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Here's yet another take on the Pareto Principle: Up to 80 percent of a product's cost is determined during the first 20 percent of its life cycle - the design and development phase. This phase also largely determines the critical competitive issue of time to market and can greatly impact time to volume, or the ability to ramp up production quickly to meet demand.
Few of the technology advances in recent years have focused on this all-important 20 percent, however. At most companies, new product development is characterized by islands of automation that are not integrated with other parts of the enterprise, much less with outside partners. Engineers use computer-aided design (CAD) software to develop drawings, but when it comes time to share design information with customers or suppliers - which often happens very late in the process - the details typically are transposed to paper or tape and moved by Federal Express. This not only consumes precious time, it makes it difficult to keep track of who has seen what version of the design and to be sure that the latest changes have been communicated to all who need to have them. Moreover, it's a process that fails to tap the expertise and intellectual capital of suppliers.
Enter Collaborative Product Commerce, a concept first introduced by the Aberdeen Group, Boston, in 1999. "In CPC, the emphasis is on the word 'product' - what a manufacturer produces - along with a focus on 'collaboration' - the sharing of intellectual capital and experience," says Jack Maynard, research director for enterprise applications and services at Aberdeen. "A primary goal of CPC is to tie together all of the islands of product knowledge and expertise wherever and whenever they exist."
As companies outsource more and more manufacturing to contract manufacturers or Tier 1 suppliers, the need to work together to develop products has intensified. Maynard notes that 60 percent or more of the components used by manufacturers to assemble their products come from outside the enterprise. "Therefore, the need for collaboration is essential as new product designs are conceived and then worked on by multiple entities outside the corporate four walls," he says. Outsourcing and collaboration are not foreign concepts to manufacturers, Maynard acknowledges. "What is new is the power to take what the manufacturers already know how to do and employ technology to make it better and faster ... Today product companies must satisfy demand more promptly and deliver unprecedented product quality and serviceability, all while reducing costs and increasing satisfaction."
This is underscored by the ever-increasing brevity of product life cycles and the consequent pressure to keep rolling out new products at a faster and faster pace. "The shelf life of products, particularly in the high-tech industry but in many other industries as well, continues to shrink at an incredible rate," says John Bruggeman, senior vice president of marketing at Alventive, a software developer based in Santa Clara, Calif. "You have got to get relevant, compelling products to market faster than ever before."
Another issue impacting this trend is the proliferation of globalized, highly dispersed work forces. "Even within an enterprise, research, design, engineering and production operations are frequently geographically dispersed and, consequently, have similar needs to coordinate activities and collaborate across departmental domains and multiple time zones," says Maynard.
"Revenues have been accelerated by our ability to access global markets more quickly than ever before."
CPC solutions, which Aberdeen says can encompass Product Lifecycle Management (PLM), CAD, Product Data Management (PDM) and Collaborative Product Design (CPD), address all these issues. Typically deployed in an application service provider model, they allow companies to securely share information and collaborate with their suppliers and customers much earlier in the process; and they provide program management tools that keep track of the many complex tasks and documents involved in new product introductions.
It was program management that led The Budd Company Plastics Division, Troy, Mich., to implement software from Ventro Corp., Mountain View, Calif. "Our biggest issue with the previous paper system was that you never knew who had finished their portion of the work or who had responded to our work orders," says Tracy Carzoli, program manager at Budd Plastics. The company makes a variety of auto components, from doors and roofs to chassis frames and subframes, for about 100 current vehicle models. Budd recently installed Ventro software, formerly known as NexPrise ipTeam, that allows it to collaborate with 50 suppliers throughout North America. IpTeam enables Budd to keep track of each step of the new product introduction process, "so we always know where we are," says Carzoli. The engineering change order process is managed with greater efficiency, she says, and "the whole process has speeded up quite a bit."
Streamlining the change-order process is a key issue. As a design is being developed, even through the early stages of manufacturing, many changes occur. The later they occur, the more costly they are. PlanetCAD, a software developer based in Boulder, Colo., cites research which shows that if a design fault is discovered while a product is in detailed design, the cost of the change, averaged across industries, is $3,500. If that same change is not discovered until after testing and prototypes, the cost is $35,000. The damage jumps to $350,000 if the necessary change is not discovered until the product is on the production line. Should a recall be required, the cost is measured in millions.
Too many change orders also can result in lengthy delays, causing companies to lose the advantage of being first to market.
Bringing suppliers and customers into the design and development process means that more problems will be spotted in the early stages, or averted altogether. Vendors say companies using these solutions typically experience a 30 percent to 50 percent reduction in engineering change orders.
"Let's say you are designing an electronic device and you put a chip where I need to drill a hole," says Bruggeman. "If I could get there before you lay out that board and tell you where I am going to put holes, I solve tons of tooling problems. Re-doing a board layout can take up to two weeks, and when a product life cycle is six months, two weeks kills you. If something costs you a week, a day even, that is a huge part of the total cost projection for that product."
Manash Chakraborty, senior director of industry marketing at Ventro, offers a similar example. "Let's say you design something in your own island and pass it on to a supplier to build and the supplier says, 'wait a minute, the tolerances you are asking for are impossible with the type of material you are telling me to use.' So you go back and forth in an iterative process that could take weeks or months, depending on the industry. Whereas if you earlier bring your supplier team in as an integral part of your design team, you can get inputs on all these issues before you build the specification. That is where it needs to happen."
"These costs get locked in with the very earliest decisions," notes Mike Adami-Sampson, vice president of product strategy at MatrixOne, a software developer based in Westford, Mass. "And I'm referring to the whole cost - not just price but support costs, warranty costs, all of that. If you don't find out until the very end that some little decision you made is going to cost you twice as much, it's usually too late to change."
These important, early decisions don't necessarily have to be about the design itself, but can involve standard componentry. "A designer may call for a particular chip, which is in short supply, while I have excess inventory of a similar chip from a different supplier," says Bruggeman. "If he knows that early on, he may want to take advantage of my inventory excess rather than face an uncertain supply situation."
Design for the Extended Supply Chain
Corporations have moved through several distinct approaches to product design in recent decades, says Rod Rodin, CEO of eConnections, Pasadena, Calif., which provides collaborative solutions to the electronics industry.
Even if the manufacturer has a compelling reason for using a particular component, Bruggeman adds, it is helpful for the supplier to have that information as early as possible. "Either I want an opportunity to influence and change the decision or I want to know early on what decision is coming so I can manage my operations," he says. "Either way is better than what is happening today."
In some cases logistics information also needs to be a part of early design activity. Varying country regulations about product content, for example, can impact a company's ability to sell its products in these markets.
Castrol, the global lubricants business of BP plc, recognized that it needed a way to incorporate regulatory considerations in advance of product formulation in order to minimize and eliminate possible disruption during a product's launch. This has become increasingly important as Castrol has moved away from local production to centralized plants and increased its exports.
The company found a solution in ClearCross, Reston, Va., which also provides Castrol with a full range of content and compliance solutions for international trade. Castrol actually tests formulations against the ClearCross content data base prior to physical creation in order to avoid restricted materials and problematic compliance issues. These issues, says ClearCross President Pano Anthos, can range from things like testing requirements to labeling details.
"Revenues have been accelerated by our ability to access global markets more quickly than ever before," says Cliff Betton, environmental health and safety manager for Castrol. "Use of ClearCross in the product development phase reduced time to market, while enhanced customer service increases product sales and market share."
Input from customers also is crucial during a product's development stage. "One area that results in a lot of mistakes is the problem of not capturing the voice of the customer, the requirements of the customer, properly," says Adami-Sampson. "When you go back and do a post mortem on a product that failed, you often find that this was missed in the very beginning steps. MatrixOne has built-in processes to track requirements, as have other application providers.
For example, EDS PLM Solutions, Milford, Ohio, has a requirements collaboration module in its TeamCenter product. "When change orders happen everybody thinks it's because engineering is correcting something, but most of the time it's because requirements change," says Joe Maloney, chief architect of TeamCenter. "The ability to understand requirements definition is critical to the process."
So how do these solutions actually work? The typical model is one where manufacturers expose their process over the web, says Adami-Sampson. "We use essentially the lowest-common-denominator strategy that says everyone, or darn near, has an internet connection and a browser. So all we have to do is give users a secure connection and identification and a password and we can begin communicating. That's over-simplifying it, but the idea is to give your partners the right kind of access to both your product information and processes over the web."
Because data associated with product design frequently is large, the fastest way to disseminate it is to leave it right where it was created, according to an Aberdeen report. "By establishing a virtual product information repository, product data can be centrally stored or, using internet redirection, pointed to with a URL, so original data does not need to be moved and is always current. Moving the data takes time and bandwidth; but more importantly, moving data creates the added challenge of keeping the information synchronized - being sure that all participants are viewing the correct version. Having all of the stakeholders on the same page is worth innumerable savings in days and dollars."
Software applications make it easier for partners to work with this often complex data by ensuring that it is in a format compatible with the user's system. This is important because engineering data has a history of being seen as too proprietary to connect into mainstream networks. PlanetCad's solution, for example, maintains a profile on each supplier in the network and automatically translates all drawings being shown to that supplier into its preferred format. "There is no longer a technical excuse for the separation of engineering departments from the rest of your manufacturing operation," the company says.
Alventive's approach is to strip away all data except what that particular person needs to see. "A user can roll his mouse over a component, such as a computer chip, and get the information he is interested in," says Bruggeman. "If he is a purchasing manager, he will probably see the vendor, the part number and the price. If he is a tooling engineer, he may need to see a drawing of where the chip is on the board so he can determine where to drill a hole."
This is where visualization technology can be a big help. "It is a simple theory but a picture is worth a thousand words," says Maloney. "It bridges understanding, cultural and language backgrounds. Instead of saying this piston is too close to the wall, if you can show a picture and circle the piston and wall, the point is quickly understood. The technology is not perfect yet but it's pretty good." Personalizing data to the individual user also is key to maintaining the high levels of security these systems require.
"The whole security aspect that people are working with deals with the ability to limit what any one individual can see, especially if they are outside the enterprise," says Maynard. "A particular 3D CAD drawing may be out there, but a given supplier can only see section A-A3, for example - just the touch points of where its piece of the process touches other pieces. Vendors are working a lot at being able to break out the drawings so manufacturers can share just the pieces where the form and fit come into play."
These applications also have to navigate the tricky problem of enabling different collaborative environments as a product design matures. During the first "ideation" phase, too much structure gets in the way, but as the project moves into the final design, prototype and sourcing phases, structure must be imposed.
"You have to have the ability to transition the business process as the project moves along through its life," says Adami-Sampson. "You want these transitions to be subtle so that the control gets imposed almost inadvertently. This can drive you crazy, and its especially hard for the classic IT folks who are used to thinking about a transactional world where everything is routine and predictable. ERP and financial applications are there to make things predictable, but in product development predictability is the last thing that exists. No two designs happen the same way, not even in the same company by the same people - so if you apply a software paradigm based on predictability you will just grind everything to a halt."
There can be little structure in the beginning because the information is really unstructured, adds Chakraborty. "Most of the time you don't even have a CAD model. People are just working in a product team environment, exchanging ideas."
But even this, he notes, is done through specific business processes. "That's why we think it is very important for companies to ensure not only that their business processes are streamlined but that the business processes that go beyond their firewall and touch other product team members are streamlined as well."
In the Alventive suite, the degree of structure in the business process being used determines which software product is employed, says Bruggeman. Quick Collaboration, for example, is completely unstructured and used for informal, ad hoc exchanges such as design review. Design Process Collaboration is completely structured with very well defined work flows and is used for such tasks as sourcing.
Follow the Sun
Having a browser-accessible central design repository also allows product teams to encompass members from any part of the world. In this context, says Adami-Sampson, "thinking of collaboration as being real-time, in terms of actually meeting together and working concurrently, is not a driver of success. That is OK and certainly has its purpose, but it just can't happen very often in a follow-the-sun world." What is more powerful, he says, is asynchronous collaboration or threaded discussions that occur over time rather than simultaneously in a meeting.
Such discussions point to another benefit of these systems - the ability to save design information in a way that can be reused at a later time. Knowing what not to do or what will not work as early in the process as possible is the lynchpin of CPC, says Maynard. But just as significant is making sure "that what already works is not re-invented, that product designs can be reused, and that good processes can be replicated."
Knowledge re-use and knowledge sharing is key.
"If knowledge does not get proliferated throughout the system, people wind up re-doing the same things over and over," says Maloney. "Knowledge reuse and knowledge sharing are key." The TeamCenter product, he says, looks at this function as capturing the engineer's notebook, so that later on people can understand decisions that were made. "We want to get that notebook out of the engineer's hand and into the computer system in a story way, so people can understand how it got to this step, who approved it, why did they do it this way, why did they choose this part - all the lessons learned."
This knowledge base can help companies improve operations across divisions, as well as within their own business unit. Other parts of the company may already have designed a needed component, or have a relationship with a supplier that is providing similar parts, notes Mike Martin, vice president of the PLM practice at TSC Consulting, Farmington Hills, Mich. "Instead of sourcing from other suppliers, you might be able to use some of the componentry you already have."
Hewlett-Packard, Palo Alto, Calif., uses eRoom Technology, Cambridge, Mass., to capture and share knowledge across multiple business units. Now, instead of each division having its own system for communicating with suppliers, all collaboration is done over the web through eRoom, so suppliers have only one touch point. "We are operating in multiple parts of the world so a key factor for us is that eRoom allows us to have a front end that is always on," says Chris Rand, HP manager of IT infrastructure. "We can always have people working in this space regardless if the U.S. has gone to sleep."
Results So Far
CPC technology is still in its infancy, so quantifiable results are hard to come by. Aberdeen Group presents a number of examples of end-user benefits in its latest report, though company names are withheld. It cites the following examples: a heavy manufacturer that has reduced the error rate on new product designs by 50 percent, while saving substantially on travel expenses related to design reviews; a manufacturer of heavy machinery that accelerated its preliminary design by 30 percent and reduced its time to market by 40 percent; a CPG manufacturer that shaved nine months off the development cycle for a new product; and a contract manufacturer that increased manufacturing volumes tenfold by closely collaborating with all clients during the design process.
"Manufacturers that avail themselves of CPC technology can obtain a substantial competitive edge over their rivals," the research group concludes. "Working closely with all stakeholders along the product lifecycle chain offers the first real opportunity to 'get it right the first time.'"
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