The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06

The Lean Product Development Implementation Strategy

Creating and Launching Superior World-Class New Products for a Competitive Edge

Presented by

Vel. Sreedharan

2 of 302 World Class New Product Development- A presentation by Total Engineering Solutions

Section I

WCNPD – Design Excellence Strategy

An Introduction

�Ground Rules and Basic Tools

�Some Tools to go with the Rules

�The Magic of Toyota Motor Co

�Six Sigma Deployment – A closer look

WCNPD - Design Excellency Strategy – An Introduction


� Ground Rules and Basic Tools� Recognize the 3 distinct dimensions of Product Development

� The Methods of Five Why’s

� Avoid both overshoot & undershoot; Take a “high altitude look”

� Six Sigma – Avoid Blind Deployment

The Magic of Toyota Motor Co� - Why Toyota is 4 times more productive than anyone else in the world?

� Highest Quality, Reliability, Dependability

� Overall total customers’ confidence in trouble-free operation & performance

� Best total Value through New Innovative features & options

� A Fundamental paradigm shift in how it approaches Product Development

� Competitive Pricing and focus on Continuous Customer care and Loyalty



� Ground Rules and Basic tools:

– A good first step toward getting a handle on the complex and challenging and sometimes poorly understood activities of New Product Development is to recognize the three distinct dimensionsinvolved. Refer to Fig 1 below

Market Price

Ma

nu

fact

uring

C

ost

Time-to-Market

Figure 1

The three distinct dimensions of new product development, focusing on manufacturing cost reduction.




– Market Selling Price – Must be maximized, requiring creativity, innovation & in-depth understanding of market needs

– Cost of Manufacturing - Cost must be driven ever downward; achieve lowest possible cost

– Time to Product Launching– Must be minimized, both to stay ahead of the competition and be profitable during the life cycle of the product

Achieving optimal profitability demands that all three aspects be addressed. Reducing manufacturing cost is the fastest and surestway to achieve a measurable increase in profits.

Let us look at some ground rules that we must follow to play in the design-excellence game – For New Product Development.




– Rule 1- The value of a product, from the customer’s perspective, can never be compromised as a result of cost-reduction efforts.

– Rule 2- Product Development must be executed by a cross-functional team, at a minimum of Manufacturing, Marketing / Sales, Eng / Supp through parallel and collaborative efforts and pull in the same direction.

– Rule 3- All product development work must be prioritized both within a given project and across all design activities within an organization. A sense of urgency to launch products to the market place before competition does!

Question your assumptions

In my experience, a large % of the cost of most products is not intrinsically necessary and that is why cost-reduction methods like VE/VA would strip away all preconceptions and non-value added functions and features to optimize design. The greatest enemy of innovation is a closed mind!

– The Methods of Five Whys

– Provides a way to crowbar open those close minds that surround you, when you come across people with stubborn assumption, mindset or paradigm.



� Some Tools to go with the Rules :

Designer: “We have to make this product using high-cost materials.”Team Leader: “Why do you think that is true?”

Designer: “Because the customer requires that the product withstands a harsh use-environment.”Team Leader: “Why do you think that high-cost materials are essential to the product surviving in the specified environment?”

Designer: ”Because when we tried using a cheaper grade of XYZ alloy, the test results were terrible.Team Leader: “Why did we try a cheaper grade of the same material instead of performing a survey of possible alternative materials?”

Designer: “Because we have always made this type of production from XYZ alloy.”Team Leader: “Why are you convinced that the choices of our ancestors (previous design engineers) are still the best choices today? Hasn’t material technology advanced dramatically in the past few years?”



� Some Tools to go with the Rules :

– We have only used four “whys” in the above example, and have already uncovered the obstructive assumption (probably driven our designed friend somewhat crazy!) Be tactful and diplomatic in your use of this technique.

– Avoid both overshoot and undershoot:

Virtually, most of the products can suffer from either over or undershoot vs. some optimal level and either way your profit will suffer. In other words, do not over engineer the product anymore than what customer is wiling to pay and perceives its value in his / her eyes, not the manufacturer

– Every now and then, designers should take a “high altitude look”

It is critical that design teams consider synergies across products within a firm to achieve break through cost reduction.

– Questions like, “Have we missed any opportunities to reuse previous design work?” Can we standardize, consolidate features in a family of parts? Ask these questions



� Some Tools to go with the Rules :� Six Sigma – Blind Deployment:

This is an excellent methodology for the manufacturing, quality and reliability world and there need not be any doubt on this statement.

� But after some reputable executives of large corporations gave it a rousing cheer in the press some years back, many companies embraced the methodology, only to find the tools either not applicable to their critical problems or too complex and time-consuming for their type of products.

� The point here is applying “six sigma” as a blind deployment will add only cost, complexity and higher product cost and not real value or benefit. Therefore, it shall be employed only for those areas where critical performance, safety, reliability, dependability are absolutely (100% of the time) are required regardless of cost.

� Examples: Automotive brake system, airlines components and systems, Space craft launching programs. Wherever safety, flawless performance and unquestionable reliability is warranted, six sigma will in most cases will be cost justified. (this cost of quality should be built into the product)



� The Magic of Toyota –Why it is 4 Times more Productive?

– Compared to most of the global automotive manufacturers, Toyota engineers and managers normally achieve significantly higher(50 -60%) value-added productivity.

– Toyota never misses its milestone dates for new product introductions. Has totally different operating philosophy and cannot be easily copied or duplicated.

– It is a totally different, dedicated and in a way, culturally driven performance of excellence and will serve as a benchmark

- A fundamental paradigm shift in how your company approaches product

development. It is human nature to resist change.



� The Magic of Toyota-Why it is 4 Times more Productive?

– What is product development? A useful definition is that it is the collective activities or system that a company uses to convert its technology and ideas into a stream of new products that meet or exceed the needs of customers and the strategic goals of the company. Toyota does this better than most of the companies in the world.

– In 25 years product development has changed significantly and added a lot of complexity (structured teams equipped with CAD/CAM, 6-Sigma, Mfg experts, defined processes etc), which was introduced for good reasons.

– But complexity introduces numerous problems, like communication breakdowns, loss of personal responsibility, true human interaction, pride of work, personal passion etc.

– I have incorporated as many selective concepts and ideas which are simple, proven and most effective techniques towards NPD process strategy. I hope you will enjoy this journey of NPD into a new way of thinking and try to adopt as many principles, concepts, methodology & team work as feasible in your company’s culture.


Section II

WCNPD – The Business of Lean Design

�Product Development for the Lean Enterprise� What’s “Lean” Mean� When is a Product Profitable?� Defining Target Cost� The 5 keys to developing Great New

Blockbusters Products

WCNPD - The Business of Lean Design


� Product Development for the Lean Enterprise

- The term “Lean” has a very specific meaning and intent in manufacturing

companies; the act of minimizing, if not out right eliminating all the non-value

added waste throughout the company to enable higher productivity, increased

profits, and improved overall competitiveness.

- This is done through systematic improved processes and methods, rather than wholesale elimination of jobs. Actually, firms utilizing the lean design and manufacturing tools will actually create jobs, increase shareholder value and put a smile of satisfaction on the faces of their product designers/ engineers

– In principle, Lean Design is similar to the concept of Lean Manufacturing. Systematic identification, analysis and minimizing or total elimination of all non-value added issues and optimizing the functions, performance, features, quality and total customer value at the lowest possible cost.

– The challenge is: Do it pro-actively and better than the nearest competitors



� What ‘s “Lean” Mean ?

– The goal of Lean is to employ commonsense methods and tools presented throughout this training class to seek out and destroy waste in the design arena, thereby yielding products that maximize the cost efficiency of a lean journey.

– Another element that is associated with Lean is the concept of total value. In a nutshell, value is what customers are willing to pay for. The first step in defining value of a product is to identify the problem that it is intended to solve. This is the key element for the strategy of new product development

– Every product is the solution to a problem. The more important the problem, the more effective the solution built in the product, as perceived by customers, the more they are willing to pay.

– Value does not always demand complexity, nor does it implies technological sophistication and also not directly correlated to cost. All that matters is the creation of value that successfully solve the customer’s problem in a cost-effective manner!



� The Five Principles of Lean Design

– Principle # 1- Precisely defines the customer’s problem and identifies the specific functions that must be performed to solve that problem.

– Principle # 2- Identify the fastest process by which the identified functions can be integrated into a high-quality, low-cost product

– Principle # 3- Strip away any unnecessary or redundant cost items to reveal the optimal product solution

– Principle # 4- Listen to the voice of the customer frequently and iteratively throughout the development process

– Principle # 5- Incorporate cost-reduction tools and methods into both your business practices and your culture to enable continuous cost reduction



� When is a Product Profitable ?

– We all know profit growth is at least as important as boosting sales.

– Hence, it is critical that designers understand where costs come from, how they build up to determine profit margins, and what a design team can do to influence them.

– Key challenge facing designers and engineers is that by far the greatest leverage for cost reduction occurs early in the product development process as shown in the figure below.

Refer to Fig 2 ( Lifetime Product Costs) for the details on this.



The Majority of product costs are committed early in the design process, even though the expended costs are quite low. Once a product reaches production, there is frustratingly little that can be done to affect its fundamental cost structure. Thus, the earliest stage of the product development cycle, preferably efforts should be directed for lean design to reduce product cost

100

80 Committed Cost

60

40

20 Incurred Cost

0

Concept Design Prototyping Testing Production

Lifetime Product Costs (Cumulative Percentage) Figure 2.



� Defining Target cost

– If you don’t know where the Target is, You can’t Hit a Bull’s Eye! How much profit do we need to make on this new product to justify the commitment of money, resources and time? In other words, What is Our Target Margin? The margin that we select must be defined with care. A good rule of thumb to use is that the target margin should be slightly (perhaps 5%) higher than your firm’s current average gross margin.

– This provides you some cushion and protection against unexpected cost growth during product development and ensures that will at least maintain your current level of profitability. Obviously, if you have hit a pot-of-gold product that can far exceed our average gross margin, we should go for it!

– The purpose of a Target margin / cost is to establish a minimum threshold, below which a new product can never go without risk of cancellation.

Target Cost = Projected Selling Price – Target (Desired) Margin

– The Selling price, of course will be based and checked on the market price of competitors. Never do the calculation the other way: Selling price = Cost + Desired Margin.

– Why? Because you don’t control the price, the marketplace and the final customer decide that, even though you should try to maximize your profits within clear limits for a given type of product. If the target cost cannot be met, and if there can be no recovery, the project should be canceled. The Target Cost decision process is shown in Fig 3



Figure 3 Target cost decision process

Set New Target Cost

Change Functionality?

Strategic Product?

Target Cost Achievable?

Change Market price?

Cancel Project and Reassign Resources

Launch Product

Accept Target Cost

Waiver or Set New

Target Cost

Accept Target

Cost



� The Five Keys to Develop Great New Products contd..

– 1. Commitment: Not Contribution of Senior Management: Blockbuster teams should get the full cooperation of the highest level of management. Senior managers are either intimately involved with virtually every aspect of the process, or they completely backed the project.

– Top management gave the entire team the authority and resources it needed along with responsibility to proceed at full speed.

– 2. Clean and Stable Vision: Blockbuster teams stayed on course by establishing “project pillars” early on – specific, immutable goals for the product that the team must deliver.

– 3. Improvisation: Blockbuster team did not follow a structured, linear path to market. Instead they moved in a “flexible” strategy, trying all kinds of different ideas and iterations in rapid succession until they developed a prototype that clicked with their customers.



� The Five Keys to Develop Great New Products ..contd

– 4. Information Exchange: Blockbuster teams did not limit their information exchange to formal meeting. They shared knowledge in dozens of small ways –from coffee meetings to video conferencing to streaming in and out of a room covered in Post-it notes to hundreds of e-mails.

– The constant information exchange, communication and working together in an informal way as a well-knit team made the difference. In other words, it is the motivating culture and climate for best performance, which are essential to nurture product development.

– 5. Collaboration Under Pressure: Blockbuster teams focused on goals & objectives as opposed to interpersonal differences. They built coherent teams, not concerned about building friendship or even insisting that everyone like each other. They simply focused on the job and provided support to each other to get the job done.


Section III

WCNPD – Consider Cost

From the Very Beginning

� Capturing the Voice of the Customer

� Prioritizing Customer Requirements

� Breakthrough Improvement in Product Design

� Optimize, Balance for the Best Value at the Lowest CostFeasible

� Better than your nearest / best competitor to quantum leap

WCNPD - Consider Cost From the Very Beginning



- First and basic strategy to controlling product cost

- Fundamental to product design & performance concept

- Must be done early to meet or exceed customers’ expectation & value


- Don’t assume anything

- Don’t take it for granted what features / options customer like & don’t like

- Use the simple, proven and easy-to-use available tools cost effectively

- These tools may not be precise, but directionally correct to lead the team

- Remember! -Customers’ requirements, priorities and tastes are sometimes dynamic. Thus, it could be a moving target that design team should be aware of




– What do customers really pay for? –They will certainly be willing to pay for anything that benefits them in solving their problem effectively and efficiently.

– The critical part is-Benefits are not the same thing as product requirements.

– Benefits are perceived by the customer, in their own language, and are independent of the specifics of a product’s features, performance, configurations, material etc.

– All these are requirements of the product that will presumably deliver the benefits that the customers are looking for.

– Hence, requirements should and must be derived from benefits to be close to the voice of the customer (VOC).

– A systematic process for the translation of customer needs and benefits into language of product design is needed. A process to accomplish this strategy in details is shown below in – Fig 4




� - Translation of customer needs / benefits into the language of product design

� First, we attempt to understand the problems of our potential customers and the real benefits they want and willing to pay for them

� A list of functions is defined that are essential to solving all the customer problems

� Functions are described with simply a verb and a noun (e.g. the function of a car engine is to “power car”) is developed. The design team will derive the requirements that must be met or alternatively, the specifications that must be achieved. These requirements will then become the basis for the LPD strategy

� However, we want to be absolutely sure that our product delivers the benefits that our customer desires, meet or exceed their requirements and provide some excitement

� First step of this goal - designers to learn how to listen to the Voice of the Customer (VOC)




– Gathering Customer Intimacy Information

� Number of ways in which a design team can systematically gather customer information. All of them have their advantages and disadvantages

� Fig 5 - shows the details customer intimacy ( advantages and disadvantages)

� If you understand the customer’s problem precisely and the possible solutions are fairly clear and obvious, only a sold dialog may be required.

� For unique & innovative products, however, design teams should be chasing the customers to get feedback at every juncture.

� This model for the iterative feedback approach is shown in Fig 6



Customer Problem

Benefit #1

Benefit #2

Benefit #3

Function #1

Function #2

Function #3

Function #4

Function #5

Design Requirements

QFD – From Functions to Requirement

A systematic process for the translation of customer needs and benefits into the language of product design. Our goal: To understand the problems & benefits what the customers perceive and the solutions (benefits) that they are willing to pay for (no more or no less)- as best as possible & practical that we can

provide to satisfy them Figure 4



Cell-Phone Example

Mobile / 24-Hour Communication

Lightweight / Easy to Use

Large Service

Wireless Transmit / Receive

Fits into Shirt Pocket

Audible / Silent “Ring”

Long Distance Reception

Usable at Night

Design Requirements

Customer

out of Contact When on



Number of ways in which a design team can systematically gather customer information (all of them

have their advantages and disadvantages) - Figure 5

Achieving Customer Intimacy

Description Advantages Disadvantages

Focus Groups • Potential customers are

gathered and asked questions

about product

• Captures demographics

• Can yield many new ideas for

improvements

• Can be influenced by

facilitator; results often

inaccurate

Customer

Surveys• Several questions are sent to

potential customer for statistical

feedback

• Easy to create and distribute

• Large statistical basis• Somewhat distant, and

"digital" in results

Indwelling • Employees are paid to spend

time at customer's facilities and

on teams

• Best source of direct feedback

• Can help develop alpha

customer relationships

• Can be an expensive drain on

resources

Probe-and Learn • Several versions of a product

are test marketed in semi-

prototype form

• Reduces risk in new or

unfamiliar markets

• Yields direct market data

• Can be costly if there is no

inexpensive way to prototype

product

Alpha Customers • A real-world customer is asked

to participate in product design

and testing

• Almost assures early orders

• High-value feedback from real-

world users

• Product design may be "wired"

for just the alpha customer

Iterative

Prototyping• Prototypes are created at

several points in process to gain

customer inputs

• Helps span the gap between

designers and customers

• Reduces risk of major errors

• Can take time and create

waste if not used judiciously

Internal

"Surrogates"• Employees are encouraged to

participate in activities that use

firm's products

• Convenient, once developed

• Designers become their own

customers

• Great if you can find them, but

developing them takes time

Polling the Sales

Force• Sales force is asked for new

product ideas• Quick and easy

• Many new, but anecdotal, ideas• "Shotgun" list of ideas, without

clear priorities



A model for the gathering of customer feedback throughout the product development process (note that iterative prototyping is used to provide potential customers with something tangible to consider and comment on). – Figure 6

Lean Design

Alpha Prototype

Refined Prototype

Formative Prototype

Refined Models

Rough Models

Feedback from

Lead Users

Raw Concepts Problems, Needs,

Preferences

Search for Technical Solutions

Commercial-

Design and Development

Embodying Current Knowledge

Into Prototype

Intimate Involvement of Customers




– Prioritizing Product Requirements Using the Lean QFD …contd

� Why it is important to establish priorities of product requirements? Because “value” is not just performance delivered; it is performance delivered at a given price, we will call it –target cost which will later be transformed (adding our target margin) into the target selling price.

� Hence, some critical tradeoffs must be made regarding functions and features to arrive at the optimum level of product development design concept. This step is the first lean tool for product cost reduction

� In the lean world, we all have no patience for misapplied tools, nor do we tolerate unnecessary complexity. The Lean Quality Function Deployment (QFD) is a simple, easy to use decision and prioritization tool that can be applied intelligently at the beginning of a NPD project, and as needed throughout the product development process.



� Capturing the Voice of the Customer– Prioritizing Product Requirements Using the Lean QFD …contd…

� We discussed earlier about the “translation” of a product description from customer’s problem, to customer benefits, to product functions, and finally to detailed requirement. – Reference: Fig 4, Fig 5 and Fig 6

� We will use the Lean QFD to help “fine focus” and magnify these translations, and to prioritize the design outcomes in two levels. There is a first-level and a second-level applications of Lean QFD process as applied to New Product Development strategy

� The first-level application will help us translate customers’ problems, benefits and solutions including product functions (designed to solve their problems) into prioritized functions as shown in Fig 7 – using the example of a cell phone (Fig 4) to illustrate how this tool is applied. The example has been kept very basic and simple and clearly may not cover all the complete set of functions of a cell phone

� Once the design team has a prioritized QFD list (customer benefits and critical functions ), the second-level application of Lean QFD focuses on deriving the specific design requirements for each of the functions compiled –shown in Fig 8

� Let us use now apply the cell-phone product development example to illustrate how this tool can be effectively applied.



The first-level application of Lean QFD is to convert customer benefits into prioritized

functions. The example of a cell-phone product is used to illustrate how the tool works.- Figure 7

Key Customer Benefits

Weighting Factors for Key

Benefits

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B)

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2 1 1.5

1) Wirelss Transmit/Receive 5 0 5 17.5 1

2) Fits into Shirt Pocket 0 5 0 5 5

3) Audible/Silent "Ring" 2 3 0 7 4

4) Long Distance Reception 4 0 5 15.5 2

5) Usable at Night 3 3 0 9 3

6) Voice and Data Capability 1 1 0 3 6

7) Color Display 0 1 0 1 7

8) Games 0 0 0 0 -

9) Text Messaging 3 1 0 7 4

10) Digital Camera 0 0 0 0 -

"Function" Lean QFD

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� First-level application of Lean QFD: contd…

� The example is a quick & easy illustration and may not be complete in all respects. The first thing to note is that it takes the form of two-dimensional matrix

� On the horizontal axis, we capture the key benefits that our potential customers demand from the new product. Better yet, ideally we would have real-time customer participation during our first-level application of Lean QFD.

� Remember, benefits are always viewed from the customer’s perspective and in their own language, so who better to help you fill out this matrix?

� Note that space has been provided for only 3 “key elements”. This is because with the original version of QFD, teams tend to make this process too complex.

� I have chosen only selected few that are central in the minds of customers. You are free to enhance and expand it in any way you wish, including adding space for a few more benefits.




� A weighting factor is identified for each benefit. The weighting factor is simply a multiplying factor that captures the reality of customer perception that not all benefits are equal. The weighting factor helps to provide an objective balance for the QFD process

� The range factor is from 1 to 3. If you allow a larger weighting factor, it is easy for a strong-willed team member to skew the results by insisting on a huge multiplier. The team is now ready to brainstorm the possible functions that might be needed to deliver the key benefits desired by the customer.

� Once all of the functions are listed, the scoring process begins. Suggest a subjective scoring range from -5 to +5. A positive score indicates that the function under review positively impacts a key benefit; a negative score implies that the function actually degrades that benefit.

� A zero score means no effect on that particular benefit. Conduct the scoring as a team, with customers included, if feasible. The weighting factors need to be honestly evaluated and put in.

� Objectivity is critical to obtaining useful and meaningful results. If real customers could not be present, have someone from the team designated as the VOC and defend customer’s position




– Prioritizing Product Requirements Using the Lean QFD …contd…

� Total the scores by multiplying it in each box by the appropriate weighting factor and add up each row. The higher the positive score, the more critical that function will be for the ultimate product.

� Low or negative scores should be eliminated.

� Once the priority list is finally agreed upon and comfortable with the team, you can move on to deriving design requirements for each function, as show in Fig 8

� Refer to Fig 8 – In this case, we are translating our prioritized product functions into design requirements. Note: that a separate matrix like the one above should be created for each critical function.

� Again, the cell-phone example has been used purely for illustration purposes for capturing the Voice of the Customers in product design development process.



The second-level of Lean QFD -Figure 8

Key Customer Benefits

A)

Mo

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24 H

R

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mm

B)

Lig

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ht

Easy t

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Us

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C )

Larg

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Serv

ice

Are

a

Un

it

Man

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rin

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Co

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T

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et

First-Priority Function Requirements

Wireless Transmit / Receive

Weighting Factors For Key Benefits

2 1 1.5 2 1 Sele

cte

d

Re

qu

irem

en

ts

1) Type of Cell-Phone Chip Used

Option 1 – 1st Generation 0 0 0 0 0 0

Option 2 – 2nd Generation 2 1 2 -1 0

Option 3 – 3rd Generation 3 1 3 -5 -3 -1.5

2) Power Utilization

Option 1 – Low 0 0 0 0 0

Option 2 - Moderate 0 -2 2 -2 0 -3

3) Communications Standard

Option 1 – GMT 0 0 0 0 0 0

Option 2 - CDMA 0 1 3 -1 0

6

0

3.5

Po

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eq

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� Second-level of Lean QFD: contd…

� Refer to Fig 8- We are translating our prioritized product functions into designrequirements. Note: A separate matrix like the one above should be created for each critical function. The 2nd level Lean QFD tool looks different from the first-level

� The most important changes, from a process perspective, are that we don’t really want an external customer during these discussions. Reason: 2 additional columns have been included that are highly sensitive: unit manufacturing cost and time-to-market. They need to be kept confidential, but have impact on design requirements

� The addition of two columns creates a good and “balanced scorecard” for our design choices. If price is a critical factor for the product under consideration, it should be included as a key benefit, not as a substitute for unit cost. Exactly the same benefits and weighting factors used in the first-level application are used here.

� Begin your analysis with the highest priority function. You will use an entire matrix to derive requirements for this function, a second matrix for the next priority, and so on How far you need to go? The top 3 to 5 functions deserve this special treatment, provided that the rest are minor, both from a customer satisfaction and cost standpoint.




� For each function, list possible design tradeoffs, or alternatively, several levels of performance. Goal is to compare apples to apples for each design requirement and select the performance level that best balances customer needs with the practical constraints of cost and schedule. The design requirements that receive the highest positive scores are the logical choices for the New Product designs.

� A few helpful hints will be in order. I have “normalized” one of the choices for each design requirement to zero. Since the Lean QFD tool is comparative in nature, all that matters is the difference in scores among the options being considered. In most cases, there will be some “baseline” or default choice for each requirement which will be compared to possible alternatives.

� Usually, the baseline is the low-risk, low-tech choice; something your firm has had experience with the previous products. By setting the default option to zeros, the other alternatives can be determined to be “better” (a positive total score relative to zero) or “worse” (a negative total score total to zero).

� Since this tool is quite subjective, a small difference in total scores between options is really a non-decision. If there are just a few points separating two alternatives, more study is needed to make that call. Another approach would be to add one or more additional benefits to your matrix that might help make the choice more clear. Keep it simple. Get 80% of the benefit from 20% of time spent.



� Prioritizing Customer Requirements contd…

All Requirements are not created equal:

– We have reviewed so far prioritizing new product’s functions & its requirements.

– We should not prioritize this information to help us manage product cost and achieve our target.

– For successful New product Development, we need to integrate target costs, cost models, functions, requirements etc and tie them all together in a systematic framework to maximize customer satisfaction, which is the key!

– We should assume that our competition is doing the same thing as we are trying to do. Need to quantum leap the competitors. We must question ourselves� How did they allocate their target cost?

� What functions received the most attention?

� Which were neglected or given limited or no importance?

� What tricks did they use to reduce production cost?

� What are the unique attributes or similar products offered by different competitors?



� Prioritizing Customer Requirements …contd…

– Let me illustrate this point; let us consider that you are shopping for a new car. What are the attributes that you are most focused on? Price, price range, styling, safety, performance, cargo space etc.

– How about the muffler or the U-Joint, which are not likely to be of much interest to the average buying public. Any decent car should have an acceptable muffler, U-Joint, radiator etc. are not even worth comparison shopping, since they are presumed to be adequate as compared to leather seating & extra HP

– Let us look at the Fig 9 above, which is called the “Kano Model” which is a critical factor in customer perception. Customers tend to focus on certain attributes of a product and ignore others, based on a number of psychological market factors.

– Many of the attributes of a given product may not even be on the customer’s radar screen unless they fail to perform. These attributes were assumed by customers to be adequate in both performance and quality, based on past experience. Any violation of that assumption will trigger immediate dissatisfaction with the product.



� Prioritizing Customer Requirements …contd…

– Getting back to Kano’s model, product requirements are divided into three categories: Must-Haves, Should-Haves & Could-Haves, as shown graphically in Figs 9 and 10.

– It is a customer-sensitivity map in concept. As the performance of a given product attributes increases, how sensitive is the market to that improvement?

– Does it excite customers, interest them, or is the increased performance completely ignored? Obviously, heightened customer interest often translates into higher price market share, or both.

– Hence, we need to move beyond the must-haves (which really are only on the customer’s radar screen if they to perform), to the should-haves, which determine the lion’s share of price.

– The concept of Must / Should / Could prioritization offers design teams an effective and straightforward way to organize several different categories of product needs, as shown in Fig11 below



Figure 9

Excellent

Poor

Should-Haves

Pro

du

ct

Perf

orm

an

ce

Customer Satisfaction

Must-Haves

Could-Haves

The “Kano Model” for Customer Satisfaction



Examples of must have – Should have - Could have - Figure 10

Must-Haves Should-Haves Could-Haves

Automotive • Adequate Safety • Free of Defects

• Horsepower • Handling

• DVD Video • Sports

Package

Software • No Bugs • Adequate Speed

• Compatibility • Security

• Exciting GUI • Digital Photos

Cell-phone • Adequate Range • Acceptable Noise

• Small Size • Color Display

• GPS • Digital Photos

Airline Service • Attendants • No Overbooking

• Legroom • Carryon Space

• Decent Food • TV in Coach

Digital Camera • Basic Memory • Good Optics

• Lots of Pixels • Zoom Features

• Miniature Size • Streaming

Video




– Let us look at the Fig 9 above, which is called the “Kano Model” which is a critical factor in customer perception. Customers tend to focus on certain attributes of a product and ignore others, based on a number of psychological market factors.

– Many of the attributes of a given product may not even be on thecustomer’s radar screen….unless they fail to perform. These attributes were assumed by customers to be adequate in both performance andquality, based on past experience. Any violation of that assumption will trigger immediate dissatisfaction with the product.

– Let me illustrate this point; let us consider that you are shopping for a new car. What are the attributes that you are most focused on? Price, price range, styling, safety, performance, cargo space etc.

– How about the muffler or the U-Joint, which are not likely to be of much interest to the average buying public. Any decent car should have an acceptable muffler, U-Joint, radiator etc. are not even worth comparison shopping, since they are presumed to be adequate as compared to leather seating, extra horsepower and so on.



The Must / Should / Could tool – Some examples of the prioritization of product requirements - Figure 11

Must /Should/

Could Tool

Rank-Order Optional

Features or Customization

Establish Baseline

Performance

Define M/S/C Levels for Testing,

Prioritize Product

Versions,



An example of how Must / Should / Could requirements can be explicitly identified in a product design

specification. – Figure 12

Priority Requirements

M S C

M S C

4.3.8 Enclosure Dimensions Enclosure dimensions shall be: Height = 27.5 inches +/-.01 Width = 35.4 inches +/-.01 Depth = 22.5 inches +/-.01 4.3.9 Enclosure Insulation Enclosure shall be insulated with 0.5 inch-thick Styrofoam to reduce heat ingress and ambient equipment noise

Each spec is categorized at the beginning of product design



� Prioritizing Customer Requirements– The Concept of :Must/Should/Could Prioritization of Design

Requirements

� We begin with must-haves, setting tough limits on performance so that we don’t overshoot market expectations and thereby flush some profits down the drain. The most common source of waste in product design happens when the design team start the gold plating of must-have requirements.

� Certainly, we need to be careful not to undershoot; we don’t want to ruin our product reputation by allowing our must-haves to become noticeable in a bad way.

� On the other hand, anything we can do to reduce the cost invested in the must-have requirements will yield a bounty when it comes to attackingthe more valuable shoulds and coulds.

� Ideally, the Lean QFD will provide us with sufficient visibility into customer priorities to enable categorization of requirements into musts, shoulds and coulds. Let us summarize these 3 features for a quick display for our ref:



� Prioritizing Customer Requirements- Must –Have Indicators:

� Little or no customer interest – assumed to be acceptable

� Doubling the performance/ quality of the requirement will yield a zero price increase

� A tendency toward a standardized level of performance – an entire industry uses the same requirement

- Should – Have Indicators:

� This is the area where we want to focus most of our time and allocated cost.

� Customers directly ask for or demand this requirement

� An improvement in performance / quality of this requirement would yield an increase in price.

� There are multiple levels of this type of requirement, based on the specific needs of each market segment (i.e., it is a differentiating requirement)

� Pricing power of the requirement is directly related to its customer priority or importance



� Prioritizing Customer Requirements– Could – Have Indicators: I suppose the could-haves will be whatever is left over, but just in case,

use these Indicators to identify those risky but exciting “wow-factor” requirements”

� The feature or performance level is not currently on the market in the form you are considering. Customers are not asking for it, but if they are told about it, they are interested, and hopefully excited about the features and benefits.

� There is some significant risk involved; market risk, technical risk, or both. Could-have features tend to appeal only to a sub-segment of your product customers

Prioritization of Design Requirements

– In Fig12, the prioritization information is clearly indicated for each system in product spec.

– Design work should be prioritized to first deal with the must-haves, using a “good-enough” strategy to keep cost and design time to a minimum. (Note that must-haves are prime candidates for commercial-off-the-shelf components or other outsourcing strategies).

– The should-haves come next, receiving the lion’s share of allocated target cost and development time. Finally, if we are on schedule and within our target cost, we attack the could-haves, being careful to weigh risks and benefits as we proceed

– This general strategy is shown graphically in Fig.13 Remember, if you can’t squeeze the could-haves into the current product design, they can be carried over into a future version of the product. All we need to do now is execute the design to our prioritized requirements.



Beginning of Project Launch of Product

Must Highest priority requirements

Haves or features are front-end loaded

to allow scope flexibility at the

end of project.

Should

Haves

Could Scope reduced

Haves to meet target cost

or time-to-market goals

Must / Should / Could Prioritization Tool – Figure 13


Section IVLean Product Development

Value Analysis/ Value Engineering Tear Down

– A New Process For

� Product Development Strategy for Innovation & Creativity

� “Outside-the-box thinking”- Discipline and Philosophy

� Cross Functional Team work (also suppliers & customers)

� Competitive Product and Process Benchmarking

� Includes customers and supplier community for synergy

� A detailed analysis of Product Functions and its Value

� Case Studies- VA/VE Tear Down and Cost Matrix Analysis

WCNPD - Value Analysis – Tear Down – A New process


� Value Engineering / Value Analysis – An Evaluation

� VA / VE – Application using the “Creative Thinking Process”

� Product Development and Innovation

� Breakthrough Improvement (Competitive Benchmarking & Reengineering)

� Product & Process Benchmarking using the VA / VE Tear-Down Process

� Functions and Analysis – Foundation of VA / VE

� Levels of Function Abstractions

� Functions, Selection & Detailed Cost Matrix –Case Study # 1 Pencil

� Establishment of Product Cost Targets – Case Study # 2 Toaster ovens



� Value Engineering / Value Analysis – An Evaluation– Value Analysis – is defined as an organized effort directed at analyzing the

functions of goods and services to achieve those necessary functions and essential characteristics in the most profitable manner.

� It is normally directed at existing and current products. It is an “after-the-fact” activity, practicing the value process following design release, during the production of the product. A continuous improvement philosophy. Example-tolerance, capability, help for lean mfg & non-value added review

� Value Analysis differs from other cost improvement initiatives by questioning, defining, and analyzing the functions of components, including areas as to how a part could be made easier, better quality or less expensive

� Understanding the function of the part can significantly alter the component’s geometry, integrate its functions with other components, or eliminate the need for the function and its part.




– Value Engineering – is exactly the same strategy and process as the Value Analysis, except it is directed at the new products, during their development stage

� In other words, Value Engineering as a “before-the fact” activity, applying the value methodology during the new product design / development phase.

Therefore, VE is a critical step for Lean Product Development strategy

– VA / VE Tear-Down – is a method of comparative analysis in which disassembled products, systems, components, and data are visually compared and their functions determined, analyzed, and evaluated to improve the value adding characteristics of the project under study.

� VA & VE are the key elements, which describe and compliment the disciplined, systematic approach of the VA Tear-Down strategy for the overall product development process.




– The Job Plan- Key to the VA methodology is the Job Plan which incorporates thecreative divergent-convergent thinking process, explained below:

� Divergent thinking (sometimes called right-brain thinking or creative thinking) explores the unique ideas by stimulating and applying the team’s creative traits. It involves randomness, imagination, visualization, synthesis, non-judgmental scrutiny, irregularity and sensuality–hence it is called divergent or lateral thinking process

� Convergent thinking (sometimes called left-brain thinking) explores relevancy, applying the principles of logic and quantitative analysis techniques. Involves logic, analysis, judgment and evaluation.

� It is a also vertical thinking and is the antithesis of divergent and creative approach of thinking process

� Information, speculation & planning phases are viewed as Divergent Thinking

� Execution, reporting and the subsequent implementation of actions fall into the Convergent Thinking.



Figure 15 Job Plan Sequence – the creative divergent-convergent thinking process

DIVERGENT THINKING

CONVERGENT

THINKING

INFORMATION SPECULATION

PLANNING

EXECUTION REPORTING

IMPLEMENTAION

Job Sequence Planning



� Product Development & Innovation

– We are always improving existing things –products, processes, systems etc and creating new things. A company dies when these activities stop. Companies must continuously improve and innovate to maintain market position.

– VE is innovation & creativity focused, while VA is more intended for continuous improvement. Taking the best of both processes, the VA / VE-Tear-Down method integrates these two disciplines to provide the creative stimulus that is needed for Product Development process.

– In our technology-accelerating, competition-oriented society, improvement alone cannot provide the strategic advantage to win over competitors. Some level of innovation is also needed to gain strategic advantage and achieve a high level of success, with a minimum of investment and risk.

– This cross-functional oriented process combines employees from product engineering, manufacturing, marketing / sales, quality / reliability, product costing, finance etc in a team environment. The investment in capital, time and resources in VA/ VE Tear-Down activities is significantly less than that needed for traditional applied research and development activities for New Product Development



Breakthrough Improvement –Product Design & Development

� Break Through Improvement:� As opposed to Kaizen (gradual, incremental & continuous improvement) this

process strategy result from innovative and creative thinking motivated and aimed at stretch goals, or breakthrough objectives of product design ideas

� Stretch goals force an organization to think in a radically different way, and to encourage major improvements as well as incremental ones. When the goal is significantly higher, say 200 – 1000% improvement, one must be really creative and think “out of the box” resulting in a paradigm shift!

� The seemingly impossible is often achieved, yielding dramatic improvements and boosting morale. Two approaches for breakthrough that help companies achieve this strategy are as follows: Let us examine them now closely.

� - Benchmarking

� - Reengineering



Breakthrough Improvement – Product Design & Development

� Benchmarking:� Benchmarking is the search for best practices that will lead to superior performance

Benchmarking helps a company learn its strengths and weaknesses- and those of other leading organizations & incorporate the best practices into its own operations.

� The best practices refers to approaches that produce exceptional results, are usually innovative in terms of technology or human resources, recognized by customers and industry experts. It can provide motivation by helping employees to see what others can accomplish. One example comes to my mind

� Boeing set a stretch target of reducing the time to build a new 747 & 767 airplanes from 18 months (in 1992) to 8 months, teams studied the world’s best practices of everything from computers, autos to shipbuilding. By1996, Boeing achieved the total lead time to10 months – a quantum leap of 225% improvement!!

� Modern competitive benchmarking / teardown analysis was initiated by Xerox, an eventual winner of the Malcolm Baldrige National Quality Award. Two major types of benchmarking are competitive and generic. Let us examine them in some detail




� Competitive Benchmarking:� Usually focuses on the products & manufacturing processes of a company’s best and

aggressive competitors

� Generic Benchmarking:� Evaluates processes or business functions against the companies regardless of their

industry.

� Benchmarking summary strategy:� As the circumstances dictate, it is probably best that the company improve all

businesses functions, processes, best practices & new product development for globally changing economy. For example, the warehousing & distribution practices of L.L. Bean were adopted by Xerox.

� Motorola encourages employees to ask “who is the best person in my own field and how might I use some of their technique & characteristics to improve my own performance in order to be best (executive, machine operator, chef, purchasing agent and so on). Benchmarking should not be aimed solely at direct competitors only, rather what it takes to be a world-class player overall




� Examples practiced by Xerox, Motorola and GE:� These companies studied their competitors and discovered that:� Its unit manufacturing cost equaled the Japanese selling price in the United States. This and the

facts below helped the companies as a wake-up call. It made them understand the tremendous challenge that would be required and to set realistic goals to achieve closing the cost gap to be competitive. Competitive Benchmarking strategy helped them realize that goal

� The number of production suppliers was 9 times that of the best companies, assembly-line rejects were 10 times higher and product lead times were twice as long and defects per hundred machines were 7 times higher. Benchmarking require the following 4 processes:

� 1. Determine which product, functions and processes to benchmark� 2. Identify key performance indicators to measure –to meet or quantum leap

Identify the best-in-class companies-both industry specific and generic as required

� 3. Measure the performance of the best-in-class companies and compare the results to your own performance. Published information, site visits, in-depth interviews are the strategies used

� 4. Define, take actions and improve organizational systems to meet or exceed the best performance. Simply trying to emulate the best is like shooting a moving target. Goal is to excel and leap frog the competition, because competition will also be doing exactly the same thing



Competitive Benchmarking

� Understanding your customers – Key to effective strategy

� Who are they?� What do they value most?� What are their needs?� What are their key activities, problems and needs of their business?� How can our product solve their problem, needs or improve satisfactions?� Is there anything of product value or application that we can help enhance?� How do they see us versus our competitors?� How do they make buy decisions?

A Suggestion!� That exactly why, it is strongly suggested that customers along side with

other system suppliers should participate in a competitive tear down Benchmarking

� Who knows more about more product QFD, options and applications than your own selective and target customers base. Suppliers interface with your industry at large and their input and feedback is always of added value and costs nothing.




� Benchmarking Strategy – Critical Factors for Success

� Understand your process thoroughly first before evaluating your competition

� Strong management commitment and total cross functional team work is vital

� Team should be cross functional, empowered and preferably include suppliers

� Benchmarking comparisons, if needed should also include outside of your industry

� Remember ! – Benchmarking strategy is a never ending process

� The team should be committed to implementing the findings & results

� Benchmarking overview training prior to the actual workshop would be helpful




� “VISION WITHOUT ACTION … IS MERELY A DREAM.”

� “ ACTION WITHOUT VISION … JUST PASSES THE TIME.”

� “ VISION WITH ACTION … CAN CHANGE THE WORLD.”

� Joel Arthur Barker




� Reengineering (also known as process redesign)-is focused on “breakthrough”improvement to dramatically improve the quality and speed of work and to reduce its cost by fundamentally changing the processes by which work gets done

� Reengineering is often used when the improvements needed are so great that incremental changes to the strategy will not get the job done. The usual question always will be: “Why did we ever do it like that in the first place?” and the answer is often, “ That is the way we have always done it.”

� Jack Welch of GE, compared his company to a 100 year old attic, which has colleted a lot of useless junk over the years. Process redesign (called Work-Out in GE jargon) is the process of cleaning all the junk out of the attic.

� Thus we have seen that to achieve breakthrough improvements not only in product design development, processes but also focus on the administrative and cultural aspects companies and employees to achieve world-class status



- Competitive Benchmarking

� What is Benchmarking? – Another Perspective to Look At!

� Benchmarking is the practice of being humble enough to admit that someone else is better at something and wise enough to try and learn how to match or even surpass them at it. In other words it is striving for the best of the best!

� If you know your enemy and know yourself, you need not fear the result of a hundred battles. Benchmarking facilitates understanding of your own product and process relative to your best competitors and therefore it creates value

� Benchmarking compare your company to the applicable best practices for your product functions and attributes regardless of the industry you are in. This is key to understanding the concept of Benchmarking. It is the process and or functions that we are evaluating, not necessarily the same product we are manufacturing

� Thus, Benchmarking encourage innovation to help meet or exceed all customer requirements better than your nearest competition. It ensures that our products meet or exceed the competition for those attributes and values considered high priority by our customers




� Why Benchmark?� Improve profits, product value and effectiveness for the customer

� Accelerate and manage change in a globally changing economy

� Identifies and help achieve breakthrough innovations and stretch goals

� Create a sense of urgency and help accelerates the rate of required changes

� Eliminate the “not-invented-here” complacency or sometimes arrogance, depending upon individual company’s culture and people’s general attitude

� Creates a fact-based climate for generating cross-functional team consensus

� Understand world class performance and help you see “outside the box”thinking




� Benchmarking is NOT:� - Copying, Imitating, catching-up or Duplicating competition’s ideas or design� - Expose our own weaknesses or shortcomings� - Spying, espionage or only performing a competitive analysis for comparison� - Just a number crunching exercise, which is quick and easy

� Benchmarking IS:

� - Finding specific areas of improvements (product attributes and processes)� - Helps to understand your own processes & practices as to where you are now� - Determine as to the steps for improvement compared to world-class� - A disciplined process that facilitates areas of strategic importance and critical to your company. It can

cover product, process or anything of value to your firm� It can be executed in a collaborative process or performed independently

� Understanding your customers--the key to effective product strategy� Who are they? What do they value most? What are their needs and key activities?� Problems & business needs –How our product can solve problems & satisfy them?� Product value & applications that we can help enhance better than our competition� How do they see us versus our competitors? How do they make buying decisions?� Who knows more about product QFD, products and applications? Suppliers interface with your industry

at large and their input and feedback is of added value and doesn’t cost anything!



� VA Tear-Down & Competitive Benchmarking– Need to ask the questions to know where we are

� Is our product sales, profitability / market growth are doing fine or we are in trouble?

� Are we truly responsive to customer’s need?

� Do we have products features and functions the customer pays forbut doesn’t need?

� Does the customer need features and functions we don’t furnish?

� Have we investigated a range of alternative ways to satisfy the market requirements?

� Do we know which of our product features is value adding?

� Do we know the cost of the above features & other costs all buried in lump-sum total?

� If there is room for improvement, it is better for us find out before the competition does.



� Focus on Function

Focusing on function as the way to improve value, is the simple relationship and cornerstone of Value Analysis. Expanding function, the principle value elements will be:

FunctionValue = -------------

Cost� Utility Value or “Need”- This focus on the most obvious value. How effective is the

product at solving the customer’s specific problem or requirements

� Esteem Value or Want - Somehow Increase our sense of well being/ self- worth

� Exchange Value or “Worth” – The product might have desirable value to others

� Scarcity Value – If the product has enough value and in short supply or demandTherefore, incorporating all the above relationship

Utility + Esteem + Exchange + Scarcity Value = ------------------------------------------------------

Cost



Figure 14

Elements of Product Value Relative

Product Examples Use / Utility Esteem Scarcity Exchange Market Price

Paper Clip Gold Tie ClaspTap Water Imported Bottled WaterDecorative Wall Poster Original Oil PaintingTickets to Local Movie Theater Tickets to See Bruce SpringsteenMagnetic Compass Portable GPS LocatorGeneric Office Software Fully Customized Office SoftwareDigital Alarm Clock Swiss Grandfather Clock

Some examples of how the four categories of product

value maanifest themselves in various types of products



Product Functions and Governing Rules: The two major classifications

� Function Analysis –The foundation of Value Engineering / Value Analysis:� Function is the end result desired by the customer. It is what the customer is willing to pay for it.

Function analysis is the cornerstone of VA / VE and is the one discipline that separates from the many problem-solving and processes available. Some examples of functions are:

� - A spring does not move parts; it stores energy� - A screwdriver does not turn screws; it transmits torque� - An oil filter does not clean oil; it traps dirty particles� In the above, the verb identifies the action to be taken and the noun is the target of the action. In

the spring example, “store” is the action and “energy” is the target. Next we will examine a simple electrical fuse to understand functions into primary and secondary

� In the VA Tear-Down, competitor’s products are disassembled to determine how well the functions are designed & effectively integrated to provide the best value at the lowest cost. Addressing the functions to be provided, rather than the components selected to perform these functions, broadens the creative boundaries in seeking innovative ways of improving the product.

� Basic Function: The principle reason (s) for the existence of the product or service, operating in its normally prescribed or designed manner.

� Secondary Function: The method (s) selected to carry out the basic function (s) or those functions and features supporting the basic functions. It is mandated by a customer as a condition of a sale. Not satisfying these requirements could result in lost product sales



Figure 17

RANDOM FUNCTIONS

VERB NOUN

Break Circuit

Connect Circuit

Protect User

Protect Supplier

Protect Equipment

Identify Failures

Advertises Mfgr

The Function of a Fuse



Basic & Secondary Functions; Understand Levels of Abstraction:

� Basic Function: The principle reason (s) for the existence of the product or service, operating in its normally prescribed or designed manner.

� Secondary Functions: The method (s) selected to carry out the basic function (s) or those functions and feature supporting the basic functions. It is mandated by the customer as a condition of a sale. Not satisfying these requirements could result in lost product sales.

� Levels of Abstraction: � A simple product like a fuse can have many functions –basic and secondary. If we examine the

product in more detail, we can move to a lower level of abstraction and examine its components.

� The fuse consists of a glass tube, a low electrical tolerance resistance strip, terminal ends, and a bonding media to assemble the product.

� Each component of a fuse performs many functions, and on its own level of abstraction, each has at least one basic function. However, many individual basic functions become secondary when moving the focus of the study to a higher level.

� The glass tube & terminal ends are important to the fuse but less important when evaluating the contributions of the fuse to the equipment it protects



Levels of Abstraction (contd):� A cigarette lighter has about 19 parts. Each part, in isolation has its own basic

function. However these parts and their functions are designed to support the basic function “produce flame”.

� When the fuel is spent, the basic function cannot be performed & the lighter thrown away, however all of the components of the lighter are still operable. Why it is thrown away? Refer to the Rule:4 below, which says that the loss of basic function causes the loss of the market value & worth of the product.

� Governing Rules of Functions Analysis:

� 1. Once defined, a basic function cannot change� 2. The cost of the basic function is usually a small part of the total product cost� 3. Basic functions cannot sell without supporting (secondary) functions and

supporting functions must satisfy the basic function of the product � 4. The loss of the basic function (s) causes the loss of the market value and

worth of the product or service

� Let us review a case study # 1 of a standard lead pencil to understand a product’s basic & secondary functions and they affect its cost matrix in general



D e s c r ip t i o n F u n c t i o n B S

P e n c i l M A K E M A R K S X

E r a s e r R E M O V E M A R K S X

M e t a l B a n d S E C U R E E R A S E R X

I M P R O V E A P P E A R A N C E

T R A S M IT F O R C E F O R T H E E R A S E R

X

B o d y S U P P O R T L E A D X

T R A N S M IT F O R C E X

A C C O M M O D A T E G R I P X

D I S P L A Y M F R ’S N A M E

I M P R O V E A P P E A R A N C E

X

P a in t P R O T E C T W O O D X

I M P R O V E A P P E A R A N C E X

L e a d T R A N S M I T F O R C E & M A K E M A R K S X

P e n c i l F u n c t io n s

Function Selection & Function Cost Matrix: Figure 18Let us take a basic and a simple case of a standard lead pencil for examining this example



�Functions, Selection & Cost Matrix

� The function “make marks” was selected as the basis function of the pencil

� That function is accomplished by the lead in the pencil

� All other functions are in support of the basic function and therefore, secondary.

� These secondary functions are therefore, candidates for elimination, consolidation or modification to reduce the cost of the pencil.

� The manipulation of secondary functions is accomplished by the creative efforts of the team & the basic function is not changed.

� Pencil must retain its ability to “make marks” & satisfies the customer’s sense of value and there may be other creative alternatives and scope to perform “make marks”!

� In VA, the manipulation of secondary functions is guided by reducing the cost contribution of performing those functions.



Functions, Selection & Cost Matrix

� Eliminating or combining many non-value adding secondary functions and their parts achieves the objective of VA, to improve value by improving the cost-to-function relationship of a product.

� If you make longitudinal cut in the wooden body & remove the lead, you can write (make marks) with just the lead without the benefit of any of the secondary support functions.

� It will reduce the cost to perform the basic function, but will not represent the best value proposal for the pencil in the market place

� The Function Cost Matrix is a function analysis approach, the objective being is to draw the attention of the analysts away from the cost of components and focus their attention on the cost contribution of the function. Let us review the matrix

� The components and their costs are displayed on the left vertical side. The functions performed are at the top horizontal line

� Each component is examined to determine how many functions it performs, and the cost contributions of those functions.



Figure 2-6

Rem

ove M

ark

s

Secure

Era

ser

Impro

ve A

ppeara

nce

Make M

ark

s

Tra

nsm

it F

orc

e

Accom

modate

Grip

Dis

pla

y Info

rmation

Support

Lead

Pro

tect W

ood

Function Components

Cost (in

cents

)

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

Perc

ent

Cost

ERASER 0.43 100 0.43

METAL BAND 0.25 50 0.13 25 0.06 25 0.06

LEAD 1.14 70 0.84 30 0.30

BODY 0.94 10 0.09 40 0.37 5 0.05 5 0.05 40 0.35

PAINT 0.10 50 0.05 50 0.05

TOTAL 2.86 15 0.43 4 0.13 6 0.20 29 0.84 27 0.79 2 0.05 2 0.05 13 0.35 2 0.05

Function Cost Matrix



�Functions, Selection & Cost Matrix

� Example the eraser cost $0.43 parts of a penny, and 100% of that cost is dedicated to the function “remove marks”.

� The metal band, costing $0.25 parts of a penny performs three functions (secure eraser, improve appearance & transmit force, when using eraser).

� A cost estimate roughly allocated the cost to perform those functions by estimating the process and material cost of the metal band component.

� To determine the cost of the function “improve appearance”, the illustration shows that the metal band, body, and paint all contribute to that function.

� The analyst can now read the chart vertically to determine the cost contribution of performing the function “improve appearance”



Functions, Selection & Cost Matrix

� At this point in the process, it is more important to determine the relative cost impact of the functions than to attempt to accurately determine the manufactured cost contribution of those functions.

� Detailed cost estimates become more important following function analysis, when evaluating value improvement proposals.

� Reading across the row marked “total” shows the cost and % contributions of the functions of the pencil.

� Here, approximately, 56% of the pencil cost supports two functions “make marks” and “transmit force”.

� Addressing the cost to perform functions, rather the cost to produce the parts that carry out those functions, will help the VA tear-down team select which areas to brainstorm for value improvement analysis.



Levels of Abstraction:� We may wonder at this point that the complexity of a product or system that

contains a great many more components than a pencil would be proportionately more complex.

� In other words, you can imagine what a Function Cost Matrix of an automobile or large auto system would look like, after the pencil example.

� However, the level of abstraction selected to perform the analysis governs the complexity of the process and not the number of components of the product.

� Using automobile as an example, a high level of abstraction could contain many major subsystems as the components under study, such as power train, chassis, electrical, body and passenger compartment.

� The team can focus just on the power train for further analysis (less complex) than moving to a lower level (engine, transmission, drive shaft etc) for a more detailed (comparatively more complex) analysis.

� Another approach to simplify the process, while maintaining its validity is to select only the basic functions of the individual components for the function part of the matrix.



Levels of Abstraction (continued):

� A good approach for a simple product or assembly that has about 20 to 30 components.

� Find the applicable functions for each component of the product, classifying those functions as basic and secondary to that component.

� Use only the component’s basic functions and display those functions on the Function Cost Matrix.

� Because the analysis will be moving to a higher level of abstraction by evaluating the product, many of the component’s basic functions displayed in the matrix will be secondary to the product.

� To summarize, each component has a basic function. However, that basic function may be considered secondary to the system the componentsupports, unless the basic function of the component is also the basic function of the system.



Value Analysis (Existing) and Value Engineering (New) Products:

� The technique used in VA Tear-Down involves a search and evaluation of alternate ways to meet required performance at the lowest possible cost.

� The alternatives available for consideration are greater in a new product (Value Engineering) than for existing products (Value Analysis). That is why VE which is creative or innovation focused is critical during the early stages of NPD

� Existing products will generally have design constraints, interchangeability and after market services issues, not to mention procurement contract commitments, scrapping or modifying existing inventories, design documents, modifying tooling / fixtures & sales brochures New products have fewer constraints.

� It also assures that the cost benefits occur in the initial production and the break-even point for the investment of a value-engineered new product is far more favorable than doing it later on after the production starts.

� Existing and current products have a market that is constantly changing and cost reduction & value-adding improvements require constant attention against competitors and technology advancements. To improve market share and sales, current products also should be considered for the VA Tear-Down strategy



The VA Tear-Down Process – Steps:

� 1. Plan & procure competitive products or system assemblies

� 2. Disassemble and tear down to the desired level

� 3. Perform detailed analysis

� 4. Organize and document other required Information

� 5. Display parts and assemblies for team brainstorming -

� 6. Develop ideas / recommendations for Immediate & Future Improvements

� Step1. Plan & procure samples:

� Research, study and select parts & assemblies from the best competitors

Picking up a limited sample of competing products will result in biased information

Too large samples will distract from the discipline of the process sequence and

dilute the final outcome.

� The correct number of competitive samples is dependent on the scope of the study, those target competitors (industry & market leaders) being benchmarked. Need to decide as to how much, the extent of the analysis should cover either for a complete product or subsystems or just component parts.



Plan & Collecting Samples (Contd)

� In addition, the level of tear-down to be employed, the process for analyzing, defining, and implementing improvement suggestions and timing mile stones. It is important to establish study objectives that are within the VA tear-down capabilities to achieve.

� However, to facilitate bold innovation and achieve higher levels of technical and process break through, comparison with products from other industries will be useful. Collecting the right samples should be an important step.

� Step 2: Disassembly:

� The team should have clear understanding of what they are looking for before disassembly and dissecting the product. The sequence of disassembly and time should be recorded for future ref.

� The function of each part be identified and recorded by the same team who are doing the VA tear-down of product analysis and improvement proposals. Skilled production/ technician staff members are valuable addition to the tear-down team



Disassembly (contd):

� The analyst learns much through touch, smell, feel, sound and sight in the act of disassembly and this first-hand experience provides the best information.

� If certain parts are designed to perform some function in combination with other parts or assemblies, the analyst may fail to recognize the complementary (or dependency) relation between the parts unless observed first hand during disassembly.

� As a minimum, members of the VA Tear-Down team, as well as design and production engineers must be at the site of disassembly to see and record the details of the competitor’s techniques.

� It is natural to get improvement ideas during the disassembly process and therefore, all the required details should be recorded immediately.

� The disassembled products are mounted on a display board in exploded view, showing where each part was housed before assembly.



Step 3: Analysis:� Analysis is the core of the VA Tear-Down, focusing on analyzing differences, advantages, and disadvantages of the selected product samples of the competitors. It is very important that all the differences, major or minor, in function, structure, materials, processes, fit and finish etc.

� More importantly, the information should be documented with the reasons for those differences, as the team feels appropriate. The goal here is not imitation, duplication or copying the competitor’s design, rather ask the 3 questions below for exploration and other opportunities to quantum leap competition

� Why are these two products different?� Are there any advantages to the differences?� Why was that particular design or process approach selected?

� On the basis of the answers, solutions can be found which can make a significant contribution to the company’s technology data bank. It is not sufficient to just focus on using the results for modifying our products, but consider the timing factor and sequence of such modifications.

� Issues such as finished goods inventory, investments, immediate competition concerns and general technology trends must be considered in planning major product upgrades. Other cross functional departments needs to share their input and recommendations for subsequent actions.



Step 4: Collecting other Information:

� While collecting competitive product related information, we should also focus on historical records of product failures, potential structural weaknesses, and the availability of new and emerging materials, processes and technologies that may be needed whether or not used on the competitor’s product.

� Equally important and helpful step is to research ideas about structure or assembly of products from totally different industries and how they address similar functions.

� As an example, applying ideas derived from electric and home appliance to passenger car temperature-control systems also resulted in a cost-effective, functionally responsive quality solution.

� Intentionally stepping outside the traditional product boundaries and focusing on the functions of components and systems (regardless of the type of industries it came from) offers a better creative perspective for developing ideas, which can often translate into great success.



Step 5: Display:

� The display process is divided into steps or levels to get the best attention of others in the firm

� The first step is to systematically capture all the comparative analysis information including a number of suggested options representing different ways of incorporating the improved functions and features are displayed –with our product and the competitor’s side by side.

� In the second step, top management and a broad cross section of interested staff and support members are invited to view the display, as well as the analysis and ideas for overcoming competitive advantages.

� This includes marketing, engineering, production, manufacturing, suppliers and other focus groups.

� Sales strategy, business case justification, best and proven ideas of refinement and implementation are shared to stimulate additional idea generation.



Display (Contd):

� In addition, photographs, test results, catalogs, customer reactions, and if needed, videotapes are prepared so that visitors and outside suppliers can readily and quickly recognize differences from observation and published information.

� Exposing internal product related problems is an essential part of the VA Tear-Down process, such exposure must be done in a non-judgmental presentation.

� This will cultivate senior management appreciation, keen interest and necessary support for integrating the VA Tear-Down process as a high-level business culture, rather than a mid-level special event.

� Suggestion sheets are available for those who wish to think about and then write their thoughts.

� The views and opinions by third-party people like visitors, customers and suppliers along with the valuable sources of information from material experts, production engineers, designers and others represent “outside-the-box”concepts and unique ideas for the display process strategy.



Step 6: Immediate & Future Improvements:

� Two conditions require immediate change and improvement.

� The first are those value-adding competitive changes that can be implemented with a minimum of investment.

� The second is the necessity of correcting a serious competitive defect quickly with significant investment.

� Timing for getting these changes into the market may be a tactical business issue.

� The best time and place to consider incorporating “Future Improvements” is during model change over.



Immediate & Future Improvements (contd):� Improvement targets reflect customer sensitive characteristics such as

functions, features and attributes (e.g. cost, weight, package size, number of components, performance)

� Using actual competitive data & final recommendations of the VA tear-down team lends the required credibility and creative stimulus in generating ideas that will meet or exceed the target competition.

� One cannot assume that the competition will be idle or inactive during this period. Change management is dynamic and must consider the competitor’s reaction, anticipating when the next round of improvement is warranted.

� Unique Ideas, Judgment and Selections:

� As pointed out before, the staff responsible for developing unique ideas for the product development process and resolving problems of competitiveness is directly involved in each tear down step of the process.

� Both quality and quantity of ideas are preferred to harvest and determine the best value-added characteristics



Unique Ideas, Judgment and Selection:

� To avoid duplicating ideas, a short description of the ideas offered already is posted on the display board to be reviewed by the casual participants. This list also stimulates new, or improved ideas by “piggy backing” on these ideas.

� For judgment and selection the essential step is to select acceptable, feasible best of the ideas and justify rejecting the other ones.

� It is human to reject 95% of the goodness of an idea for the 5% that is wrong with it.As an example, instead of saying, “No, the ideas is no good because management will not approve the required investment, “try saying, “Yes, the idea is good, if we can justify the investment, provide value to the customer and still be profitable.

� Using positive approach to judgment and selection makes the “required investment” an issue to be resolved, rather than the rationale for rejecting the entire idea.

� Fig 19 –illustrates the typical process flow structure for selecting competing products for competitive benchmarking study and evaluation



Obj ective Of Comparison

Select

Product

Based on

Simila

r

Functions

Select

Product

Based on

Simila

r

Functions

Select Based on Similar

Process

Select Based on Similar

Process

Select

Product

Based on

Simila

r

Configura

tion

Select

Product

Based on

Simila

r

Configura

tion

Out of The Box

Thinking

Out of The Box

Thinking

Ideas From

DifferentProducts

Ideas From

DifferentProducts

Ideas fromDifferentModels

Ideas fromDifferentModels

Rev iew AndSort

Ideas

SelectProductBased on

Similar Materials

SelectProductBased on

Similar Materials

Accept Ideas

Combine Ideas

Rej ect Ideas

Justify Rej ection

New Idea

Figure 19

Guide For Selecting Competing Products for Comparison



Products with similar configurations, processes:

� To overtake and maintain the lead over a competitor’s product requires thinking out of the box thinking

� As an example, if a fog lamp for an automobile were selected for improvement, the comparable lamps used by competitors would be analyzed, taking it to a new level, the functions used in fog lamps, as distinguished from other wide range of lamps.

� The state of technology should also be considered in selecting products for comparison. To-day’s watches have solar cells and washing machines have built-in microcomputers. Rapid changes in material, design and processtechnology are offering unique methods for meeting affordable and profitable function improvements.

� To stimulate innovative ideas requires looking beyond the limits of examining only the target competitor’s product and search different producers as well as products from different industries, which have similar functions, configurations and characteristics.

� The above approach and rationale should also be used for selecting products with similar processes. This will analyze their processes, help uncover and counter competitor’s process advantages



Products with similar material & functions:

� For similar materials, the objective is to find any advantages in the use of materials.

� If our product improvement candidate is plastics material, examining different plastic products, how they are reinforced (with glass fiber, carbon fiber etc), how it is colored (hot stamping, two-tone color etc) and how it is formed for small volume (vacuum forming, blow mold etc) will stimulate improvement ideas.

� Selection of samples will be more effective, if the team knows that different kinds of products that use same or similar materials contain ideas that are not present among products with the same kind of use or function.

� As regards to functions, if we look at the fog lamp example, comparing and evaluating the functions to Christmas tree lamps, street lamps, and household lamps could be useful for exploring new improvement ideas.



Products with similar material & functions (contd):

� They all share the same base function of “emit light”, but they emit light in different ways. Some color light, amplify light, focus light, modify the light spectrum or manipulate light in other ways.

� Selected lamps could also include flashlights, neon signs, highway lights and others. Comparison focus could include lens design, color spectrum, reflectors, bulb design, assembly techniques, wiring schemes, or the use of material, among others.

� That is why isolating selected functions to look outside paradigm limits can provide valuable insights beyond the competitor’s product for improving the fog lamp, or other products.



Managing Ideas:

� When gathering ideas, judgment should be suspended. Judging, evaluating and managing ideas are a separate and distinct step, after a reasonable quantifies and variety of ideas have been sorted, prioritized and recorded.

� Design engineers invest considerable time, R&D before their design is finalized. Therefore, fresh ideas coming from other sources (that do not originate from their peers) will look upon in a defensive and skeptical manner.

� Ideas from marketing, customer sources, manufacturing specialists and representatives from different industries are sensitive to faults and design shortcomings as well as improvement opportunities. Their ideas are not meant as criticism, but offers of assistance to meet the goals of the tear-down assignment.

� The brainstorming meeting format must accept rebuttals and criticism, but criticism must be constructive. It is okay to question the value and practicality of ideas, but the objective should be to find and convert ideas into a proposal and a plan, rather than rejecting them out right.

� Successful tear-down and managing of ideas can result only from using ideas extracted from differences from a wide range of viewpoints and various types of analysis and evaluation.



The VA Tear-Down Process and Establishment of Cost Targets

Establishing VA Tear-Down Cost Targets Setting Cost Targets –Simple, Reasonable and Stretch (Aggressive):

� Setting cost targets is a common and important metric Product cost targets are selected on business needs, strategy, and objectives, and are influenced by market conditions.

� Price is influenced by cost, the two respond to different business conditions.

� Cost is the expenditure of resources required to manufacture a product that satisfies customer’s sense of value.

� Price is the value manufacturer’s places on products that anticipate how much customers are willing to pay for the functions and features offered by that product.

� A successful business is one that can satisfy customer requirements at a cost that results in planned profits.



Setting Cost Targets-Simple, Reasonable and Stretch (Aggressive)

� In to-day’s global market and competitive economy, driven by accelerating technology (also contributes to shorter product market life) ever growing capacity, need for rapid new product development, customer’s tastes and demands, companies compete for sales & market share.

� New Product Development and improvement is a dynamic, continuing, cyclical venture. because the advantages of new and improved products erode as new competing products are introduced. As a result, sale prices must be lowered and profits shrink forcing renewed product improvement activities.

� No more five-year product life, before competition reduced the price and introduced new and exciting new products. In VA Tear-Down, it is a common practice to try to first achieve target costs for each part of the product.

� Shortfalls or over targets are normal and the negatives and positives are balanced as long as the overall final product cost is achieved, without losing its overall value and market / customer acceptance. Three Types or levels of target costs will be discussed. They are as follows:

Simple, Reasonable and Stretch (aggressive)



Successful Implementation of Target Costs –Case study # 2 – Three Toaster Ovens

Figure 20

Three brands of oven toasters



A review of a detailed case study (3 oven toasters) to understand as to how the VA Tear-

Down process is applied effectively to set and achieve product target cost successfully.

These are 3 types of table top oven toasters and the example is chosen because most of the household uses them and everyone can easily relate to the design and construction of these appliances – Ref to the pictures of ovens –Fig 20

It is simple in structure and principle for easy understanding of the concepts. Each product can be switched from 400W to 800W and each can be used for a variety of cooking. Let us say the retail price of these products is approximately around U.S $33 each.

Following explanation to walk you through the VA Tear-Down and target cost setting process.

� Column titled “ours” is the base product of our oven being addressed for new product improvement in this example

� Weight comparison of the common component parts of the ovens aregiven in grams

� Product Target Costs for improving our product (oven) are established on the basis of these data –for new product development strategy



A review of a detailed case study (3 oven toasters) to understand as to how the VA Tear-Down

process is applied effectively to set and achieve product target cost successfully – Ref to Fig

20 for the pictures of the oven toasters

� Setting Simple Cost Targets: Cost Targets are established as a result of Tear-Down analysis and are based on physical properties rather than projections or market desires.

� Refer to the product comparative analysis (Fig 21); We will see that the oven –“B” is the lightest in total weight of 2133 grams as identified at -(#1).This weight becomes the first simple target because it can be achieved by copying B’s design-the start of ours challenge

� It will be noted that some of our oven parts weigh less than B’s. If we use those, we can achieve an additional -(274 – 202 = 72) + (357- 338 = 19) + 12 = 103 g , which would now result in the new product target of 2133 – 103 = 2030 g. This is our 2nd target for minimum weight, a simple target, which can be achieved by making suitable modifications as required

� During this time, let us assume that company B is also aggressively pursuing to introduce a new toaster oven, lighter weight and cheaper than their current product offering. Let us take this as a valid challenge in this case study



Figure 21: Product comparative analysis of components – Toaster Ovens

No COMPONENTS A OURS B Minimum Wt In Grams – (Difference from OURS)

Individual Target

1 Cord Assembly 102 112 80 80(32) 32= 80

2 Heater 252 287 203 203(84) 87 = 200

3 Grill Assembly 92 79 76 76(3) 9 = 70

4 Door Assembly 325 338 357 325(13) 38 = 300

5 Reflector Assembly 415 454 375 379(79) 84 =370

6 Switch Panel Assembly 44 110 30 30(0) 70 = 40

7 Cover Assembly 787 762 716 716(46) 62 = 700

8 Tray 316 202 274 202(--) 22 = 180

9 Other Assembly 10 0 12 0(--) -- = 0

TOTAL WEIGHT 2,343 2,344 2,133 2,017(337) 404 = 1940

Note 456.6 grams [1] [2] [3} [4]



A review of a detailed case study (3 oven toasters) to understand as to how the VA Tear-Down process is applied effectively to set and achieve product target cost successfully.

� Setting Reasonable Targets: If we benchmarked the products by combining the lightest parts of the 3 ovens, the resulting weight = 2017g (#2). This will result in a total weight savings of 2344 – 2017 = 327 g (ref to Fig 21- # 3)

� Assume a relationship between a part weight and its cost, the lightest with least expensive parts should be our target. The total weight saving to be achieved on our oven is 327g (#3)or approxly 14.4% - a theoretically minimum and a product at reasonable cost!

� Incorporating lowest weight and modifications at this level is rather easily attainable, but not very challenging from an innovative product development standpoint! Therefore, setting stretch (aggressive) targets should be our goal. This will combine the above minimum weight + an aggressive, realistic, yet challenging weight goal for a new product of Oven!

� To move ahead of the competition requires information on advances in material, process, market growth, progress of in-house technology to assess product advantage & limitation

� Stretch targets involve factoring in unproven improvements for each component, rather than using the sum of the parts in today’s market. We set component targets because material, process & technology may differ among product parts and sets our stretch goals



A review of a detailed case study (3 oven toasters) to understand as to how the VA Tear-Down process is applied effectively to set and achieve product target cost successfully.

� This is a credible target (established on the basis of actual product & part examples as well as justifiable potentials & market projections). In the oven example, the total of individual parts targets, which reflect NPD team’s challenge, added up to 1940g (#4), a weight saving of 2344 – 1940= 404g (17%). Product target is now 1940g (sum of all the targeted parts).

� Individual parts may exceed or come in under their assigned targets. It is important that we should be aggressive, yet realistic and credible to pursue the product target weight -1940g. Targets that are well founded provide a worthy challenge to use the VA tear-down process.

� The next step is to determine if the aggressive weight target established by this process will be acceptable in the market and meet customer satisfaction when the product is launched. If the market evaluation indicates the need for further refinement, each component will be reviewed in detail to identify which one need further effort & how much additional tweaking is justified to address market shortfall and quantum leap the nearest best competitor!

� Unlike conventional target cost setting, established on a rough estimation, this method shows the parts to be given priority and special attention and this concept is called cost planning. Target setting by the VA / VE tear-down team carries credibility and therefore, earns merit and recognition in the organization.



Figure 22 (Display Board, Idea Control and Follow up):



Figure 23 –Example of static tear-down – oven toasters



Perforated board – disassembled parts display of the ovens

� The display boards are used for displaying what has been disassembled. Parts are hung in an exploded view arrangement, if needed and all the detailed information (part #, material, weight, specification, tooling concept, tech details of processes, estimated cost) are posted.

� A perforated board displaying various disassembled components of our oven case study example (Static Tear-Down parts) are shown in Fig 22 & 23. Tear-Down workshop exercises, generate a large number of ideas & concepts during the cross-functional team brainstorming process and the display board is a convenient and excellent tool to facilitate this process

� The ideas that are developed go through a maturing process into specific proposals and recommendations by filtering, prioritizing, sorting and in-depth discussion and investigation. The VA/VE tear-down combined with benchmarking process tend to be more practical than those stand-along brainstorming sessions.

� When the team deals with the actual products, examine, touch / feel the hardware and witness the whole tear-down process, ideas generated have significant credibility and also confidence in the eyes of the top management.



Competitor’s product selection:

� Ask the question: Why was that competitor’s product selected?- should be addressed. If the competitor has good cost advantage, then the basis for the specific advantage should be discovered and will be the source for generating ideas for cost reduction.

� If the competitor’s product claims advantage in the many functions offered which has market appeal, and then they will be focus for functions idea generation.

� When a competitor offers a new or improved product or unique feature with benefits, then a product analysis team will dig deep to investigate those products and determine what innovations have been incorporated. They will be the subject of for idea development.

The specifics of Product Disassembly – What we can learn?:

� During this process all differences, whether advantages or disadvantages, should be noted. Everything in which the competitor differs from our product is the source of ideas, regardless of its nature.

� Everything that is not found in our product, such as the way of parts assembly (sequence), tooling, fixtures, parts mating, quality assurance, or the way parts are fastened, is also the source of ideas. Opportunities of DFMA, DFS & accessibility are other potential areas for learning for product development strategy



Beyond Idea Collection:

Product improvements can only result from implementing acceptable ideas. The ultimate objective of VA Tear-Down is product development and improvements that will beat competitor’s offerings. Following are some valuable ideas.

� Make examination of the collected ideas visually friendly. Ideas and the affected parts should be organized and arranged on display boards and tables.

� Sort the ideas by departments from which the ideas and or concepts have been proposed. Information should be displayed showing expected benefits including part weight, cost, quality, function, features, and attributes as well as estimated tooling and potential capital investments (if feasible to estimate).

� Schedule target dates for implementing approved & accepted final suggestions. Implementation time schedules - final dates for completing drawings, testing, engineering release, & implementation in production be published. Best to have a designated Project Manager to lead the program from beginning to end.

� Effects of implementing idea (cost savings & benefits), investments, payback (return on investment criteria) and other progress reports should be published.



Static, Dynamic & Cost Tear-Down – A quick Look of each:

Static Tear-Down:

This is the first and original Tear-Down process, used for comparison and competitive analysis by disassembling and displaying parts to stimulate product development and improvement. There are two major steps.

In the first step, the selected products, parts or materials subjected to Dynamic Tear Down (ours and the competitor’s) are displayed as they are disassembled into their component parts. The team then reviews & decides how to analyze each part.

In the second step, the ideas for improvement that were suggested for competitive analysis are used to form product development strategies. The toaster ovens in our case study are done under static & cost tear down strategy.

The basic steps of this process and flow are shown here. Refer to Fig 24 below for the details.



Basic Steps of Cost

Tear-Down1. Plan Event1. Plan Event

2. Collect Information2. Collect Information

3. Select Team3. Select Team

4. Select /Collect Parts or Products to be

Compared/Analyzed

4. Select /Collect Parts or Products to be

Compared/Analyzed

5. Preliminary Investigation5. Preliminary Investigation

6. Review Statistic Tear-Down Procedure

6. Review Statistic Tear-Down Procedure

7. Conduct Other Tear-Down7. Conduct Other Tear-Down

8. Develop Displays 8. Develop Displays

9. Collect Ideas9. Collect Ideas

10. Examination10. Examination

11. Follow-up11. Follow-up

1. Preparation

II. Display -I

III. Analysis

IV. Display -II

V. Follow-up

Review ScopeProcess affected

Figure 24




Dynamic Tear-Down:

The term “dynamic” refers to all the design features that contribute to the time (cycle time for total assembly) and cost of assembling the product in production. In this process, following disassembly, the products are re-assembled (if needed more than once) as intended by the product’s manufacturer –to document time.

Sequence of assembly process, the time required, perhaps estimating potential set-up time and other elements are recorded, simulating the manufacturer’s assembly methodology of the competitors’ products.

This information is systematically compared and evaluated and the function of each part is determined to assess its contribution to the product. The objective of Dynamic Tear-Down is to reduce the labor and capital expense required to assemble a product.

The assembly operation is a major labor cost component and a prime target for product improvement by reducing fixed cost. Refer Fig 25 (dynamic tear-down) for the details




� Cost Tear-Down:� Because the main issue of concern is cost, all cost-related information must be

included in the analysis

� Information includes component cost comparison, assembly time translated into cost as determined in Dynamic Tear-Down. Objective is to project as best as possible and assess the total cost to market the product, less over head (which can only be roughly estimated) with competitor’s products.

� Important thing to note! The purpose of focusing on cost is not to collect and compare total product cost, but to obtain the best information possible for improving our product’s functions, features, attributes, and identifying their contributions to enhancing customer perceived value versus the competition.

� This is achieved by evaluating all the competitive advantages through analysis, and isolating cost-reduction factors through such detailed analysis. The scope of this process is focused not only to the cost of the product, but also items like tooling, package issues, accessories, catalog, distribution logistics and so on.



Static, Dynamic & Cost Tear-Down – A quick Look of each (contd):

� Because the details of the competitor’s manufacturing processes and volume are generally not known easily, the competitor’s cost is usually estimated on the basis of our own, or our supplier’s process and volume.

� To evaluate competitors’ purchased standard shelf items, our purchasing team can search and find catalog related items of the competitor.

� Where the competitor’s total cost is lower than ours, the team uses the various items of differences as their target for reducing the final product cost.

� Conversely, when competitor’s cost is higher than ours, the team can use the cost difference to improve or add value-adding features to our own product



Figure 25 - Basic steps of dynamic tear-down

8. Prepare Project

9. Record Time

10. Compare/Analyze

11. Complete Suggestions

12. Future Themes

13. Assign Targets

14. FOLLOW UP

1. Plan Event

2. Select Team

6. Acquire Tools and Facilities

3. Obtain Products for

Analysis

4. Prepare Disassembly

Manuals

5. Select Work Space

7. Pre-disassembly Inspection

Preparation-Specific Action

Next Model

Follow-up



Figure 4-5

Basic Steps of Cost Tear-Down

A. Plan EventA. Plan Event

B. Collect InformationB. Collect Information

C. Select TeamC. Select Team

D. Obtain Products for AnalysisD. Obtain Products for Analysis

E Preliminary InvestigationE Preliminary Investigation

F. Measure AssemblyF. Measure Assembly

G. Compare Past CostG. Compare Past Cost

H. Wrap-up Analyze, Suggest Improvement H. Wrap-up Analyze, Suggest Improvement

I. Follow UpI. Follow Up

� Plan Event 5W1H (why (purpose), who, what, where, when & how

� Market Share � Market trend� Customer Preference

� Select Team

� Obtain Products to be Analyzed

� Product Features� Sales Information� Customer Surveys

� Conduct Dynamic Tear Down or DFA

� Compare/Analyze Cost Difference

� Determine Competitive Edge� Suggest Value-Adding Improvement

Figure 26�Cost Tear- Down – Continue the 3 Ovens case study



Apply the “cost tear-down” strategy to our toaster oven example.

Brief explanation is :Figure 27A Specifications of oven toasters



Figure 27B -Features of oven toasters (contd)



Figure 31: Display layout – where tags are larger than the parts displayed, color-coded circular seals can be used for identification



Figure 33 - Stress what is important



Figure 34A - Graph comparing total assembly labor hours for oven toasters

� Review the product specification (Ref: Fig 27) for comparison & cost tear-down report for the 3 oven toasters.

� Also Ref: Fig 34A–for the graph comparing total assembly labor hours for the ovens using our in-house current manufacturing assembly cycle time and other standard data to arrive at the data



Cost Tear-Down Analysis:

� Tables 4-2A, 4-2B and 4-2C (Please refer to your handout copies of these) are the detailed breakdown of the cost tear-down analysis sheets.

� As an example, look at item 8 of the table 4-2C, which lists cost information for the tray component of the toaster.

� The tray consists of 2 parts: the bread tray and the crumb tray (where the bread crumb fall and are collected).

� Our toaster trays are purchased for $0.45 (see Row 8, column “price/set”).

� Competitor A’s tray is slightly larger than ours and extrapolation by weight percentage produces an additional $ 0.0214, making the estimated price $ 0.4714 per set.

� Competitor B’s cost is estimated in the same manner. Manufacturing methods looks similar, so the team decided that the only difference is in the cost of the material.



Cost Tear-Down Analysis (contd):

� Examining our crumb tray, note that the tray is smaller than the competitor’s as shown in table 4-2, part (Row 8).

� Competitor A has a separate piece, which is pressed and paint coated, then attached to the handle of the tray.

� Competitor B has an integrated tray and handle, but with a decorative tape of the same color as the cover affixed to the handle.

� Competitor A’s unit cost is estimated to be $ 0.47 higher than ours, which consists of $ 0.37 due to the larger size with better stamping layout, $ 0.05 for the paint coated separate handle piece estimated on the basis of our cost table, and $ 0.05 for assembling the separate piece.

� Competitor B’s cost increment over ours is estimated to be $ 0.26, which consists of $ 0.21 for the crumb tray, $ 0.03 for the tape, and $ 0.02 for applying it.



Figure 34B



Cost Tear-Down Report

� Figure 34B shows a cost tear-down report that covers the overall cost comparison,

those factors causing cost differences and suggested future actions. This report example covers the entire oven toaster.

� Products having a large number of systems, assemblies, and parts, such as a car, are divided into smaller cost tear-down assignments. A cost tear-down report is created for smaller elements and purchased parts such as headlamps and door mirrors.

� The individual reports are then collected, organized and summarized as the total

cost for the entire car. Looking at the Figure 34B, the following describes the major

topics to be addressed in creating the Cost Tear-Down report.

� Conclusion- 1: This section in the report contains the overall summary of the report. The % shown are those of our competitors’ (A & B) cost as compared with our cost. The assembly costs analyzed and determined in the Dynamic Tear-Down are included in this column.

� In the oven example, weight is not a significant value-adding characteristic. However, weight in heavy products like cars impact a number of value indicators such as performance, fuel economy, and handling, and therefore, requires special attention



Cost Tear-Down Report (contd)� Conclusion 2: Factors Causing Cost Differences: Listed in the “Factors for low” sections are the

items for which competitors’ costs are lower than ours. These items are considered possible sources for product improvement through cost reduction.

� The next section lists those competitors’ cost items that are higher than ours. This report may indicate that our design is better than the competition, or the competitor’s products have better performance.

� Conclusion 3: Actions and Requests for Future: This section indicates what actions to take now, as well as recommendations for future actions. The section is the consensus of the full Tear-Down team’s suggestions summarized on the basis of all the analyses performed up to this point in time. Don’t worry exact cost differences of + or –’s. Focus on the reasons for differences (less cost could be due to cheapening & more due to over eng

� Conclusion 4: It is not necessary to determine the absolute cost of the competitor’s product. Determine the differences in cost, focusing on the reason for those differences. There is nothing gained in evaluating items that are cost equal.

� Record any use of automation or special tooling used by the competitor to achieve a cost advantage. Determine the cost effect by analyzing the cost to produce the item in our manufacturing facility. Assume the same production volume & cost level as our own product.

� Closing Points: (guidelines when conducting static tear-down and cost analysis):

Create a relaxing environment; Encourage visitors to invite their associates & send invitations

to all people concerned. Let them see the graphs and charts to stimulate their visual senses

and contribute ideas



Evaluating VA Tear-Down Results to determine customers’ value

Section V

� Evaluating VA Tear-Down Results

The customer determines the

True / Total value – Willing to pay for them

Two Measurement Methods:

� Forced Decision (FD system)

� Decision Alternative Ratio Evaluation (DARE system)



Evaluation: Results/ Competitive Analysis-Continue 3 ovens study

Evaluating VA Tear-Down Results:

� The VA Tear-Down method compares our products with our competitors’ products, focusing on differences relating to cost and functions both for product components and for the entire product.

� The purpose of VA Tear-Down is to uncover competitor advantages, develop ideas to eliminate such advantages, and surge ahead of the competition.

� Even if the VA tear down team isolates the reasons for higher cost than the competition and takes actions to correct the problem, the steps do not assure that the competitive disadvantage has been resolved. The competition likely will be doing the same thing!! It is a race against time & who can do better & faster!

� The customer ultimately determines the product value, functions and cost that he or she is willing to pay. There are two methods to capture this specific voice of the customers (VOC)

1.Forced Decision (FD) Method

2. Decision Alternative Ratio Evaluation (DARE) System Method

Let us examine closely how these two factors reflect the voice of customers




� The Customer Determines Value:

� The customer determines value of our products and the cost Tear-Down help determine whether or not we are competitive in the marketplace.

� Also, customers are not interested in products, if they are less expensive, but functionally inferior to competitor’s offerings, or if they lack features.

� The same is true if the cost is more and doesn’t achieve the proper balance of function and cost in the eyes of the customer, not the manufacturer. Customers evaluate a product by its final value as:

FunctionValue = ---------------------

Cost




� In addition to the above, there are many other aspects and characteristics that determine the value of product competitiveness.

� We need to incorporate them in our NPD, if we have to succeed creatively against tough competition.

� To do this, a priority ranking of those specific characteristics must be established, one that will offer the customer those high-value functions as a trade-off for those of lesser value.

� If the priority for each item can be assessed and quantified forcomparison, functions can be objectively measured.

� Let us now review a proven method for rating the priority for each function, and then expressing that priority numerically, to come up with balanced strategy




� Weighting Each Evaluation Element (Select items –competitiveness can be compared)

� In addition to cost & functions, ask the question-“What do the customers want?

� What about the product that attracts customers? How much are customers willing to pay for the functions and features of a product?

� What superior product characteristics will motivate them to purchase a product?

� Therefore, a priority ranking of those characteristics must be established, one that will offer the customer those high-value functions as a trade-off for those of lesser value.

� A method for rating the priority for each function, and then expressing that priority numerically, is now introduced below.



Measurement Methods:

Forced Decision (FD) Method: (Ref to Fig 35 for the details)

� In this evaluation, items are compared in pairs as in a league tournament. See Fig 35 Of the pair, the one item felt to have the greater value to the customer is given the score of 1 and the other given 0.

� Refer to the oven example, when appearance and projected area (the overall foot print of the base) are compared as to which is the greater customer value, appearance is judged by the evaluators to be the more important value of the two and is scored 1 and the projected area, therefore, receives a score of 0.

� Next, appearance and switch operations are compared. Here, the switch operations are judged to have greater value (scored 1) than the appearance (scored 0).

� When all the pairs have been compared, the total scores given to each of the items are summed in the total column. Priority is given to each item according to its total points, as shown in the column titled Ranking.



Measurement Methods (continued):

� Whether switch operations has a greater customer value than appearance could be debated. When assessing the switch on an oven, switch operations was judged to be more valuable to the customer. However, a paired comparison of a wall switch would find that appearance has more value to the customer that switch operations.

� Reason for this is that a wall switch is simple to operate, a stand-alone item and part of the room decoration. Oven switch is more complex, setting the heat range etc and the switch appearance is actually a small part of the overall appearance of the oven itself.

� Although appearance is valued higher than switch operations in making a buy decision the customer will return the toaster oven if the operation of the switch is too complex.

� Judging customer value must consider the specific environment of the functions being evaluated, rather than generalize the customer value preferences.



Measurement Methods (continued):

Decision Alternative Ratio Evaluation (DARE) System: (Ref Fig 36 for details):

� Using the FD (Forced Decision) method, the priority of each function to be compared is done and determined by anticipating which of the two in a pair functions the customer would select. However, the importance of each function also needs to be determined.

� Simply because two items are close to each other in priority ranking does not indicate that they are almost equal in importance. DARE is the method to quantify the degree of importance.

� It is difficult to evaluate how important a function is in relation to all other functions. But, once the priorities have been determined by the FD method, it is relatively easy to compare the importance of two items that are next to each other in priority.

� Beginning with the item highest in priority ranking, determine how much more important that item is than the item that is directly below in priority ranking. The item lower in priority is given the factor 1, & the higher priority item, a number higher than 1.



Figure 35

FD – Analysis of Toaster Oven Functions

COMPARATIVE EVALUATION

FUNCTION DESCRIPTION A B C D E F G H I J

TO

TA

L

RA

NK

A Appearance 1 0 0 1 1 1 1 0 1 6 4

B Project Area 0 0 0 1 1 1 1 0 1 5 5

C Switch Operations 1 1 1 1 1 1 1 1 1 9 1

D Food Placement/ Retrieve Ease

1 1 0 1 1 1 1 1 1 8 2

E Control Panel Visibility 0 0 0 0 1 0 1 0 1 3 7

F Caution Labels 0 0 0 0 0 0 0 0 0 0 10

G Cleaning Ease 0 0 0 0 1 1 1 0 1 4 6

H Crumb Removal 0 0 0 0 0 1 1 0 1 2 8

I Cooking Area 1 1 0 0 1 1 1 1 1 7 3

J Cord Length 0 0 0 0 0 1 0 0 0 1 9

Date_________ TEAM____________



Figure 36

DARE Analysis of Toaster Oven Functions

Functional Description

J K W

1 Switch

Operations 1.2 1.2 8.2 20.7

2 Food Placement /Retrieve Ease

1 1.2 1.2 6.8 17.2

3 Cooking Area 1 1.1 1.1 5.7 14.4

4 Appearance 1 1.1 1.1 5.2 13.1

5 Projected Area 1 1.3 1.3 4.7 11.9

6 Cleaning Ease 1 2.0 2.0 3.6 9.1

7 Control Panel

Visibility 1 1.2 1.2 1.8 4.5

8 Crumb Removal 1 1.4 1.4 1.5 3.8

9 Cord Length 1 1.1 1.1 1.1 2.8

10 Caution Labels 1 1.0 1.0 2.5

Total

39.6 100

DATE_________ TEAM___________



Decision Alternative Ratio Evaluation (DARE) System (continued):

� Returning to the oven example (Fig 36), we see that switch operations is 1.2 times more important than food placement / retrieve. This value is entered in column J.

� The process is repeated for all the prioritized functions as shown in the figure. The value of J is subjective. They are the result of team discussing the comparative value of the functions compared to the lowered value function.

� As an example, the FD determined that cord length was more important than caution labels, but by how much? Starting with the lowest value, the team decided that cord length was 1.1 times more important than caution labels.

� Next, the team discussed the relative importance or degree of separation between crumb removals over cord length.

� The team decided crumb removal was 1.4 times more important than cord length. The team continued with their assessment for all.



Decision Alternative Ratio Evaluation (DARE) System (continued):

� Once all pairs have been compared, the degree of importance for all the function items are converted into values calculated on the basis of 1.0, the lowest valued attribute.

� The ratio of importance is calculated & entered in column K. For example (Fig 36), (caution labels / cord length) X (crumb removals / caution Labels) will be: = 1.1 X 1.4 = 1.5 (1.54 rounded off).

� Multiplying (1.1 X 1.4) X 1.2 = 1.8, is the K value of control panel visibility over the two preceding functions. Continuing with the calculations in column K, the degree of importance for Ease of cleaning is 3.6 and Appearance is 5.2 when compared with all the other items.

� Let us convert the absolute values of degree of importance from column K to percent. In this case 100% is given to column W to the absolute value total of 39.6 from column K.

� By converting the data to %, the values are normalized and will relate to any product example using the DARE method. The values calculated this way the Degree of Importance Factors: these can be applied to many areas including cost distribution.



Paired Comparison: (Refer to Fig 37 for the details)

� The Paired Comparison combines the FD and DARE processes in one continuous step. Paired comparison is a simpler alternate method to the FD and DARE processes. Either FD or DARE together or Paired Comparison can be used at this point in the evaluation, depending on the evaluating team’s preference.

� Referring to the Fig 37, the ten function descriptions are alphabetically listed. As in the FD method, the functions are evaluated in pairs to determine the valued preference of the pair

� For example, comparing appearance to projected area, the team selected A (appearance) The team was asked: “By what degree of importance is function A better than function B?” The team has 3 choices (see Choice Factors).

� If the team found it difficult to choose between A & B in determining which function was better, the team would select choice factor 1. If, after some debate, the team agreed that Appearance was better, the choice factor would be 2.

� If the team selected Appearance after a short discussion, if any, the choice factor would be 3. In this example, the team selected choice factor 3, which appears in the first square as A3.



B C D E F G H I J Description Score Rank Percent

A3 C2 A1 A2 A2 A1 A2 I2 A3 A Appearance 14 4 13.9

B C2 D3 B3 B3 B1 B1 I3 B2 B Projected 11 5 10.9

C C2 C1 C3 C2 C2 C2 C3 C Switch Operations 19 1 18.8

D D3 D3 D2 D2 D1 D3 D Food Placement /Retrieve Ease 17 2 16.8

E E3 G2 E3 I1 E2 E Control Panel Viability 8 7 7.9

F G3 H3 I3 J2 F Caution Labels 0 10 0

G G3 I3 G3 G Cleaning Ease 10 6 9.9

Choice Factor H I1 H2 H Crumb Removal 5 8 5

1. Low - Hard Choice I I3 I Cooking Area 15 3 14.9

2. Medium - Fair Choice J J Cord length 2 9 2

3. High - Clear Choice Total 101 ~100

Paired Comparison

Figure 37



Paired Comparison: (Refer to Fig 37 for the details) - Continued

� Comparing function A to function C (switch operations) C was chosen with a choice factor of 2 (see Cell C2). After appearance has been evaluated against other functions, projected area (B) is compared in a like manner.

� The paired comparison scores are totaled and normalized in the % column. The rank column places the functions in descending order of importance, based on the function’s score.

� The % column in Fig 37 corresponds to “column W” in the DARE analysis - Fig 36. Differences in the values are the result of differences in approaches. You will note that the important relationships are the same –between FD, DARE and Paired Comparison methods

� VA Tear-Down team members are encouraged to select and modify the FD, DARE, and Paired Comparison processes to suit the purpose and products selected for evaluation.

� A modification for the Paired Comparison method is to expand the choice of factors from 3 degrees of importance to 5. This will result in a greater degree of separation in the relative importance of the functions. It would not, however, change the function ranking.



Competitiveness Analysis:

� We have so far stressed the importance of each function offered by a product. It is equally important to determine how well these functions perform when compared to competition’s products. To make this comparison, team members evaluate each function on a scale from 0 (worst) to 10 (best), with 5 representing the standard, and then calculating the average values.

� The evaluation must be made as objectively as possible from the standpoint of the product’s consumers. Exclude people who were involved in the creation of the product for obvious reasons. Representatives of actual purchasers and users can judge the value of the functions offered, their relative goodness, and their willingness to buy the product

� Although the values for individual function items are known, they are not, equal in importance and cannot be simply summed up. The rating by each evaluator is multiplied by the degree of importance (see column W) in Fig 36 to obtain the function point for that item.

� Then the ratings by all the evaluators are summed up as an average score for that function. The numerical score does not indicate an absolute value. When compared to the competitor’s score for the same function, however, the score indicates the relative ranking of the products being compared.

� (Refer to Fig 38 for the details)



Fig 38 Toaster oven competitiveness comparison chart



Competitiveness Comparison Chart: - (Refer to Fig 38 for the details)

� Refer to the Fig 38 here of the oven example, the rating given to appearance for competitor A toaster is 8 (the average of the evaluator’s score) and the degree of importance factor is 13.1 (see Fig 36, column W). Therefore, its function point is 105 (8X13.1). Similarly, the function points are calculated for all function items. The total of the function points is 676 for oven A, 709 for our oven and 688 for B.

� In addition to the total function points, it is also important to compare the points for each function. Comparison by function makes it possible to determine the function for which our product lags the competitors, that function’s importance, and the priority of the effort to catch up with or exceed the competitors.

� All people concerned can easily share the analysis and the status as well as what has to be done. The chart shown in Fig 38, also helps develop sales strategies. For example, our product does not necessarily have to prevail over all others in every one of the function categories. This is not necessary. The challenge is to intelligently “optimize” it!

� By developing superiority in functions highly valued by customers, we can advertise and promote these functions to gain market share. Information displayed in Fig 37 & Fig 38and similar charts added to the parts display in Static Tear-Down, helps assure beneficial results of the tear-down process.



Value Evaluation:

� Even if our product scored superior to its competitors, the issue remains: Is the customer willing to pay for those functions?

� The value equation (value = function / cost) is used in Value Analysis to measure value. The cost part of the equation has been determined previously in the cost tear-down (ref to fig 34B). Competitor A’s cost index is 98.4 and B’s index is 85.6, with our cost set at 100.

� The value (function relative to cost) can be calculated with the total of the function points divided by each of these indices.

� The resultant values are used to assess the value of our product in relation to competitor’s products.

Function� We know the relationship that Value = --------------

Cost� The values of 3 ovens calculated by means of this equation are shown in Fig 39:



TOASTER OVEN PRICE COMPARISON - Figure 39

Calculated on theoretical Cost

Cost %

Function Point

Values

Product A 98.4 676

Ours 100 709

Product B 95.6 688

709 divided by 100 = 7.1

676 divided by 98.4 = 6.9

688 div by 95.6 = 8.0



Value Evaluation:

� The same figure is shown at the bottom of Fig 38. The value of competitor B’s oven is calculated by dividing the total of function points (688) by its cost index (85.6) to get a value of 8.0.

� This indicates that it is 12.7% better in value than ours, which has a value of 7.1. The value of competitor A’s oven, determined in the same way is 6.9, which indicates it is slightly lower in cost but its low function point detracts from the advantage of the lower cost.

� Our oven is in the middle in terms of value.

� The same relationship can be applied by substituting Price for Cost. This is a more valid Value approach because the customer doesn’t care about the cost but the price he or she must pay for the product.



Calculated basis on Market price - Figure 40

Market Price

(a)

Function Point (b)

Value (b/a X 100)s

Product A $36.80 676

Ours $40.80 709

Product B $38.40 688

18.4

17.4

17.9



Value Evaluation:

� In fig 40, the function points for our product, 709, are divided by $ 40.80, which is the actual retail price rather than our suggested retail price of $ 56.00. The result is its market value index 17.4. Likewise, competitor A’s oven is sold at $ 36.80 (suggested retail price is $ 44.00) Therefore, its market value index is 18.4 (676 divided by 36.8).

� Competitor B’s oven, retailed at $ 38.40, suggested price of $ 52.00, the market value index of 17.9 (688 divided by 38.4), or 103% of ours.

� In today’s market, most consumer goods and hard products are sold at a discount against the manufacturer’s suggested retail prices, designed to increase the customer’s sense of value because with identical functions, a discount usually increases the customer’s value perception.

� Of the 3 ovens, customers are most likely to find competitor A the best value on the market in overall evaluation. Sometimes, people sense that the discount is being offered as a prelude to announcing a newer, better product, then the discount strategy may fail and backfire!



Section VI

WCNPD – Target Costing

The Next Frontier in Strategic Cost Management

� Foundations of Target Costing:

� The Target Costing Process:

� From Allowable to Achievable Target Cost:

� Incorporating Customer Input in Target Costing:

� Target Costing – A detailed illustration of case study # 3– Coffee Maker Example (Brew Master)



Foundations of Target Costing:

� Since profits are our primary goal, it seems reasonable that we should start by determining a desired profit margin. Remember this:

� “If you don’t know where the Target is, you can’t hit a Bull’s eye!”

� In other words, what is our planned target margin, which should be decided with care. A good rule of thumb (approximate projection) to use is that the target margin should be slightly (perhaps 5%) higher than your firm’s current average gross margin.

� This provides you with some protection against some cost growth during development, and ensures that you will at least maintain your current level of profitability.

� Obviously, if we have somehow found a pot of gold product, that can far exceed our average gross margins, we should go it.



Foundations of Target Costing (Continued):

� The purpose and foundation of a target margin (for the purpose of Target Costing) is to establish a minimum threshold, below which a new product can never go without risk of cancellation.

� Target Cost = Projected Price – Target (Desired) Margin

� Note! You should never do the above calculation the other way:

� Price = Cost + Desired Margin. Why? Because you don’t control the price!

� The marketplace is the final arbiter of product price, although your should try to maximize your profitability.

� If the target cost cannot be met, and if there can be no recovery, the project should be cancelled. This decision process is shown below.



Target Cost – Decision Process Flow Figure 41

Set New Target Cost

Change Functionality

?

Strategic Product?

Target Cost Achievable?

Change Market Price?

Cancel Project and Reassign Resources

Launch Product

Accept Target Cost

Waiver or Set New Target Cost

Accept TargetCost

Yes

Yes

Yes

Yes

No

No

No

No



The Target Costing Process (ref to Fig 41 details)

� Target costing, by nature, is a strategic process.

� It has two major phases and requires the support of many other key organizational processes.

� We will review a step by step description of the sub processes, inputs, outputs, tools, and participants involved in development of the target costing process.

� Let us review five key messages that are critical to this process strategy.



The Target Costing Process - KEY MESSAGES:

� Target costing takes place within the strategic planning and product development cycles of a firm. Product design goes through this development cycle in a recursive, rather than linear, fashion.

� The first phase of target costing is the establishment phase. The focus here is on defining a product concept and setting allowable cost targets for products or a family of products.

� The second phase of target costing is the attainment phase. This phase transforms the allowable target costs into achievable target costs.

� The establishment and attainment phases of target costing occur at different points in the product development cycle. Different organizational processes play primary and secondary roles in these two phases.

� Target costing is supported by many other business processes.

� The success of target costing depends on these other processes being performed effectively within an organization.



THE CONTEXT OF TARGET COSTING

� Target costing is intimately linked to an organization’s competitive strategy and its product development cycle.

� Competitive strategy defines the goals that an organization must attain to satisfy market demands and remain profitable.

� Target costing provides the means by which the organization achieves these goals. It does so by integrating the strategic variable of market trends, customer needs, technology advances, and quality requirements into a product definition that meets a customer’s price, quality, and time expectations.

� Target costing is the simultaneous planning of how to satisfy customers, capture market share, generate profits, and plan and manage costs.



The Context of Target Costing (Continued)

� Without a target costing system, meeting competitive prices and generating acceptable returns on a consistent basis is difficult, if not impossible, in today’s environment.

� The product development cycle provides the other context for target costing. Target costing manages costs at the design stage when costs are being committed.

� The opportunity to use design as a vehicle for cost management typically applies only to new products. This is why target costing and new product development are intimately linked.

� While target costing can be used for existing products, this is possible only if these products or their manufacturing processes are being radically redesigned.



The typical product development cycle has four stages:

� 1. Product Strategy and Profit Planning

� 2.Product Concept and Feasibility

� 3. Product Design and Development

� 4. Production and Logistics



1 Product Strategy and Profit Planning:

� The product development cycle starts with enterprise level strategic planning. The result is a business, product, and profit plan that spells out the particular market segments a firm intends to sell in and the products it intends to produce for this chosen niche.

� The plans typically spell out the planned market shares and required profit margins from the various products.

2 Product Concept and Feasibility.

� The next step in the product development cycle is to translate product and profit plans into specific product concepts. Product concepts are developed using customer input and competitive intelligence.

� Product feasibility is determined by making preliminary life cycle cost estimates, evaluating the technology needed, computing the required investment, and estimating the available capacity.



� Product Design and Development and Production and Logistics

3 Product Design and Development

� Once a product concept is accepted and its feasibility tested, it goes into full-fledged design and development.

� Detailed specifications for manufacture and assembly are developed at this step. Manufacturing processes are concurrently designed and suppliers are called in to provide design & process improvement ideas

4 Production and Logistics

� The start of full-fledged production and distribution marks the culmination of the product development cycle.

� Service and support plans are activated. Market results and customer responses are monitored to provide information for continuous improvement or redesign of the existing or next generation products.



The Organizational Context of Target Costing Figure 42

The Organizational Context of Target Costing Exhibit 3-1

Market Research

Product Development Cycle

Competitive strategy

Product strategy and plans

Product concept and feasibility

Competitive intelligence

Production and logistics

Product design and development

Target Costing



The Organizational Context of Target Costing:

� The Figure 42 locates the target costing process within the twin contexts of competitive strategy and the new product development cycle is shown in the above figure.

� It shows that competitive strategy is the product of research on customers and competition. This research also is used for product planning, which gives a concrete shape to a firm’s competitive strategy.

� Product planning is the first step in the product development cycle.

� Target costing plays a key role during the product planning, concept, and design stages of this cycle.

� Once production begins, target costing assumes a backseat and continuous improvement (also referred to as kaizen costing) takes over the cost management role.



The Organizational Context of Target Costing (contd):

� The Figure 42 also depicts competitive strategy and product development cycles as sequential processes.

� A product, however, does not necessarily go through these steps sequentially. Products with longer development periods may go through iterations of this cycle numerous times.

� A strategy based on a particular market and technology may start the product development cycle.

� Markets and technologies, however, are dynamic and may change before a design is final.

� With new market conditions and technologies, a product may have to be recycled through the concept and feasibility steps.



Phases in the Target Costing Process

� Target costing occurs in two phases that correspond, roughly, to the first and second halves of the product development cycle.

� We call them the establishment phase and the attainment phase of target costing.

� The establishment phase occurs during product planning and concept development stages of the product development cycle and involves setting a target cost.

� The attainment phase occurs during the design development and production stages of target costing and involves achieving that target cost.

� The two phases of the target costing process in relation to the product development cycle are shown in Figure 43 below:



Product strategy and point plans

Product concept and feasibility

Product design and developmen

t

Production and Logistics

Establishing Target Cost

Attaining Target Cost

Target costing and product Development CycleFigure 43

Figure 43Figure 43



Establishing Target Costs

� Target costs are established within the parameters defined by a firm’s product strategy and long-term profit plans. These plans specify the markets, customers, and products that a firm intends to develop.

� New products can be developed by applying new technology or combining existing technologies.

� The original fax machine is an example of a product created from the application of new technology. Products that combine a fax machine, printer, copier, and a scanner in one box are examples of new products created by combining existing technologies.

� Products aimed at specific markets or customers are tested for feasibility and then allowable target costs are set for feasible products.

� Figure 44 provides an overview of how this allowable target cost is established.



Seven Major Activities Occur – Target Costing

� As shown in Fig 44, seven major activities occur in establishing target costs.

They are:

� Provide Market Research

� Perform Competitive Analysis

� Determination of Customer or Market Niche

� Understanding & Developing Customer Requirements

� Defining Specific Product Features

� Establishing An Acceptable (to customers) Market Price

� Required Profit Target (a product must yield)

� We will examine these activities more in details and reference Fig 44 for this purpose



Market research

Define product/ Customer niche

Understand customer requirements

Define product features

Market price

Required profit

Target cost

Competitive analysis

The Establishment Phase of Target CostingThe Establishment Phase of Target Costing

Figure 44Figure 44



� Seven major activities that occur in establishing Target Costs

� Market research

� Competitive analysis

� Customer or market niche

� Customer requirements

� Product features

� Market price

� Required profit



Market research, Competitive analysis and Customer or market niche

� Market research provides information about the unrecognized needs and wants or customers. The research is used to define the market or product niche a company plans to exploit.

� Typically, a market niche is a broad definition of a class of customers such as “health conscious eaters” or “computer power users.”

� Competitive analysis determines what competitors’ products are currently available to the target customers, how the customers evaluate these other products, and how competitors might react to our company’s new product introductions.

� Customer or market niche determination involves analyzing market and competitor information to decide what particular customer segment to target.

� A customer or market niche is a more specific definition of customers, such as “young, upwardly mobile professional, two-income families between the ages 30 and 45.”



Customer requirements, Product features,Market price And Required profit

� Customer requirements involve specific product-related information from customers. The initial product concept is used for determining preliminary requirements.

� Continuous input from customers is solicited, and the product design is refined until it meets their requirements.

� Product features involves setting specific requirements about the features a product will have and the levels of performance of each feature. The latter captures traditional quality variables such as reliability, dependability, and frequency and ease of repair.

� Market price establishes a price that is acceptable to customers and capable of withstanding competition. Market prices can be established in many different ways, which will be discussed in the next chapter.

� Required profit target is the profit a product must yield. It is typically expressed as return on sales (ROS) ratio. This ROS must take into account the long-term profit plans and the financial return on assets (ROA) a company must earn in its industry.



From Allowable to Achievable Target Cost:ATTAINING TARGET COSTS

� While the establishment phase focuses on macro planning processes, the attainment phase deals with technical cost planning and engineering needed to attain target costs.

� This phase focuses on how to make the allowable target cost achievable.

� Activities designed to attain target costs occur primarily during a product’s concept development, feasibility testing, and design development stages.

� All three stages precede the release of a product design for manufacturing. Once a design has been released, the focus of cost reduction shifts to continuous improvement efforts.



Attaining target costs is a Four step process:

� 1. Compute cost gap.

� 2. Design costs out of a product.

� 3. Make sure that the Target Cost achieved prior to releasing the design for production –using the Value Engineering Strategies to bridge the cost gap.

� 4. Release the final design for manufacturing and perform continuous improvement.

These Four steps are shown in Figure 45:



Compute Cost Gap Produce

Initial Cost

Estimate

Compare to Target

cost

Perform value

Engineering

Design Products process

Estimate achievable cost

Perform Cost

Analysis

Release design to Production

Undertake continuous improvement

Actual Cost

Design Cost Out

Figure 45Figure 45



Computing the gap

� Computing between the allowable cost and the current cost is the first step in attaining target costs.

� Note that this is total product costs and not just manufacturing cost.

� The current cost is the initial “as-is” estimate of the cost of producing a product based on current cost factors or models. The overall gap between allowable and current cost must be decomposed by life cycle and value chain.

� A life cycle decomposition assigns total product cost into birth to death categories of research, manufacturing, distribution, service, general support, and disposal.

� Value chain analysis breaks down the cost by whether it is incurred by the firm or one of its value chain members such as suppliers, dealers, or recyclers.



Designing costs out

� Designing costs out is the most critical step in attaining target costs.

� The key to cost reduction is to ask one simple question: How does the design of this product affect all costs associated with the product from its inception to its final disposal? To include all costs, and not just manufacturing costs, may appear farfetched at first.

� However, many “downstream” costs such as distribution, selling, service, warehousing, support, maintenance, and recycling can be greatly affected by product design.

� Consider a product such as a convection oven. The weight of the oven and the complexity of its control panel are two elements affected by design.

� The design of these elements, in turn, affects both manufacturing and other downstream costs. A heavy machine will increase loading, transportation and installation costs -2 men instead of 1 be needed to handle the machine

� A complex electronic control panel will increase the time salespeople may have to devote explaining to customers how the oven works.



Designing costs out (continued):

� It may also increase product support and repair costs as electronic components may fail more rapidly than mechanical components.

� Finally, the material used to manufacture and give it the extra weight may result in a significant disposal cost. All these factors add to a product’s life cycle cost. Many of these costs can be reduced if they are anticipated and explicitly considered by product and process designers.

� Cost reduction through design requires recursive problem solving using four key activities: product design, cost (and value) analysis, value engineering, and cost estimation. The activities recur until the product design goes from an initial concept to a design ready for manufacturing. A design is released for manufacturing only when a product’s projected actual cost is equal to its allowable target cost.

� This recursive problem solving is a characteristic of target costing. Its purpose is to generate cost effective designs. Unlike traditional cost management, recursion avoids later manufacturing problems by eliminating the need to correct design errors after manufacturing starts.



Production

� Production and continuous improvement represent the last stage in attaining target costs. These activities focus on product and process improvements that reduce costs beyond that possible through design alone.

� This stage includes steps such as eliminating waste, improving production yields (such as getting more production from raw materials), and other efficiency enhancing measures.

� Japanese refer to this as kaizen costing. In the U.S. it is value analysis,others call it as continuous improvement.

� It is after production starts that actual costs can be compared against targets and lessons learned are used for the next generation of products developed



SUMMARY – Allowable & Attainment Phase of Target Costing

� Target costing occurs in two phases

� An establishment phase that sets an allowable cost target

� An attainment phase that makes the allowable cost achievable.

� These phases occur within the four-stage new product development cycle. New products offer the best opportunity for target costing, because 70-90% of all costs are typically committed at the development stage of a product.

� This does not mean that existing products cannot benefit from target costing – they can. The benefits, however, are limited to the extent that design options have been locked in.



Incorporating Customer Input in Target Costing

� This is a quick overview of how to incorporate the voice of the customers in the target costing process. There are 5 key messages that we will examine:

� Target cost systems are market driven. They must incorporate customer’s wants, desires and needs

� Customer input is used in all four stages of the product development cycle

� All customer levels, intermediate and ultimate, must have a voice in the target costing process.

� Customer focused firms have several common traits. These firms use stat of the market technology. Conduct open-minded inquiry in customer needs, wants complaints.



Incorporating Customer Input in Target Costing (continued)

� Systematically distribute customer & market information throughout the organization. Whenever appropriate, share information through teams

� Make underlying assumptions about data collection methods explicit

� Challenge all assertions or assumptions about customer needs

� Many other data collection and analysis techniques are available.

� The technique used should be tailored to fit a firm’s needs and used only after considering benefits and shortcomings



Value to the customer:

� If a company truly understands what is valued by customers, designers may add features that add cost without significantly adding value in the customers’ eye. So what does value to the customer really mean?.

� Value is the difference between the benefits received and the cost incurred by the customers in getting those benefits. Benefits received include each customer’s selective perception and opinion of the utility derived from physical and aesthetic attributes of a product and the way the product fits his or her needs and demands.

� For example, the attributes of a car include both the physical features of the product (weight, size, power) and its aesthetic properties (sexy, youthful, fun to drive). The costs include the price paid and related immediate outlays for transportation, installation or training as well as life cycle costs such as maintenance, repairs, and disposition.

� Another element of the cost is the risk associated with life cycle cost. In general, products with longer lives have greater risk and therefore higher perceived costs. Figure 46 shows the two dimensions of customer value



Dimensions of Customer Value Figure 46

Benefits received (Physical/Aesthetic)

Costs (Price + Life Cycle+ Risk)

CustomerValue



What does Really Customer Focus Mean?

� Every organization claims to be customer focused. How does an organization that is truly listening to its customers behave? Learning what the customers want is difficult. It involves more than just taking information.

� The process of monitoring the VOC includes asking the right type of questions, absorbing the answers into a proper mental model of the market, communicating that information to the other members of the organization and management team, and then acting on it.

� As this process becomes refined, management broadly shares market information as well as perceptions of what the customer thinks of its products against those offered by the competition.

� A market focused company exhibits the following strategic traits to be a market leader in truly understanding and staying Customer Focus in new product development.



� What does Really Customer Focus Mean?� Uses state of the market technology in products, because customers want it

� Conduct open-minded inquiries (complaints / requests from all feasible sources)

� Make customer & market information available throughout the organization

� Shares all the information through teams (both cross-functional and global)

� Challenges all assumptions; Lively, open & frequent debates and interactions

� Makes underlying data assumption explicit so it can be scrutinized and challenged

� A market driven and focused organization that acquires the above traits is well geared to learning what it needs to know for target costing. Fig 47 below explains this in some details.

� These traits help to build an organization’s base of experience. This base, in turn, creates the foundation for faster and more rapid organizational learning about customer needs and for becoming market focused.

� Both are essential for making intelligent trade-offs in the target costing process.



Traits for Organizational Learning from CustomersFigure 47

Firm’s base of experience

Organization Learning for Target Costing

Share Information

through teams

Make Information accessible

Make data collection assumptions explicit

Challenge all assumptions

Use state of the market technology Inquire

about customer needs



Major Components of Brew Masters Coffee Maker - Figure 54



Beginning Steps in Establishment Target CostFigure 48

Market research




Market Price

Required profit

Target cost




� Target Costing – A Detailed Illustration Brew Master Coffeemaker

� We have reviewed target costing’s structure, tools and processes and will now move on to study an illustration of a case study in detail.

� Our purpose here is to provide an integrating framework to understand as to how this process works to systematically arrive at the Target Cost that we need for the New Product Development strategy.

� Establishing Target Costs:

� To establish a target cost (which is the first phase of the strategy) requires conducting market research, performing a competitive analysis, and defining a market niche. This overview is shown graphically in Fig 48.

� Background of the case study: Brew Master is a manufacturer of small kitchen appliances such as toaster, coffeemakers, grinders, blenders, juicers and so on. Competition is tough with major brands like- Mr. Coffee, Braun, Krupps, Sharp and Toshiba.

� The company is looking for market opportunities to exploit in their various products, One such product is their coffeemaker line. Brew Master makes conventional drip coffee maker and an espresso / cappuccino maker. How can the company apply the target costing process to its coffeemaker line?



� Beginning Steps in Establishing Target Costs:� Fig 48 -shows the first phase for establishing Target Costs The company is looking

for developing a New Product of an upscale (top of the line) coffeemaker line. Assume their market research and analysis discovers an upwardly mobile college educated consumer group who is interest in more “gourmet” type of food at home.

� The company’s further research results in the discovery of a “home gourmet”market niche of a coffeemaker line that provides “espresso” quality coffee, but is not as complex and time consuming to operate. There is little competition in this market segment

� Brew Master must form a cross-functional team to come up with an initial product concept and test its feasibility. Team proposal is for an initial product concept that combines a coffee grinder and a drip system into a single coffeemaker.

� The new design will grind fresh coffee beans and push extremely hot water through the grinder basket to make a coffee that smells and tastes more like espresso.

� Assume the design is technically and financially feasible and the company’s product team want to proceed to the next steps to understand customer requirements & define product functions and features, as shown in Fig 49



� The 8 Steps Process – Achieving Target Costs� Step 1 – Establishing Target Costs

� Step 2 – Define Product / Customer niche

� Step 3 – Competitive Analysis

� Step 4 – Understand Customer Requirements

� Step 5 – Define Product Features

� Step 6 – Required Profit Margins

� Step 7 – Set Market Selling Price

� Step 8 – Achieve the Target Costs



Market research




Market Price

Required profit

Target cost


Next Steps in Establishment Target CostNext Steps in Establishment Target CostFigure 49Figure 49



� Next Steps in Establishing Target Costs:

� Based on market research of coffee drinking consumers’ focus groups, Brew Master has identified 8 features & functions: -classified as- Must haves, Should haves and Could haves.

� You may recall that we have discussed the importance of the above 3 customer attributes earlier in our discussion to help prioritize and optimize product functions. We are applying this concept now in our strategy for establishing the Target Cost for the coffee maker

1. Coffee taste and smells like espresso

2. The unit is easy to take apart and clean

3. It has a six + cup capacity

4. Coffeemaker looks real sharp, upscale and nice in appearance

5. It has a clock timer to start automatically at a designated time

6. It performs well with different grinds of coffee beans

7. It keeps the coffee warm after making it at a best serving temperature

8. It automatically shuts off the unit after a designated time period.



� Final Steps in Establishing Target Costs� These customer requirements (converting customer needs /wants into functions

and into design requirements) become the basis for the engineering design and specification of the coffeemaker. (Recall example of cell phone reviewed before)

� The product team now must convert this customer input into more precise and focused product definitions, specifications for meeting customer satisfaction

� Example of this product definition will include specific items like: eight cup coffee carafe, grinder size, blade rotation speeds, size and shape of the coffeemaker, the heating unit, size, the water heater specifications, & so on. We will have a hands-on workshop exercise to practice all the above concepts

� A product definition is typically in the form of a blueprint, a computer designed drawing or model or an actual scale model.

� The last two steps in establishing the target cost for the proposed coffee maker are to set price and profit margin, as shown in Fig 50.



� Final Steps in Establishing Target Costs (contd)

� Market research shows that the market price for an 8 cup drip coffeemaker with a clock timer is currently $ 69. A stand-alone coffee grinder sells for $ 15. Since the two features are combined, and the coffee taste is being enhanced, Brew Master can charge a price slightly higher than $ 84. Given its desire to capture 20% market share, assume that Brew Master can set the target price at $ 100

� Please Note! To keep the example simple, multiyear cost planning is not introduced –Clearly the price projection will normally have to be over the life of this product and it will be a declining price, since competitors are likely to introduce their own new products. Cost reduction therefore will be more important over time for this product than at its introduction

� The final step in the target costing process is to establish a target profit margin by determining the desired return (typically 7 – 10% in the small appliance industries) for the coffeemaker. The company wants 10% target margin.

� The target cost for this new coffeemaker, therefore is $ 90 (100 – 10), also is called the “allowable cost” for the product. We will now focus our efforts to move from the allowable to the Achievable Cost of the coffee maker product



Market research




Market Price

Required profit

Target cost


Final Steps in Establishment Target CostFinal Steps in Establishment Target CostFigure 50Figure 50



� Attaining Target Cost (4 Steps are shown in the Fig 51)

The second phase of the target costing addresses the challenge as to how to attain the final $ 90 target cost?-How do we turn this allowable cost into an achievable cost?- Four systematic steps are involved:- in attaining this final target cost goal.

1. Compute exactly the cost gap as accurately as possible2. Design cost out of the product before releasing the design for

manufacture3. Perform continuous improvement using the Value Engineering

Process. 4. Release the final design to product; Continue cost take-out efforts

(Kaizen)

� 1. Computing exactly the Cost Gap:

� Allowable (target) cost $ 90, is the total cost and not just the manufacturing cost. Let us pay close attention to the next statement here. The current cost is the initial “as-is” estimate of the cost of producing the coffeemaker based on current cost factors or models.

� The gap between the allowable & current costs must be decomposed (refined & updated correctly) by life cycle and value chain, which assigns total product cost into birth to death categories of R/D, manufacturing, distribution, service, general support and disposal etc.

� A value chain decomposition breaks down the costs if incurred by Brew Master or by one of its value chain members such as suppliers, dealers, or disposers provides an assumed breakdown of the allowable and current costs by life-cycle and value chain for Brew Master coffeemaker.



� Computing the Cost Gap ..continued

� How did the company arrive at these cost breakdowns? The breakdown of allowable costs by life cycle typically requires estimating the costs to be incurred on R&D, manufacturing, marketing, distribution, repairs, warranty and other support, and disposition costs at the end of the product’s life.

� The value chain requires estimating the costs incurred within a firm and those by its suppliers, dealers and recyclers. Past historical average can be used as an initial estimate for these costs. For Brew Master, past experience shows, manufacturing costs typically are 41% of the total product cost for small appliances.

� In this 17% is inside costs and 24% are for components purchased from suppliers. This historical data can be used as a starting point to set the allowable cost for each category in the life cycle and value chain costs. Fig 52 shows the life cycle breakdowns as a % of the allowable cost of $ 90.

� R& D -4%, Mfg -41%, Selling & Distribution – 20%, Service & Support – 10%,General Business Overhead (G&A)–20% and Recycling- 5%. It also shows that 62% of the allowable cost of $ 90, or $ 55.80, is within Brew Master and 38% or $34.20 is in the value chain.

� Brew Master’s initial estimate also shows that the total product cost of the new coffeemaker will be $ 114 or a gap of $24 (114 – 90).The total $114 consists of $ 67 inside (gap - $ 11.20) and $47 outside (gap = 12.80).




Initial Cost

Estimate

Compare to Target

cost

Perform value

Engineering



Perform Cost

Analysis



Actual Cost

Design Cost Out

Figure 51Figure 51



Value Chain ---------------------------------------------------------------------------------------------------------- Inside outside Total --------------------------------------------------------------------------------------------------------------------- Life Cycle Allowable Current Gap Allowable Current Gap Allowable Current Gap

Research and development

$3.60 (4%) $5 $1.40 $3.60 $5.00 $1.40

Manufacturing 15.30 (17%) 20 4.70 $21.60(24%) $30 $8.40 36.90 50.00 13.10

Selling and Distribution

5.40 (6%) 6 0.60 12.60(14%) 17 4.40 18.00 23.00 5.00

Service and Support

9.00 (10%) 10 1.00 9.00 10.00 1.00

General Business overhead

18.00 (20%) 19 1.00 18.00 19.00 1.00

Recycle Cost 4.50 (20%) 7 2.50 4.50 7.00 2.50

Total $55.80(62%) $67 $11.20 $34.20(38%) $47 $12.80 $90.00 $114 $24

Figure 52Figure 52



� Computing the Cost Gap ..contd

� The information in Fig 52 shows us that the largest cost gaps exists in external manufacturing costs ($8.40), internal manufacturing costs ($4.70), and external selling and distribution ($4.40).

� It is clear that Brew Master’s cost reduction efforts must be focused both externally and internally. It needs to work closely with its suppliers and dealers and involve them actively in cost planning and cost reduction efforts. This means partnership and mutual trust and sharing of information with these various entities. Ideas for reducing costs in the value chain are:

� Reduce suppliers’ cycle time

� Reduce the distance parts and products have to travel

� Give incentives for cost reduction ideas and solutions for a win-win situation

� Involve value chain members in lean production exercises

� Reduce the uncertainty value chain members face; share production estimates and scheduling with them

� Involve value chain members in total quality management programs.



� 2. Designing cost out of product- (before releasing product to production):

� The key to cost reduction is to ask one simple question: How does the design of this product affect all costs associated with the product from its inception to its final disposal?

� To include all costs, and not just manufacturing costs, may appear farfetched at first.

� However, many “down stream” costs such as distribution, selling, warehousing, service, support and recycling can be greatly affected by product design.

� Cost reduction relies on four major activities: Product design, cost analysis, value engineering, and cost estimation.

� Cost reduction is recursive, since the activities cycle back several times as the product goes from an initial concept to a final design.

� The recursion is a characteristic of target costing. Purpose of the recursion is to generate a cost effective design and not to correct design errors.



� How Cost Reduction Occurs:

� Cost reduction will be a trivial task if no constraints were place on the features and functions offered in a product and the time to develop it.

� For example, Brew Master can simply delete the coffee grinder and reach its target cost of $90. However, this defeats the basic product concept.

� The challenge, therefore, is to reduce cost without sacrificing any of the features or functions important to a customer.

� We demonstrate how to reduce costs using the four steps recursive (repeatable) activity cycle as shown in Fig 53.

� This cycle, which is design to cost analysis to value engineering to cost estimation, is combined with the data from Fig 52 to show how to attain the target manufacturing cost of 36.90 from the currently estimated level of $ 50.

� Note that the target includes both inside and outside manufacturing costs, because suppliers are part of the product team during this cost reduction phase.




Initial Cost

Estimate

Compare to Target

cost

Perform value

Engineering



Perform Cost

Analysis



Actual Cost

Design Cost Out

Figure 53Figure 53



� How Cost Reduction Occurs (continued)

� Design Product and Processes:

� In the case of Brew Master, the coffeemaker and the manufacturing process are considered at the same time. This avoids the costly changes later because machines may not be available or capable of executing a product as designed.

� Cost Reduction / Continuous Improvement:

� Perform Cost Analysis:

� For Brew Master, cost analysis means deciding what components of the coffeemaker (heating element, control panel, grinder etc) to target for cost reduction and then assigning a cost target to each of these components.

� Cost analysis also focuses on the interaction between components and parts. Often, a reduction in the cost of one component more than offsets the cost increase elsewhere.

� For example, decreasing the cost of the outer shell of the coffeemaker by making it small may increase the costs of the control panel, electronic circuitry and heating element. If these cost increases are large, no net savings accrues from decreasing the outer shell.

� Cost analysis requires 5 major sub activities. Let us review each of them.



Major components of Brew Master’s proposed Coffee Maker Figure 54



� 3. Perform continuous design & functional Improvements tohelp achieve the final target cost - 6 steps are involved

A. Develop a List of Product Components and Functions.

� Cost reduction efforts starts by listing the various product components, identifying the functions that they perform and their current estimated cost.

� The initial product design and cost estimates provide this information. The list shows what components and functions are needed to satisfy customer requirements and what the cost to provide these functions might be. Fig 54 shows a diagram of the various components of the proposed coffee maker.

B. Do a functional cost breakdown.

� Each part and component performs a specific function. The next step is to identify that function and estimate its cost. This is shown Fig 55. For example, the function of the brew basket assembly is to grind and filter coffee. Its current estimated cost is $ 9, which represents 18% of the total manufacturing cost for this product.

� To keep the example simple, we have combined several functions and components for the coffeemaker. At a detailed level, the brew basket or the electronic control will be broken into several subcomponents. The total for all components is $ 50, which is the same as the manufacturing cost estimated shown in Fig 55



Functional Cost Breakdown for Brew Master's Coffee Maker Figure 55

Cost

Component Function Amount Percent

Brew Basket Grinds and filters coffee $9 18%

Carafe Holds and keeps coffee warm 2 4

Coffee warmer Keeps coffee warm 3 6

Body shape and water well Holds water and encasement 9 18

Heating element Warms water and pushes it 4 8

Electronic display panel

Controls brew and clock settings 23 46

Total $50 100%



Customer Feature Ranking for BrewMaster’s Coffeemaker Figure 56

Customer Ranking ___________________________________ Relative 1 (not 5 (very Ranking Customer Requirements important) important) (%) ___________________________________________________________________________________ Coffee tastes and smells like espresso 5 20% Easy to clean 4 16 Looks nice 2 8 Has 6+ cup capacity 3 12 Starts automatically at designated time 4 16 Works well with different coffee beans 1 4 Keeps the coffee warm 3 12 Automatically shuts off 3 12 Total 100%



� C. Determine Relative Ranking of Customer Requirements

� The functions of the coffeemaker form the engineers’ view of the product. This is not the customer’s view. You will recall that Brew Master had identified 8 features important to its customers.

� The engineer’s view of a product as functions must be reconciled with the customers’ view of a product as a set of features. We must relate product functions to the features customers want.

� First assess the relative importance that customer place on the various features. Have a formal survey of prospective customers rank the importance of these eight features, to be used to rank customer requirements. An assumed ranking for each feature, based on survey results are shown in -Fig 56.

� The importance ranking is done on a five point scale. A score of 5 means the feature is very important; a score of 1 indicates that it is not important. For instance, the taste and smell of coffee is the most important feature and multiple grinder settings is the least.

� The last column of Fig 56 converts the raw scores for the importance of features into a relative ranking of features. This is done by first adding together the raw scores of the eight functions (5+4+2+3+4+1+3+3) = 25.

� Each function’s score is then expressed as a % of 25. For example, the coffee taste has a score -5 out of 25 The relative ranking, therefore is 5/25 = 20%. It says that, of the total value a customer derives from this coffeemaker, 20% comes from the way coffee tastes.



� D. Relate Features to Functions

� The relative ranks of features must be converted into an important rank for each function. Since components carryout the functions of a product and are the key design parameters, this step relates customer ranks to the components that best meet that particular requirement.

� Quality Function Deployment (QFD) is a useful tool for target costing, because it highlights the relationships among competitive offerings, customer requirements and design parameters. The QFD matrix summarizes the information about product functions from Fig 55 with customer ranks from Fig 56.. It adds two other pieces of information collected during the market research phase.

� First, it adds the correlation between a component or design parameter and customer requirements.

� Second, it adds information about how customers evaluate competitors’offerings of these same features.

� A QFD Matrix is shown in Figure 57. Let us analyze this matrix.



� Relate Features to Functions (continued)

� That the requirement that coffee taste like espresso has a high correlation with the design of the brew basket and the heating element.

� How many cups the coffeemaker can hold is correlated to the water well and the carafe size.

� Taste is also the most important feature to a customer, and it is currently rated at 3 for Brew Master and 2 for its competitor.

� This tells Brew Master that, although it is ahead of the competition, it is still far from what the customer would like to see as far as taste goes.

� On appearance, the competition obviously has a better looking product with a rating of 5;

� However, the customer ranking for this feature is 2, which suggests that it is not worth spending too much in improving the appearance of the coffeemaker.



3□ ■♦Automatic shutoff

3■ □♦♦●Keeps the coffee warm

1■ □○Works with different beans

4□ ■♦Starts automatically on time

3■ □♦Has 6+ cup capacity

2□ ■♦Looks nice

4□ ■♦♦●●Easy to clean

5■ □♦♦Tastes/smells like espresso

1 2 3 4 5Requirements

Low HighCustomer

Customer Ranking

Competitor Ranking

Display panel

Heating Element

Body/Water Well

Coffee Warmer

CarafeBrew Basket

Components or Functions

Figure 57Figure 57



� Correlation of Design Parameters and Customer Requirements

♦ = Strong correlation

● = Moderate correlation

○ = Weak correlation

Comparative Competitor rankings

■ = Competitor ranking

□ = Our ranking



BrewMaster’s Coffeemaker: Functional Cost Analysis of ComponentsFigure 58COMPONENTS

Customer Brew Carafe Coffee Body/Water Heating Display RelativeRequirements Basket Warmer Well Element Panel Feature

Ranking

100%35.0%10%20.4%9.6%10.0%15.0%Converted component

12%1 X 12%

= 12%

Automatically

shuts off

12%.8 X 12% = 9.6%

.2 X 12% = 2.4%

Keeps the coffee warm

4%.95 X 4% = 3.8%

.05 X4% = 0.2%

Has multiple grinder settings

16%1 X 16%

= 16%

Starts

automatically on time

12%.5 X 12% = 6%

.5 X 12% = 6%

Has 6+ cup capacity

8%.4 X 8%

= 3.2%

.6 X 8%

= 4.8%

Looks nice

16%.6 X 16% = 9.6%

.1 X 16% = 1.6%

.3 X 16% = 4.8%

Easy to Clean

20%.5 X 20% = 10%

.5 X 20% = 10%

Tastes/smells like espresso



� E. Develop Relative Functional Ranking

� The QFD matrix allows converting feature ranks into functional or component ranks. This is critical, because customers think in terms of features but products are designed in terms of functions & components For the conversion, we need one other piece of information, the % contribution of each component to a customer feature. Information is shown as a general correlation shown in Fig 57

� Engineers have to convert this correlation data into specific contribution%. Such a breakdown for the coffeemaker is shown in Fig 58 and the information is interpreted as follows. The feature “tastes like espresso” is a function of the brew basket and heating element design. (You can verify this from Fig 57.

� Engineers feel that both these components contribute equally to this “taste” feature. We, therefore, assign equal (50%) weight to each function’s contribution to taste. Relative value ranking of the taste feature is 20%.Therefore, since both components contribute equally, we assign each component a value rank of 10.

� The last row of Fig 58 adds the value contributions of a component to all features to arrive at that component’s approximate value to a customer. The brew basket is assigned a value, based on a customer importance rank. Of 15% the carafe has a value of 10%; and so on. Note that the last row & last column both add up to 100%.They are simply different views of customer values. The column represents value of features, and the row represents the value of components.



� F. Perform Value Engineering (Most critical/ best opportunities for cost reduction)

� To achieve the cost targets, Brew Master must analyze the various components to determine how to provide their functions at the lowest overall cost with no reduction in required performance, reliability, maintainability, quality, safety, recylability, and usability of the coffeemaker.

� For example, the function of the heating element is to bring water temperature to a specific level.

� Value Engineering asks how the water temperature can be raised to 110 degree F in three minutes, at a lower cost. It generates ideas for simplifying both the design of the coffeemaker and the processes used to manufacture it. Value Engineering consists of three steps.

� The first step is to identify the components for cost reduction. Choosing which components to select requires computing a value index. This is a ratio of the value (degree of importance) to customer and % of total cost devoted to each component.

� For the coffeemaker, the value information is in the last row of Fig 58 and the relative cost information is in the last column of Exhibit 11-8. Both quantities are expressed as %. Fig 59computes the value index and shows its implications for cost reduction.



[1] [2] [3] [4] [5]

Value ActionComponent or

Function

(EX. 11-8)

(% of total)

(EX 11-11)

(%)

Index

(Col. 3/2)Implied

Brew Basket 18.00 15.00 0.83 Reduce cost

Carafe 4.00 10.00 2.50 Enhance

Coffee Warmer 6.00 9.60 1.60 Enhance

Body Shape and

water well 18.00 20.40 1.13 O.K.

Heating Element 8.00 10.00 1.25 Enhance

Electronic

display panel 46.00 35.00 0.76 Reduce Cost

100.00% 100.00%

Component

Cost

Relative

importance

Value Index for Brew Master’s Coffeemaker - Figure 59



� Perform Value Engineering (continued)

� As Fig 59 shows, components with a value index of less than 1 typically are prime candidates for value engineering. Components with high values are candidates for enhancement since far too little is being spent for a feature important to customers.

� These components present an opportunity to enhance the product. The two variables in the value index, cost and relative importance, are plotted on the graph shown in Fig 60.

� An optimal value zone in Fig 60 indicates the value band in which no action is necessary. The optimal value zone is based on the experience and the opinion of the target costing team members.

� The zone is usually wider at the bottom of the value index chart, where low importance and low cost occur, and narrower at the top, where features are important and cost variations are larger.

� The area of the graph above the optimal value zone indicates components that are candidates for cost reduction. Items below the zone are candidates for enhancement.




� The second VE activity is generating cost reduction ideas, which requires creative thinking and brainstorming. The purpose is to ask what can be reduced, eliminated, combined, substituted, rearranged, or enhanced to provide the same level of functionality from a component at less cost.

� Fig 61 lists some cost reduction ideas that Brew Master might consider reducing the cost of the electronic display panel, the prime target for cost reduction identified by the value index.

� Note that the cost reduction ideas in Fig 61 contain some general principles that can be applied to many different situations. These ideas focus on reducing the number of parts, simplifying the assembly, using common or standard parts, keeping the design simple, not using soon to be obsolete parts, and not over engineering the product beyond what will meet customer’s needs.

� A cross-functional team is essential because these type of engineering design choices must be guided by customer and financial input.

� Engineers need to know reliably if the cost reductions are worthwhile or not.

� For example, considering whether to eliminate the flexible circuit requires a good idea of its purchase cost as well as good cost tables that can estimate what a flexible circuit adds to the other manufacturing costs of the coffee maker.



Brew Master Coffeemaker Electronic Display Panel : Value Engineering Ideas to Reduce Cost Figure 60

Rearrange layout of board To heater connectionHeater connector

Substitute standard 8088 chip Instead of custom design

Central Processor chip

Combine with printed wire boardClock Timer

Standardize board specification; Use mass produced unit

Printed wire board

Eliminate flexible circuit; use wiring harnessFlexible circuit

Reduce wattage; more than needed in current design

Power Supply

Cost ReductionPanel Subcomponent



Component Interaction Matrix Figure 61

200523��Display Panel

20104Heater

20089��Body

20103��Warmer

20102��Carafe

20049Basket Coffee

UnitDisplayHeaterBody WarmerCoffee Carafe

BasketAvailable Components




� The last VE activity is testing and implementing promising ideas, which require determining if cost reduction ideas, are technically feasible and acceptable to customers. Those ideas that meet this test are further developed and incorporated into the product or process design and cataloged in a VE ideas data base so they are available for future design efforts.

� One tool often used for testing the feasibility of ideas is the component interaction matrix. This matrix, which helps to identify the impact of changing one component on other components, requires cost data. It ensures that no current or soon out of production components are used. The use of such components can increase product cost significantly. Fig 62 shows a sample of component interaction matrix for Brew Master’s coffeemaker.

� The cost column of Fig 62 shows the cost of a component. The availability column shows the date on which the component is expected to be obsolete. An OK entry indicates a relationship between the components. Brew Master must determine whether the relationship between the components is positive or negative.

� For example, decreasing the size of the brew basket may decrease the cost of the heater, which does not have to use as much water heating power. Similarly, we may find that the display panel cost goes up as the body cost goes down.

� In this case, the savings in body may be wiped out by the increase in panel cost. In determining these costs, we must keep the life cycle for all components consistent. For example, we may have engineered a body to last for 15 years, when the display panel will last only 7 years.




� Please note! – Many appliance companies have made this mistake in recent years. For instance one maker of dishwasher uses a 25 year steel wash tub with a 7 year electronic control panel.

� The replacement cost of the panel is almost 65 – 75% of the cost of a new dishwasher. Clearly, the company could have reduced the cost of the tub by using materials other than steel that do not last as long or increase the life of the control panel to match that of the tub.

� Note! – We have noted that a lot of time and efforts have been spent in, brainstorming, thinking and evaluating the “Value Engineering” strategy to achieve the final Target Cost of the product. This is the foundation & philosophy of Lean Product Development process

� 4. Release Final Design for Production:

� Ideally, Brew Master will release the design of the new coffeemaker for manufacturing when it is satisfied that the estimated achievable cost is equal to the allowable cost. If this is not the case, it has three options: remove some of the features, increase the market price, or get cost savings from continuous improvement.

� The first two actions are feasible only if they will not adversely affect the sales of the coffeemaker. The last action requires serious evaluation of the manufacturing processes, defect rates produced, yield experienced, cycle time for manufacturing, storage, transportation, and other areas to determine whether any waste can be eliminated.

� These continuous improvements may be used to fill any shortfall between allowable and achievable target cost



Section VII

WCNPD – VA Tear-Down Benchmarking

Hands-On Team Workshop

� Complete explanation of the strategy, tools & process are taught

� At the end of this section, 5 to 6 teams will be formed

� As much as possible, teams will be cross-functionally mixed

� Guide lines and rules will be explained for a hands-on workshop

� 2.5 hours given for benchmarking & Best-In-Class ideas

� Teams to document and complete their recommendations

� Team Presentations, analysis, discussion and Q &A

� Review briefly what has been learned



� Benchmarking- Definition, Innovation & Bold Thinking

� Benchmarking – Attributes to focus on

� Checklist: Brainstorming Questions –Function Redesign

� Checklist: Brainstorming Questions – Product / Process Redesign

� The “Pugh” Methodology – Case Study –Truck Battery Box

� Ground Rules for Competitive Benchmarking Strategy

� Workshop, Documentation, Analysis, Conclusions & Final Design

� Team Presentation of Final Design / Recommendation / Rationale

� Lean Design Challenge, Stretch Ideas & Supplier Partnership



� Benchmarking – Definition

� Benchmarking is the process of identifying, understanding and adapting outstanding practices from organizations anywhere in the world to help your organization improve its performance

Example: Supply Management

Company A World Class

� Supplier Lead Times 150 days 8 days

� Order Input Time 6 minutes 0 min

� Late deliveries 33% 2%

� Shortages per Year 400 4

� Suppliers / Buyers 34 5.3



� Benchmarking – Definition Another Definition:

� Benchmarking is the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders. It is not a tool, but a structured process. Not an end, but a means, Not a one-time event, but a continuous practice.

� Benchmarking – Innovation and Bold Thinking:

� Stop copying, imitating or duplicating the competitors’ design and concepts� Stretch your imagination to the outer boundary- “outside the box” thinking!� Keep pushing the envelope, piggy back & build on others idea & creativity� Think about the unthinkable – Be daring!� No idea is too small or too big: Every possible ideas need to be documented� Ignore the detractors; Stay focused; Stay Enthusiastic & believe in the Team� No paradigm, pre-conceived notion or not invented here (NIH) philosophy� Develop the concept of “Best of all the World’s” Innovative design approach� It is better to be directionally correct than numerically not precise!-Just do it!



� Benchmarking – Attributes to focus on

� 1. Design: Engineering, Performance, Functionality, Construction & Appeal

� Lean Manufacturing & Assembly: DFMA, Poka-Yoke and World-Class

� Material, Tooling and Technology: New & Proven technologies

� Quality, Reliability, Durability (QRD): Life-Cycle Cost and product value

� Marketing, Sales & QFD (Voice of Customers, customer applications & value)

� Stretch & Future ideas / Concepts: Outside the box thinking to quantum leap the nearest and best competition on a global basis –Never ending strategy

� Lowest Cost and Total Value: For both customers and the company-Long term



� Benchmarking – Attributes Checklist1. Design:

� Functionality, Performance, Simplicity of Design And Robust in Construction

� Meets customers’ minimum Musts & Wants (QFD) –Will the Customer pay for these?

� Mistake Proof ness (Poka-Yoke), Standardization, Built-in Quality And Ergonomics

� DFMA, Lean Manufacturing & Modularization System Approach (family of parts)

� Designed for current equipment, capability, facilitate optimum set-up/ changeover

� Ease of trouble shooting, Service Diagnostics, Legal, Safety & Regulatory issues

� Maximize use of “shelf items”, Adaptable to Stretch / Futuristic Ideas / Technology

� Accessibility, Serviceability and meet safety and legal requirements, if applicable

� Standard shelf or commercial items; Parts standardization & use existing designs

� Reduce the number of parts with multifunctional goal to suit production volume

� Least number of fasteners, size, type, style and length to speed up assembly time

� Lowest possible cost to provide the maximum value, product quality and total life cycle benefits better than the nearest competition



� Benchmarking – Attributes Checklist2. Lean Manufacturing:

� Is it Designed for Lean Manufacturing (Ease of assembly and Disassembly)?

� Is it Designed for Serviceability, Diagnostic and Mistake-Proof in Manufacturing ?

� Family of parts Mfg to lower set-up, tooling standardization and Built-in Quality

� Fasteners: Least number of size, type & variety using emerging fastener technology

� Optimum, Proven and Cost-Effective Technology for automation to lower mfg cost

� Wherever feasible to design for flexible Manufacturing cell layout to lower mfg cost

� Supplier’s pre assembled modular assembly, where it will be cost effective

� Facilitate Lean Manufacturing, Operational Excellence & elimination of all NVA items



� Benchmarking – Attributes Checklist3. Material, Technology & Tooling:

� Optimize material Spec, Thickness, Standardization, Surface Finish and Weight issues

� Alternate Material / Substitution, Utilize New Emerging Technology to lower cost

� As much as possible use standard or commercially available material.

� Near Net Shape, Optimize part orientation to lower scrap in stamping process

� Tool and Die Design: Manufacturability, Cost and Quality to suit Manufacturing Volume

� Fit, Finish and Overall Quality consideration to meet product spec & applications

� Vendor Rationalization & Opportunities to lower cost –Process Optimization



� Benchmarking – Attributes Checklist

4. Q,R & D:

� Built-in Quality, Reliability & Durability to meet / exceed customer expectation

� Does it meet total Performance goals to meet customer satisfaction

� Is the Product Design Robust to meet life cycle cost, maintenance and Repair?

� Failure Mode Effect Analysis (FMEA)-History, Field Problems & Complaints

� Life Cycle Value, Low Operating Cost & Designed for Customer Application

� Lower Warranty Cost, Field Repairs / Defects, Customer Dissatisfaction

� Will the design facilitates ease of testing, eliminate adjustments and fine tuning?

� Stretch and Futuristic Ideas to improve Q,R,D through Emerging Technologies



� Benchmarking – Attributes Checklist:5. Marketing / Sales / VOC (Voice of the Customer):

� Fit, Finish & Appearance – will it delight and appeal in the eyes of the customers

� Voice Of the Customer (VOC) –What they like, don’t like, options and Features they will pay for them or not? Do not over or undershoot design to meet VOC

� Is it designed for specific customer applications to enhance value, business or profits?

� Any features of excitement, options or unique value to consider-better than competition

� If feasible, include product’s core customers during the B.M. sessions for their input

� Performance, Best Value & Price, Quality, Delivery & After-Sales Service /Support

� Continuous Improvement, Features /Applications and listening to suppliers’ feedback

� Remember!-Customer is the King. Need to ask will they will pay for the features?



� Benchmarking – Attributes Checklist

� 6. Stretch Ideas & Concepts:

� Keep a closer watch on the product development based on Global Perspective

� Always search for New and Emerging Technologies and Systems

� Dynamics of Customers’ tastes, preferences and buying habits of the future

� Stretch or breakthrough idea / concept - that could offer / open a new market

� Customer is always the King! – Quantum leap customers’ expectation through R & D and technology to help launch new and better products to continuously meet or exceed customer’s expectation and satisfaction to provide better total value, than your nearest competition on a global basis



� Product Development – Competitive Benchmarking Hit List of Attributes to focus on – for the Team Exercise.

Design:

� Functionality and Performance to Meet all QFD item

� Design Concept, Layout, Location and Size Issues

� Number of Parts Standardization

� Construction and Robustness to meet QFD criteria

� Fasteners –Type and Numbers used to lower Cost

� Accessibility and Serviceability

� Safety and Legal Requirements if Applicable

� Standard Shelf or commercial items used in the Design

� Mistake Proof ness And ease of Trouble Shooting

� Standardization for lowering Cost



� Product Development – Competitive Benchmarking Hit list of Attributes to focus on – for the Team Exercise.

Lean Manufacturing:

� Designed for Lean Manufacturing Strategy?

� Ease of Assembly DFMA Advantage

� Is it designed for Mistake Proof?

� Manufacturing Set up and Schedule to lower cost?

� Fasteners impact on Manufacturing assembly/ quality

� Ease for Disassembly Repair & Service

� Accessibility for use of Power tools for productivity?

� Is it designed for Ergonomics?

� Supplier’s pre assembled parts to lower cost?

� Any other Unique Manufacturing Opportunities?




Material and Tooling:

� Material Spec and thickness / Gauge� Alternate or better or unique material to lower cost?� Commercial Available or Special Material? � Material Cost Factor-Estimated� Material Weight Factor - Estimated� Fit, Finish and Overall Quality� Material spec and Tooling Cost Factors?� New Process or Technology Issues� Stretch or Any Future New Material ideas� Other Material Considerations?




Quality, Reliability and Durability (Q,R,D)

� Does it Meet Minimum Quality Standards?

� Built-In Quality Design for Mfg?

� Is it Robust/ Heavy Duty / Durable?

� Built for a Reliable part or system?

� Life Cycle Cost? Maintenance/Repair

� Warranty & Failure Past History

� Legal and Safety considerations

� Facilitates ease of Testing and Adjustment to spec

� Will the Customer pay for the Value?

� Any Unique feature of QRD Factors?




Marketing, Sales and Voice of the Customer (V.O.C):

� Is the VOC appears to have been executed in Design

� Will it Meet or Exceed Customers Expectations?

� Is it designed for Customer Applications?

� Fit, Finish and Overall Quality?

� Any Customer Excitement Features/ Options?

� Supplier Feedback Opportunities?

� Will Customer pay for these features?

� Are there features that are excess?

� Any creative or break thru ideas?

� Other Marketing and Sales Ideas?




Stretch and Future Ideas:� Unique Design Attributes that are worth it?

� Breakthrough

� Technology issues-lower cost

� Any Stretch ideas- combine functions and Systems

� Material Stretch Opportunities?

� Tooling Stretch Opportunities?

� Manufacturing Stretch Ideas?

� Stretch Ideas for Modularization?

� Supplier Stretch ideas, if any?

� R & D –projects for the future

� Any other issues not covered above



� Checklist Questions

– VE Brainstorming for Function Redesign

For Identifying Potential Functions as Redesign Candidates:- Yes or No

(If the answer is “Yes”, then that particular function is a candidate for redesign)

� Can we do without this function?

� If this were not done, would anything of consequence happen?

� Is it doing more than the customer requires?

� Do others produce it at less cost or in less time?

� Is there a simpler way of meeting this need?



� Checklist Questions

– VE Brainstorming for Function Redesign

� Can another firm’s standard part or process be used?

� Does it cost more or take more time than is reasonable?

� Are we trying for too much reliability, is it over-engineered?

� If you were a customer, would you omit this?

� Is this the only way to do this? Is this the best way to do this?

� What critical function does it perform for a customer?



� Checklist QuestionsFor Generating Ideas-Potential Product or Process Redesign: Yes or No

(If the answer is “Yes”, then that particular function is a potential candidate

for redesign)

� Adapt: What else is like this? What could we copy?

What is out there that we can adapt?

� Combine: Can we combine steps / purposes / functions?

� Magnify: What can we add? Can we do it more frequently?

Should we enlarge the scope?



� Checklist Question

– VE Brainstorming Product / Process Redesign

� Minimize: What can we reduce / omit / streamline?

� Rearrange: Can we interchange steps? Do it in a different sequence?

Can we change the timing?

Can we rearrange steps in a different pattern?

Can we schedule steps differently?

� Reverse: What is the opposite / Turn it around/upside down/ backward?

Can we reverse roles or functions or steps?

� Substitute: What can we use instead / take another approach/ new twist?



� The “Pugh” Methodology – Examples of Illustration

� Concept Selection According to Pugh:

� In 1981, Stuart Pugh, a professor of engineering at a university in Glasgow, Scotland, suggested a simple and relatively effective way of sorting out multiple design concepts.

� Fundamentally the Pugh Method is very simple, basic and easy to apply focusing primarily on optimizing the best engineering design concepts, ideas and options rather than cost reduction, which is of secondary in terms of importance.

� An overview of the methodology is provided below - Figs 62 & 63



Pugh method evaluation - Some alternative conceptual designs for a canister

vacuum product - Figure 62



� Concept Selection According to Pugh Methodology

� At the heart of the Pugh Method for Concept Selection is a simple evaluation matrix that lists all of the major design criteria for a given product function.

� Each design alternative is given a “score” based on its potential performance relative to a default design choice.

� A “plus” indicates that a concept performs better than the default, a “minus”implies worse performance than the default, and an “S” (for “same-as”) means that the concept would perform equally well.

� The Pugh Method is the basic analyzing process step used in the VA Tear-Down and Competitive Benchmarking strategy. Looking at Fig 62 we have an example of some design alternatives for a canister vacuum’s allow movement function

� Not all alternatives will make a lot of sense, but there may be some aspect of one option that can be combined with another to form a radically new and unexpected breakthrough idea



How to systematically Identify- Product functions & attributes for Benchmarking

� System: Car Body (cab-in-white) Interior:

� Material Spec (Steel, Aluminum, Reinforced Plastic, Carbon-Fiber etc)

� Front Door opening

� Front Panel and Grill

� Head, Leg, Belly and Shoulder Room Dimensions

� Ergonomics of comfort, safety issues

� Entry / Egress

� Repair, Rebuild, time cycle for repairs better than competition

� Extend the cab for special applications and modifications etc




� System: Car Door and Glass assembly:

� Door Constructions (Heavy duty or light duty)

� Strong and robust or flimsy and cheap to meet QFD & Cost issues

� Door Hinge and construction

� Door Handles, design, construction & location

� Glass design-raising and lowering mechanism, tinted or not

� Maintenance and Repairs issues

� Safety and Legal Concerns and Legislative issues

� (Glass breaking on impact during accident)

� Styling, Appearance and Quality of Glass




� System: Car Instrument Panel (Dash Board)

� Instrument Gage design, Appearance and Styling

� Appearance, look, location, size, glaring effects etc

� Markings on the Switches –How good they are for operators to see easily

� How long the switch marking will stay against wear and tear

� How well the switches and the various controls are ergonomically sized and properly located for ease of sighting and operation

� Warning Lights – Location, Operation and Easy identification

� Maintenance Type gages

� Unique features of Customer Excitement (extra plug point for cell phone, TV, CD player and other personal electrical appliances)

� Extra electrical outlets for other custom modifications and changes to enhance utility including convenient remote emergency Jump Startfeature f




� System: Car Brake and Brake System

� Air or Hydraulic System?

� Manual or Power-Assist Braking System

� Any back-up safety system to come on automatically in case of brake failure

� Brake Stopping distance (How quick & effective is the actual braking effect)

� Life of the Brake pads, Master Cylinder and Brake Operating Calipers

� How good are the brake pedals need be designed better than competition? –Construction, Design, Location, Ergonomics & Operation

� Is the pedal operation is flexible for customizing setting?

� (for short, tall & handicap drivers)-car pedals today are offered as options with adjustment, similar to seats and tilt & telescopic steering adjustments




� System: Medium or Heavy duty Truck Chassis Frame Rails

� Design, Layout and Construction

� Material spec, thickness and rust preventive coating

� Soft or Heat-Treated rails for strength and durability

� Quality of rails (Straightness, Channel section uniformity, Bow, Camber, Twist etc)

� Ride Quality, Drivability, Noise, Vibration and Harshness (NVH characteristics)

� Reinforcements, Cross Members, Brackets – Are they riveted, welded or bolted?

� QRD issues and concerns.

� Flexibility to build different body styles, cab configurations and operational . applications




� A simple template guidance for all the students – strictly as an initial start only to learn about product attribute identification for a Kitchen Blender-Design focus only

� Please note! As part of an internal class exercise, all the students are expected to develop the attributes (covering all the 6 major areas-learned in to-day class) for the kitchen blender before coming to the next class. This is a learning curve

� Part Features-(chosen product system / function) Attributes-(Design Spec, where, how, & why focus)

� Product Design, Functionality, Performance Blender capacity, size, functions, features Meet all the QFD issues & opportunities Other performance and value characteristics

� Design concept, location and layout of control Blender styling, Operating buttons, locations, Buttons. Any shelf items can be used to lower cost? Shape, size, color, style-for ease of operations?

� Robustness, built to last & withstand all abuses for Examine every part of blender carefully as req’d Long term criteria of cooling environment- (Q,F, D) to be sure before making a “balanced” judgment

� Safety, Legal & Parts standardization considerations Meet or exceed legal, safety, environmental and for the family of blenders. Need to investigate / test recycling issues-elect cord, all the blender parts

� Accessibility of service, repair & maintenance cost Product designed for DFS? Lowest repair cost?

� Unique customer excitement, application, option etc Color selection, convenience, cleaning, gasket Opportunities if any to quantum leap competition?? Life, blade life for longevity, easy of operations



Figure 63 - Pugh method for concept selection matrix



� The Pugh Method

� In any case, once options have been gathered and briefly described, a matrix such as the one shown in Fig 63 is used to select promising candidates.

� Along the left-hand column, all major design criteria for the given functions are listed. Pugh recommends a fairly comprehensive list, with no weighting factors.

� The design alternatives are listed along the top of the matrix, often accompanied by simple sketches that are provided for clarity.

� At the junction between each criteria and design alternative, a “score” is determined, based on how well the alternative design concept supports that criteria. A default design (usually the existing / current design) is chosen as the baseline against which other options are compared.

� Rather than a numerical score, Pugh suggests a “+” for better than the default, and a “-” for worse than the default and an “S” representing same as the default. The team objectively perform this scoring process



� The Pugh Method� Once the scoring process is complete, we simply add up the “+”s and the “-“s (ignoring

the S-for same scores). Circle (for easy identification) all the “+”s regardless of where they are located in the chart.

� Design alternatives with more pluses than minuses deserve further consideration. If there is a dramatic winner, it may be sufficient to just select that choice and move forward. As with all concept selection, more detailed analysis by the core design team is essential to validate the qualitative results of a selection tool.

� Another interesting outcome of this process is that, you can cross ref all the design function criteria (on the left-side column) against each of the concept alternatives (top of the matrix) and pick the “+”s, wherever it may be. The best concept may still lack in 1 or 2 specific areas of attributes that others may clearly excel & should be noted

� This strategy will give another opportunity to combine and make the best of all the world’s concepts in order to develop a “hybrid or new breakthrough” design idea, if feasible. The challenge for the team: Balance performance, features, QFD, lean mfg, cost, quality & finally feasibility / practicality to arrive at the “optimum” selection

� We will now focus on how to transfer this conclusions to final team recommendation



Transform Team Pugh Analysis to Final Recommendations

� There is a Team recommendation sheet to document final conclusions, reasonsfor idea selection, trade-offs & other potential BIC for evaluation

� Team needs to constantly refer to the Benchmarking summary “hit list” detailed under the 6 major areas of Product Development to evaluate the best and balanced approach for arriving at the final team’s conclusions.

� It is NOT always an easy straight forward process. Continuous convergent, divergent thinking, long term stretch & R&D ideas / concepts all enter into the equation before decisions are made. Everything should be documented

� Benefits of savings (mfg, material, COQ, warranty, sales / market share etc) implementation cost in tooling, equipment, R&D-all need to be investigated. Any design sketches, concept proposals, photographs, supplier quotes can be attached to the recommendations to support and validate final team conclusions

� A sample of the Team’s summary recommendation sheet is shown here.



Team’s Final Summary recommendation –A sample form

� System:……… Sub-System:…… Date:……….

� Team:………. Team Champion………. Team Scribe:………………

� 1. Team’s BIC for this system or part:………………… Trade-Off’s, if any ……………..

� 2. Other BIC ideas or opportunities that still deserve analysis or R& D ?....................

� 3. List all the potential BIC ideas & opportunities to slash cost covering all the 6 major

areas of team VE / VA tear-down Benchmarking exercise. Benefits can be broken

down under each or groups of the above 6 areas for better clarification & future ref.

� 4. Future (next 2 – 3 yrs short term & 3-5 yrs long-term) potential opportunities including

stretch ideas, technology breakthrough and R&D projects also be identified. Potential

future supplier’s involvement / outsourcing of project development can also be done

� 5. Quantify all the BIC recommendations broken down into the following, if need be:

-Labor savings -Material savings -Overhead savings

-Cost of Quality issues -Tooling & Equipment $ -Other issues & Impact

� 6. Design proposals, concept sketches, photographs, supplier quotes or documentation

� of useful would help support and provide backup data for team creditability



� Ground Rules for Competitive Benchmarking Strategy:

1. No criticism allowing during session

2. A peer group is usually best. Never have high-level management and their employees participate and are part of the team. The objective here is to avoid intimidation

3. No idea is too small or too big. Every possible ideas need to be flushed out

4. Quantity is desired, The more ideas the more likelihood at least one outstanding item

5. Teams of 6 to 9 best. Ideally, if it is cross-functional in make up it is even better

6. Combine ideas, Hitch-hike on other’s idea to explore even a better one, if possible

7. Need to stretch your imagination and creativity –for “outside-the-box”thinking for ideas

8. Learn to listen first before being heard of your input. Respect other’s opinions and ideas



� Ground Rules for Competitive Benchmarking Strategy:

9. Develop a “can do” attitude; Be open-mindedness to analyze ideas without prejudice

10. Record suggestions, ideas & input with proper documentation & reasons used for each

11. Do not start the final Pugh evaluation during benchmarking. Conduct this separately.

12. Follow the guidelines, tips and creativity disciplines to come up with B.I.C. design ideas

13. Fill in the information of the Benchmarking worksheets one attribute sheet at a time.

14. One best breakthrough idea may not always be feasible; it could be a combination, Piggy back of an existing one, “best of all the worlds” concept or an incremental type Idea!

15. Goal here is to “synergize”, “combine” “integrate” and “maximize” the benefits. Make sure that all the required information, data and background is ready for team analysis.



� Workshop, Documentation, Analysis, Conclusions and Final Design:

1. Use the forms provided for documenting of all the information from the teams

2. The information should be legibly written with appropriate comments, background supporting facts / ideas / technical or financial data, identified for future reference

3. In the comment columns provided, state the rationale used for team’s conclusions

4. Factual supporting information: Cost estimates, Total projected investment in new equipment / upgrades to existing one, tooling $ and other capital $ etc should be documented with payback ROI (return on Investment) justification with creditability be provided for each idea for top management approval



� Team Presentation of Final Design and Recommendation / Rationale :

� Use the forms provided for this purpose and fill-in all the required information

� Select a leader among your team members to lead, synergize the discussion and to help facilitate a good team work and participative cultural environment (very important for the process) to facilitate the best unbiased and objective presentation. Suppliers & selected customer can participate in this meeting

1. Systematically follow the steps: Complete the ratings (+, - & “s”), circle all the +’s, pick the best 2 or 3 products (scored the highest +’s).

2. Look for other +’s elsewhere. Team brainstorm for a consensus on developing the ideal strategy to integrate the best of all the world’s-B.I.C. product strategy

3. Complete the Final Design Recommendation, document the team rationale and justification background used for recommending the B.I.C. idea / concept



Team Presentation: Final Design & Recommendation

� Enjoy the workshop exercises, team interaction experience in the next class and have some good fun presenting your team’s presentations!

� Lean Design Challenge, Stretch Ideas & Supplier Partnership:

1. In the real world, there will be similar type of VA / VE benchmarking workshop sessions at the tier 1 & 2 supplier locations, who will come to the OEM’s workshops to make their individual presentations (usually one supplier at a time because of competitive environment between the supplier community)

2. OEM Teams should try to evaluate and attempt to integrate those suppliers’ input and ideas in developing futuristic and total system concepts including exploring the cost effectiveness of suppliers delivering the systems or sub systems at the OEM plant location -JIT, line set to sequence with no inventory

3. Remember!- One of the goal of product development is Lean design and Mfg concepts, providing the optimum functionality, performance, total value and customer satisfaction at the lowest cost possible, better than the competitors.

4. The strategy of this balancing act, explained above starts right from day one of new product development. The workshop exercise that we have started to-day is just a beginning of a long, exciting and interesting road map for new product and process development – that we will all look forward to be covering in the next 3 classes.



� Team Presentation of Final Design and Recommendation / Rationale :

1. Use the forms provided for this purpose and fill-in all the required information

2. Select a leader among your team members to lead the discussion & for presentation

3. Complete the Final Design Recommendation, Rationale and justification used for the idea

4. Enjoy the workshop exercise and have fun!

� Lean Design Challenge, Stretch Ideas & Supplier Partnership:

1. Team should try to attempt for developing futuristic and stretch ideas, if possible

2. Learn to apply all the knowledge and techniques learned to arrive at team conclusions



Section VIII

WCNPD – The Human Element

A Climate for Performance



� Creativity, Innovation, Drive and Brainstorming

� A Climate for Performance

Creativity, Innovation, Drive and Brainstorming: Background

� Creativity is a gift everyone has, but few use. Why is it not used? Some people fail to realize they can be creative. Others do not see the need for it and do not feel it is worth the effort to work on improving their creative ability. Unfortunately these people do not realize the meaning and significance of creativity.

� Most of our personal accomplishments in life depend on our creative skills. It is an ability we cannot do without, if we wish to improve those things that surround us and make up the world.

� Creativity can be ours, we need only to reach out and grab it.



� Creativity, Innovation, Drive and Brainstorming

– Creativity techniques – 3 As.

There are many techniques to help to improve your ability.

You must motivate yourself to make the effort to improve your creativity.

Successful creativity requires three ingredients, which I call the 3 A’s:

� Awareness – Input and Available knowledge gathered and acquired over a lifetime

� Attitude – Desire – Inner need to do something, motivation

� Action – Out put – Result



� Blast, Create and Refine – 3 Phases of the process for Creativity:

Phase 1: Blast- This requires defining the basic function of the product or segment of the product under study. Next blast that portion of the product out of the problem so it can be clearly identified. This means identify the basic function, the one that most clearly defines the requirement and offers an opportunity for many creative ideas.

Phase 2: Create- The second phase is to develop ideas to satisfy the basic function and select one that appear to best satisfy the basic requirement, ask a series of constructive questions. The questions are as follows:

� What is the lowest-cost way to satisfy the basic function?

� Will this idea satisfy the requirement?

� If the answer is no, ask,-What has to be done to make the idea work or sell?

� Alternatives are developed and the same question asked of each alternative until a satisfactory solution is achieved. Make no attempt to evaluate solutions at this time.

Phase 3: Refine- The refine phase of the technique is to take what appear to be the best alternatives and refine them to a final recommendation. This will involve preliminary cost estimates and a review of implementation requirements to meet product cost, delivery, and manufacturing requirements.



� A Climate for PerformanceRespect for People:

� Build relationship� Value differences� Balance life� Keep always an open mind� Use teamwork

Customer Focus:

� Listen to the customer� Exceed the customer’s expectation better than the competition� Understand the customer’s problem to develop the best solution

Relentless Pursuit of Quality in All we Do:

� Demand quality in all products, services and processes� Promote continuous improvement



� A Climate for PerformanceSpeed, Simplicity, Agility:

� Act with urgency� Work effectively and efficiently� Demonstrate adaptability and sound judgment

Innovation:� Change the status quo� Be creative� Have a passion for learning

Accountability:– Take ownership– Act with integrity– Drive for results

Communication:– Listen– Walk the talk

– Communicate openly



Section IXLPD – Management Systems

A Tool Box For Enhancement forNew Product Development Strategy

�Design for Assembly & Manufacturability– DFMA Principles

�Poka -Yoke – Improving Quality by Prevention – An Overview

�Process Capability- How it Impacts Product Cost

�FMEA – Failure Modes and Effects Analysis - A brief look



� Design for Assembly & Manufacturability – Principles & Examples

� To successfully design a product which can be manufactured cost effectively and brought to the market in a timely fashion demands that industry establish a closer link between product engineering, manufacturing and quality functions.

� More specifically, the people who design the new products and processes must collaborate with those who make the design a reality.

� The first step towards this goal is implementing a design for manufacturability and automation (DFM / A) methodology. Use of basic DFM / A guidelines and assessment tool can result in improved product quality, reduction of parts inventory, fewer engineering changes, and a shorter, less costly, production cycle.

� Use of the DFA guidelines helps minimize cost of assembly withinconstraints imposed by other design requirements. The primary objectives of DFA are to minimize assembly cost by:



� Design for Assembly & Manufacturability – Principles & Examples

1. Reducing the number of parts to be assembled.

2. Ensuring that the remaining parts are easy to assemble.

Companies with widespread use of the DFA universally report the

following important results:

� A reduction in the number of component parts & in costs, both direct and indirect

� Shortening of assembly time and reduction in errors (mistake-proof ness)

� Broadening of technical options for mechanization and automation

� A dramatic reduction in assembly process complexity

� Increased cooperation between design, manufacturing & quality organizations.



� DFM Guidelines

� Design for a Minimum number of Parts� Develop a Modular Design (Family of parts and assemblies)� Minimize Part Variations (Standardization wherever feasible)� Design Parts to be Multi-Functional; Multi-Use; Combination of parts &

functions� Design Parts for Handling and Presentation / Orientation for ease of

assembly� Evaluate Assembly Methods & optimize design to Suit Assembly

Methodology� Avoid fasteners, if possible. Select fastener for ease of Assembly /

disassembly� Design for vertical (top down) assembly orientation & ergonomics

consideration� Eliminate or Simplify Adjustments� Design for ease of diagnostics, Accessibility (for tools) and Serviceability

Examples of DFA – Refer to the handout for details



� Poka-Yoke-Improving Quality by Prevention – A Review

� Poka-Yoke is a commonsense approach or technique for avoiding simple human error at work.

� Many things can go wrong in the complex manufacturing environment of the workplace. Every day there are opportunities to make mistakes that will result in defective products. Defects are wasteful, and if they are not discovered, they disappoint the customer’s expectation of quality, not to mention about the cost (loss to the company).

� To become a world-class competitor, a company must adopt not only a philosophy of Poka-Yoke, but a practice of producing zero-defects. The principles used under Poka-Yoke are generally simple concepts for achieving this goal.

� From a product design / development point of view, the designers must collaborate with the manufacturing and quality personnel to include features and built-in designs to make the product 100% mistake-proof, under all manufacturing conditions. We all know prevention is better than cure and that philosophy is what Poka-Yoke is all about.



� There are Different Kinds of Errors

Almost all defects are caused by human errors. However, there are at least ten kinds of human errors for a quick understanding and reference.

� Forgetfulness

� Errors due to misunderstanding, Errors in identification

� Errors made by amateurs, Willful errors, Inadvertent errors (absentmindedness)

� Errors due to slowness (reacting to an emergency situation)

� Errors due to lack of standards (no instruction or work standards)

� Surprise errors (equipment or tool runs or behaves differently than expected)

� Intentional errors (People make mistakes deliberately)

Mistakes happen for many reasons, but almost all can be prevented if we take the time to identify when and why they happen and then take steps to prevent them by using poka-yoke methods and the safeguards necessary for implementing it.



� Process Capability – How it Impacts Product Cost

� Let us begin to put words to our effort for defining variability. Manufacturing variability must be controlled to a level that ensures both customer satisfaction and cost-optimized production.

� If we have done a good job in our lean design process, the customer satisfaction portion of this mandate is neatly built-into our product specifications, test, and inspection guidelines, and quality assurance procedures. But do we have the same assurance that our product can be produced to those standards and quality at optimal cost?

� Any product can be produced to essentially to any standards, provided that money is no object. How can quality be guaranteed while still aggressively pursuing profits? In other words, can we control quality on a sensible budget?



� Process Capability – How it Impact Product Cost

� The new product development team must specify a design tolerance for each critical-to quality attribute. Let us assume that the product design has been made “robust” (tolerances are made as accommodating as possible of manufacturing variations) as possible.

� How do the manufacturing folks respond to these specified designtolerances? They consider various process alternatives and select the best option, but how do they make that selection? If they go with the very best and most accurate process, it will cost them a fortune to make the part and a cheap-and-dirty process can’t make the part to print and meet tolerances.

� There must be a happy medium, in which the yield of acceptable product is balanced with the cost of equipment, training and so on. A tradeoff of defect cost versus process cost.

� We must address this tradeoff during the New Product Development stage, during the detail part design.



Figure 67



Figure 68



Figure 64

Design Production Use-Life

Product Lifecycle

Design for Testability Design for Reliability

Design for Maintenance/ Service

Design for Ergonomics

Design for Manufacturing

Design for Ergonomics

Design for Environment



Figure 65A



Figure 65B



Figure 66A



Figure 66B



� Executive Summary – Product Leadership, Creation & Winning:

� New Product Development is a War and Winning is Everything, where victory

ultimately decides the fate of your business and competitiveness

� Following are the cornerstones for successful product innovation for The Lean Product Development Implementation Strategy

� A clearly articulated new product strategy for your business and systematic new product process to successfully drive the project to market place.

� Commitment and strategy to Implement a high-quality product development process discipline, Commit the required resources and Foster innovation in your organization.

� SWOT - (Strength, Weakness, Opportunity & Threats)

� Commitment of SWOT (Strength, Weakness, Opportunity & Threats) strategy, Implement a high-quality new product process discipline, Commit the resources and Foster innovation in your organization

� Understanding What separates Winners from Losers; Just do it!!

Thank You !!- Each & every one of you for your excellent participation, enthusiasm and team work and good learning. I do hope you will be able to implement the techniques and strategies learned in the class at your workplace.



Figure 69




– We could tighten the variability distribution of the process (i.e. the ability of the process to hold tolerances), or we could loosen the tolerances of the design. Either action would tend to reduce the number of units that fall into the scrap regions of the distribution.

–

– Manufacturing engineers recognize that extreme precision is not what is critical to cost-effective, high-quality production. What is essential is that each process be capable, meaning that the ability of the process to hold tolerances has been properly matched to the specified tolerance range of the product design.

– This process capability can be represented by a statistical metric called the Process Capability Ratio (Cp), as shown in Figure 69. Cp is the ratio of the total tolerance band of a given specification (i.e. the upper spec limit minus the lower spec limit), to six times the standard deviation of the process’variability distribution. The standard deviation is a measure of the “width” of a statistical distribution.

–




– So Cp, is really just a measure of the width of the variability distribution as compared to the acceptance band of the product. Cp = 1 means, only 0.3% (one in three hundred parts would be defective) of units produced will be out of tolerance.

– If a moderately complex part assembly has, say 50 process steps, the yield-loss will be multiplicative (the % of finished products that would pass through your factory without a defect would be roughly 86%) in nature.

� - Today, many industry sectors (mostly automotive industry) are

� demanding Zero defects!

– To survive, firms have two choices: either significantly improve the process capabilities (optimum product tolerances to match equipment) or do a whole lot of expensive testing, sorting and inspection.

– For New Product Development Strategy, the message is: Maximize the allowable tolerance, work with manufacturing and quality personnel to “balance the strategy” of part tolerance for the best consistent quality at the least cost feasible to meet customer requirements.



� FMEA – Failure Modes & Effects Analysis:

– FMEA is essentially a design review process that focuses on proactive identifications and mitigation of product risks. Its most frequent application is as a method of ensuring product safety where concerns of liability and lawsuits are factors to be aware of.

– Typically this is how a FMEA review is executed. The core design team and other smart special product background people gather for a product FMEA meeting. The product is reviewed in some logical and systematic way with each design element being the subject of a brief discussion.

– The goal of these brainstorming sessions is to list as many potential failure modes as possible for each element. A failure mode is simply a way in which the product (or process, as the case may be) could fail to perform its function properly, reliably and safely.

– For example, a possible failure mode for a table fan would be “wires short”. Nor all failure modes need to be the fault of the product; incorrect use of the product can also result in a failure, and may jeopardize customer’s satisfaction and safety if no corrective action is taken during the product design and or development stage.



Figure 70



Figure 71



Figure 72



Section X

LPD - Design For Excellency Strategy

� A Checklist for Lean Strategy For New Product Development

� Final Thoughts, Questions and Answers on the workshop material

� Discuss Participants individual company situations & solutions

� Real-World Applications, Culture, Communications & Team Work

� Summary Review of the Class and Wrap-Up



� Checklist for Lean Product Design / Development Excellence:

� Design for Meeting or Exceeding Customer’s value

� Design for Achieving the Target Cost & Profitability

� Design for Manufacturability and Assembly

� Design for “built-in” Quality

� Design for the Best Value at the Lowest Cost

� Design for Testability

� Design for Reliability

� Design for Maintenance / Service / Diagnostics

� Design for Ergonomics & Tools

� Design for Safety

� Design for Environment

The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06

Documents

Transcript of The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06