewer change orders and more efficient reuse of previously designed parts.

The University of Texas recently conducted a study of 35 companies that have implemented a CPC solution in order to document its impact on such variables as product quality, development cycle time and user satisfaction. It concluded that collaboration in product design and development has a positive impact on all three of these factors. Surveyed companies reported, for example, that the time involved in product development and design was reduced by an average of 15 percent, while costs of this process were slashed an average $200,000.

"One of the findings of this research that smacked me between the eyes is that time-to-market is a major driver of product development costs," says John Donovan, program manager for ROI at MatrixOne, a CPC provider based in Westford, Mass., and a sponsor of the independent research. "People think that reducing time to market is a good thing to do but they don't realize the direct impact on development costs. They are the same goal. If you drive for faster time to market, you will reduce product development costs."

Savings are not just from the direct costs incurred in design and engineering. The design phase is where total lifecycle costs are determined. Deciding at this point to use a lower-cost part or material or a more efficient design will pay dividends as long as the product is being produced and maintained.

"The most important thing that comes out of CPC is that you now have the ability to start optimizing your cost model on a per-product basis," says Donovan. "Everything else that occurs after the design phase - all the economies, negotiations, all the supplier discounting - is applied against a cost model. If your cost model is inefficient, there is nothing you can do in the supply chain to get costs out of that."

A CPC solution, then, should speed the product development cycle and enable decisions that minimize total lifecycle costs. Leading providers, which include MatrixOne, PTC, EDS, IBM and SAP, do that in a number of ways. First, they provide a centralized data vaulting capability, so that product designs are available in one place and reflect all of the latest design changes. Internal and external users are given access to the information they need, based on their individual roles in the process, and are able to submit notes and suggestions. A supplier, for example, might suggest an alternative material, or note that manufacturing costs could be reduced by moving the location of a component. Customers may review designs to make certain that their specific requirements are being met. Electronic workflow rules manage each step in this review process. Getting input from all parties early in the process results in fewer changes and faster development.

Information Portal
"We believe the supply chain starts on the engineer's desk, but the whole idea of collaboration with suppliers and customers is really where the world is going," says Charles Downey, head of the CPC practice at PricewaterhouseCoopers Consulting. The sharing of information typically is accomplished through a portal, Downey says. "The technology of creating a private engineering portal is fundamental to many of the vendor offerings," he notes. "You create a virtual design community that can consist of people in the building across the street or on the other side of the globe and that is defined for a particular project. You protect your intellectual property inside the firewall but share those things outside the firewall that are appropriate to share with partners."

The ability to share full product content is especially important when suppliers take on responsibility for significant parts of design and manufacturing, as is increasingly the case. In a best practice implementation, the relationship with such contract manufacturers moves into the area of program management, says Sheila Zelinger, with the CPC practice at Accenture Consulting. "This means you don't just manage suppliers to the delivery schedule," she says. "You take it to the next level and manage suppliers to shared targets, shared goals, shared costs - just as you would do with internal program management, to control aspects of scheduling, cost and quality."

Very few companies have accumulated information as to their suppliers' design capabilities, she adds. "So another best practice here is to start tracking that in a formalized way and perhaps to create a long-term development program to enhance the design capabilities of suppliers to meet the companies needs."

Having a common vault of information also enables companies to find and re-use components that already have been designed, either in-house or by suppliers. At most manufacturers, this intellectual capital now is paper-based and nearly impossible to search. "One best-practice in this area definitely is the re-use of parts that already have been invented," Downey says. "Not only do you save the design time and the search time, you save the time for testing and generating test specifications, and you save on warranty costs because you already know these parts are going to work."

As a new product advances toward production, the design undergoes inevitable changes. Managing those changes so that they cause as little disruption as possible is crucial. This involves automating the review and approval process and tracking all documentation. Cherry Electrical Products, which manufactures proprietary and custom electronic keyboards, electrical switches, sensors, and controls, shaved three to seven days off its engineering change process when it went from a paper-based system to an automated solution using MatrixOne. In addition to saving time, the company says it also eliminated costly errors, rework and scrap.

EMC Corp., Hopkinton, Mass., which makes data storage systems, addressed engineering change orders as part of a much larger project that involved implementations of Oracle ERP software and the Windchill engineering product development software from PTC, along with systems integration from Accenture. "On some products, when we wanted to make a change in the product design or manufacturability, the time it took the change to get through the system was on the order of up to 25 days," says CIO Dave Ellard. "Today it's 10 days."

Once a product is in production, managing a change order becomes more complex and more expensive. For example, says John Moore of ARC Advisory Group, you may want to manage an engineering change order based on what you have in terms of stock. You may want to hold the charge order until the stock is depleted. You also need to look at such things as whether you will cause manufacturing to have to switch lines, which might clog things up for two weeks." CPC solutions can monitor these different factors and provide feedback loops so that the whole process can be optimized, he says.

Building Blocks
To achieve best-practice results from a CPC solution requires more than installing software - a fact documented by the University of Texas study. Of the 35 companies it studied, best results were achieved by those that "also reengineered their business processes in a manner that facilitated the exchange of intellectual capital and business process logic for improving the design and development of existing and future products."

This is the area where most companies miss the mark, says Gary Turner with Cap Gemini Ernst & Young consultants in London. Turner, who works on new product introductions with auto industry clients, says there are still considerable barriers "around trust, culture and the silo-based structure of original equipment manufactures (OEMs) and their Tier One suppliers."

Best-practice implementations, he says, "recognize that collaborative new product development is not a technology tool that you simply put and it gives you answers. It is far bigger than that." In addition to the right technology, he says, four other "building blocks" are required: a trusting relationship with suppliers; an ability to bring customers into the process; a solid plan for dealing with change management and people issues; and, in the automotive industry, a way to bring vehicle brands closer to a single platform so that it is easier to cross-pollinate ideas and products.

"These tools are the only way forward and the case for them is irresistible," Turner says. "OEMs in any industry have to have a web-based solution that allows lots of complex information to be shared between lots of people in real time. They know this. But for the tools to work successfully, they must do things differently. That's still the difficulty."

Faster time to market, lower costs throughout a product's lifecycle, and more satisfied customers are the results of a best-practice implementation of Collaborative Product Commerce. CPC leverages the internet to enable geographically dispersed designers and engineers to more easily share complex product data among themselves and with suppliers and customers. New products move from concept to production more quickly with fewer change orders and more efficient reuse of previously designed parts.

The University of Texas recently conducted a study of 35 companies that have implemented a CPC solution in order to document its impact on such variables as product quality, development cycle time and user satisfaction. It concluded that collaboration in product design and development has a positive impact on all three of these factors. Surveyed companies reported, for example, that the time involved in product development and design was reduced by an average of 15 percent, while costs of this process were slashed an average $200,000.

"One of the findings of this research that smacked me between the eyes is that time-to-market is a major driver of product development costs," says John Donovan, program manager for ROI at MatrixOne, a CPC provider based in Westford, Mass., and a sponsor of the independent research. "People think that reducing time to market is a good thing to do but they don't realize the direct impact on development costs. They are the same goal. If you drive for faster time to market, you will reduce product development costs."

Savings are not just from the direct costs incurred in design and engineering. The design phase is where total lifecycle costs are determined. Deciding at this point to use a lower-cost part or material or a more efficient design will pay dividends as long as the product is being produced and maintained.

"The most important thing that comes out of CPC is that you now have the ability to start optimizing your cost model on a per-product basis," says Donovan. "Everything else that occurs after the design phase - all the economies, negotiations, all the supplier discounting - is applied against a cost model. If your cost model is inefficient, there is nothing you can do in the supply chain to get costs out of that."

A CPC solution, then, should speed the product development cycle and enable decisions that minimize total lifecycle costs. Leading providers, which include MatrixOne, PTC, EDS, IBM and SAP, do that in a number of ways. First, they provide a centralized data vaulting capability, so that product designs are available in one place and reflect all of the latest design changes. Internal and external users are given access to the information they need, based on their individual roles in the process, and are able to submit notes and suggestions. A supplier, for example, might suggest an alternative material, or note that manufacturing costs could be reduced by moving the location of a component. Customers may review designs to make certain that their specific requirements are being met. Electronic workflow rules manage each step in this review process. Getting input from all parties early in the process results in fewer changes and faster development.

Information Portal
"We believe the supply chain starts on the engineer's desk, but the whole idea of collaboration with suppliers and customers is really where the world is going," says Charles Downey, head of the CPC practice at PricewaterhouseCoopers Consulting. The sharing of information typically is accomplished through a portal, Downey says. "The technology of creating a private engineering portal is fundamental to many of the vendor offerings," he notes. "You create a virtual design community that can consist of people in the building across the street or on the other side of the globe and that is defined for a particular project. You protect your intellectual property inside the firewall but share those things outside the firewall that are appropriate to share with partners."

The ability to share full product content is especially important when suppliers take on responsibility for significant parts of design and manufacturing, as is increasingly the case. In a best practice implementation, the relationship with such contract manufacturers moves into the area of program management, says Sheila Zelinger, with the CPC practice at Accenture Consulting. "This means you don't just manage suppliers to the delivery schedule," she says. "You take it to the next level and manage suppliers to shared targets, shared goals, shared costs - just as you would do with internal program management, to control aspects of scheduling, cost and quality."

Very few companies have accumulated information as to their suppliers' design capabilities, she adds. "So another best practice here is to start tracking that in a formalized way and perhaps to create a long-term development program to enhance the design capabilities of suppliers to meet the companies needs."

Having a common vault of information also enables companies to find and re-use components that already have been designed, either in-house or by suppliers. At most manufacturers, this intellectual capital now is paper-based and nearly impossible to search. "One best-practice in this area definitely is the re-use of parts that already have been invented," Downey says. "Not only do you save the design time and the search time, you save the time for testing and generating test specifications, and you save on warranty costs because you already know these parts are going to work."

As a new product advances toward production, the design undergoes inevitable changes. Managing those changes so that they cause as little disruption as possible is crucial. This involves automating the review and approval process and tracking all documentation. Cherry Electrical Products, which manufactures proprietary and custom electronic keyboards, electrical switches, sensors, and controls, shaved three to seven days off its engineering change process when it went from a paper-based system to an automated solution using MatrixOne. In addition to saving time, the company says it also eliminated costly errors, rework and scrap.

EMC Corp., Hopkinton, Mass., which makes data storage systems, addressed engineering change orders as part of a much larger project that involved implementations of Oracle ERP software and the Windchill engineering product development software from PTC, along with systems integration from Accenture. "On some products, when we wanted to make a change in the product design or manufacturability, the time it took the change to get through the system was on the order of up to 25 days," says CIO Dave Ellard. "Today it's 10 days."

Once a product is in production, managing a change order becomes more complex and more expensive. For example, says John Moore of ARC Advisory Group, you may want to manage an engineering change order based on what you have in terms of stock. You may want to hold the charge order until the stock is depleted. You also need to look at such things as whether you will cause manufacturing to have to switch lines, which might clog things up for two weeks." CPC solutions can monitor these different factors and provide feedback loops so that the whole process can be optimized, he says.

Building Blocks
To achieve best-practice results from a CPC solution requires more than installing software - a fact documented by the University of Texas study. Of the 35 companies it studied, best results were achieved by those that "also reengineered their business processes in a manner that facilitated the exchange of intellectual capital and business process logic for improving the design and development of existing and future products."

This is the area where most companies miss the mark, says Gary Turner with Cap Gemini Ernst & Young consultants in London. Turner, who works on new product introductions with auto industry clients, says there are still considerable barriers "around trust, culture and the silo-based structure of original equipment manufactures (OEMs) and their Tier One suppliers."

Best-practice implementations, he says, "recognize that collaborative new product development is not a technology tool that you simply put and it gives you answers. It is far bigger than that." In addition to the right technology, he says, four other "building blocks" are required: a trusting relationship with suppliers; an ability to bring customers into the process; a solid plan for dealing with change management and people issues; and, in the automotive industry, a way to bring vehicle brands closer to a single platform so that it is easier to cross-pollinate ideas and products.

"These tools are the only way forward and the case for them is irresistible," Turner says. "OEMs in any industry have to have a web-based solution that allows lots of complex information to be shared between lots of people in real time. They know this. But for the tools to work successfully, they must do things differently. That's still the difficulty."