product lifecycle management Archives

The Links between Product Lifecycle and Supply Chain Management

Procurement/Sourcing | By Clint Reiser • 12/03/2014

I wrote a Logistics Viewpoints article in October that discussed how Diageo has transformed its supply chain from a cost savings function to an enabler of growth-driving innovation. This case discussed how supply chain was elevated to a strategic level due to its critical role in executing new product introductions. I found the connection between product introduction and supply chain to be interesting, so I reached out to my colleague Dick Slansky to obtain his perspective on the relationship between these corporate functions. Dick is a senior analyst at ARC covering PLM and engineering design tools. Prior to joining ARC, Dick was with the Boeing Company for over 28 years.

Clint: Thank you for providing Logistics Viewpoints readers with a PLM perspective on supply chain.

D. Slansky: It’s my pleasure.

Clint: Maybe we can start by getting an explanation of PLM and how it extends beyond product design.

D. Slansky: What we’re talking about is the full extent of the product lifecycle, from concept to design, to manufacturing processes, to the shop floor. Today in PLM, when an engineering organization initiates a design of the overall product, assembly, or components, what they’re doing is building an engineering BOM, which defines the resources and the shop orders.

Clint: And then the materials within the BOM…, well they need to be obtained.

D. Slansky: Yes. The engineer has to make “make-or-buy” decisions at a very early stage in the product lifecycle. And these decisions have extensive impacts on the supply chain. The industries, like automotive, that tightly integrate design with manufacturing practices must maintain tight control over the supply chain, down through the tiers that constitute the final product. When you extend this out in areas like electronics where the supply chain is truly global, the orchestration becomes extremely critical.

Clint: Are there other processes within the early stages of the product lifecycle that have critical links to the supply chain?

D. Slansky: In addition to design engineering, there is requirements engineering going on at an early stage of development. Requirements engineering isn’t necessarily designing fit, form, and function. It’s determining the requirements to manufacture and build the products – the “who, what, and where” of the process. It’s one of the preliminary exercises that determines essential aspects of the supply chain. It determines how the product will fit the market requirements and then further delineates what needs to be done in the design-build process and makes direct links into supply chain planning. One of the most critical elements is meeting the product’s time-to-launch and hitting the market window. And a main reason companies get into trouble meeting production schedules is because of deficiencies in the supply chain.

Clint: We have been discussing ways in which design and requirements engineering affect supply chain. In what ways do you see the supply chain function affect design?

D. Slansky: There are a number of touch points. When there is a supply chain constraint or requirement, often this is a matter of a particular component being unavailable. So the supply chain planning system pings the PLM system and requests a replacement part or an equivalent. Then the engineering design function needs to come up with a list of engineering equivalents that can serve as a replacement.

Also, there are continuous improvement processes. There is a lot of “as-built” information that is generated during the manufacturing process. Today with all of the analytical tools available, this information can be applied to affect some change on the manufacturing processes and maybe even back to the product design.

Finally, the notion of concurrent engineering is that manufacturers or suppliers are concurrent with the design process so that when the designer comes out with the requirements, the production function will come back at an early stage and say they can’t do it for whatever reason. In the old days internal manufacturing engineers had to figure out how to build. Today that manufacturing engineer is often outside the organization at a supplier.

Clint: So in a sense this makes supplier relationship management critical.

D. Slansky: Yes, and this is an area where processes have become more sophisticated. Today’s PLM systems allow designers to go in and view and exchange engineering drawings across organizations. And it’s not just about meeting a delivery date. Suppliers get involved in the design process to meet the requirements for delivering the product. Very often the supplier is the one with the design expertise.

Clint: Thanks Dick. So my key takeaways are that the integration of PLM and supply chain are becoming more sophisticated to support the increasing complexity of products and supply chains. And a responsive supply chain is critical to meeting production schedules and ultimately the market window.

D. Slansky: That’s right – first to market, first to profit.

Smart Products Require a Sophisticated Supply Chain

Consumer Packaged Goods (CPG) | By Steve Banker • 10/31/2011

The first paragraph of my colleague Dick Slansky’s recent Strategic Report on Smart Products’ Supply Chain Challenges (available to ARC clients only) caught my attention.

Increasingly, today’s consumers are being exposed to an environment of intelligent products –from toasters to automobiles. The level of intelligence embedded in everything from our cars, to our homes, communication devices, consumer electronics, and even mundane items as our toasters and toothbrushes, increases every day. In the very near future, not only will humans interact with a rapidly growing array of smart products, but many of these products will interact autonomously with each other and other systems to monitor and control power usage for smart grids, automatically make our dentist appointments, monitor, diagnose, and schedule services for our vehicles, and lots more.

Adrian and I have written a fair amount in Logistics Viewpoints about smart technologies, such as smart phones, mobile technologies, GPS and location tracking, RFID, real time sensors, and cool new visualization technologies. All of these technologies can be, or will be, used to change the face of logistics as we know it. In other words, our focus has mostly been on how smart technologies and products can be used in the supply chain.

But smart products have their own supply chain, and as Dick makes clear in his report, it is a challenging supply chain, particularly form a product design and manufacturing perspective. These complex, mechatronic products require the integration of mechanical, electrical, and software engineering disciplines. Electronics, aerospace and avionics, and automotive manufacturers at least understand that there are sophisticated, multi-engineering development requirements in creating these embedded systems, even if they have not yet mastered a systems approach to product design. Consumer goods companies, however, have not even begun this journey.

A key concept of supply chain management is that work should not be done in silos, that it is necessary to understand upstream and downstream requirements if you want to build an efficient, flexible, and effective supply chain.

Building smart products efficiently requires integrating different design specializations (mechanical, electrical and electronic, and software), sourcing, and validating that the products can be built effectively by an assembly line. Traditionally, when developing embedded software, “engineers addressed software validation at a late stage in the development process, only testing through emulation on hardware prototypes. Compensating for constraints and errors found in hardware or software at this late stage creates costly delays in the overall development process.” It is time consuming to trace errors back to their root cause. Sometimes in tracing root cause problems engineers discover that they need to largely start over with a fundamental redesign.

Dick’s report goes on to explain what is new in systems engineering, concurrent design, and Product Lifecycle Management (PLM) tools. PLM software has become collaborative and multidisciplinary, capable of creating digital models that companies can reuse across the engineering and manufacturing validation domains, and capable of complex product data management.

Many consumer goods are commodities, which makes having cost effective manufacturing and logistics processes key success factors. But with smart products, value migrates upstream to product design and manufacturing validation. Consumer Goods companies will need to learn a new set of skills to compete in the brave new world of smart products.

Guest Commentary: Reverse Logistics: The Untapped Revenue Stream

Guest Commentary | By Steve Sensing • 08/04/2011

Reverse logistics has become an area of high priority for companies looking to reduce costs, add efficiencies and improve the customer experience. As a result, manufacturers are uncovering the hidden value of returned assets and streamlining return, repair and product reallocation processes.

Once a supply chain afterthought, reverse logistics has evolved into a highly complex endeavor. This is especially true in the hi-tech/electronics sector, where product lifecycles have dramatically shortened, global service networks create more supply chain complexity, products are highly customized to consumer preferences and sustainable practices are increasingly required.

For many companies, the whole reverse logistics/returns management process has been a kind of black hole; a cost center that offers little visibility into which products are in the pipeline, whether they should be repaired, repackaged, restocked, recycled or disposed of in some other way, or whether they belong in the reverse channel at all. However, effectively managing the reverse supply chain has increasingly become more important to the operational and financial performance of companies.

More than ever, companies are using robust, efficient reverse logistics networks to:

Increase velocity
Reduce costs (transportation, administrative, aftermarket support)
Gain service market share
Improve customer service and retention
Meet sustainability goals

Reverse Logistics and Sustainability
Reverse logistics is also intrinsically aligned with sustainability. Instead of carting products to landfills, companies are recovering the value of the assets through a variety of other paths, such as returning to stock, donations, secondary market sales and recycling.

When companies maximize tons per mile, consolidate shipments, reduce returns and optimize product disposition/asset recovery processes, they are simultaneously reducing harmful emissions and energy usage, while increasing profitability and asset utilization.

In today’s markets, the total cost of logistics is increasingly defined in terms of carbon impact. As “going green” becomes a standard business practice, consumers are asking for measurements around climate change impacts, energy consumption and emissions.

More than ever, companies and their suppliers are required to provide environmental scorecards, quantitative environmental performance data and descriptions of sustainable initiatives. The synergy is obvious: end-to-end reverse logistics/product lifecycle management solutions translate into energy savings, provide economic value and strengthen customer relationships.

Advantages of Outsourcing Reverse Logistics
Companies that outsource some or all of their logistics services are looking for better control of their supply chains to drive quality, reduce costs, increase visibility and improve inventory management. For reverse logistics, this means increasing the speed and efficiency of recovering, inspecting, testing and dispositioning returned products.

A growing number of companies are turning to 3PLs to meet those goals. Reverse logistics is well-suited for outsourcing. Unlike forward logistics, it is characterized by uncertainty of supply; no one can easily predict which products are coming back, when they’re coming back or in what condition they’ll arrive in. Adding to the complexity is the customized nature of reverse logistics supply chains, which operate under company-specific rules that can vary for thousands of different SKUs.

Effective reverse logistics management requires a broad range of operational, technical and strategic capabilities including:

Scale and flexibility to meet changing business needs
Industry and geographic expertise
Visibility into the full product life cycle
Refurbishment/distribution center management
Web-based technologies and data integration

If you’re considering outsourcing your reverse logistics operation, here are a few questions you’ll want to answer about the providers you’re considering:

Do they have measurable performance standards?
Do they have the ability to shift fixed costs to a transaction-based environment?
Can they integrate forward and reverse logistics with overall supply chain strategies?
Do they have leverageable infrastructure and transportation resources and move products into secondary markets, e-waste streams or back into the forward supply chain?

As companies consider these and other questions, they should keep in mind the cost reductions, supply chain efficiencies and improved asset recovery rates that a robust reverse logistics network can provide. In the face of ongoing competitive and economic pressures, companies should carefully weigh the benefits of working with trusted supply chain partners to navigate the complex world of reverse logistics/product lifecycle management. By doing so they can establish themselves as leaders in sustainable supply chain management, while at the same time, unlocking the hidden value of reverse logistics, one of the supply chain’s last untapped revenue streams.

Steve Sensing is Vice President and General Manager for Ryder’s Hi-Tech/Electronics vertical, which serves Consumer/Commercial Electronic, Hi-Tech/Semiconductor, Telecommunication, Medical, & Appliance clients in the commercial and consumer arenas. Ryder is a FORTUNE 500 provider of logistics and transportation solutions.

A New Form of Supply Chain Collaboration

Chemical Industry | By Steve Banker • 07/25/2011

Cross functional collaboration has always been a central idea in supply chain management. Today, I will highlight a form of supply chain collaboration that is new to me: supply chain facility design and construction.

When it comes to product development, globalization has led companies to engage in co-development projects with key suppliers. Perhaps the most famous example is Boeing’s 787 Dreamliner passenger jet. Here is a passage from the book “Wikinomics” that illustrates this point:

Deepening supplier involvement has significantly boosted the efficiency of the design process. Bair [Mike Bair who leads the 787 program for Boeing] explains that when Boeing sent the specifications to the electronics supplier for the 777 [the predecessor to the 787] the document was twenty-five hundred pages long. “There wasn’t a lot left to their imagination,” he said. “We told them exactly what we wanted in excruciating detail.” The equivalent specification for the 787 is a mere twenty pages.

“We’ve realized that it’s more effective when the people who are building the parts also do the engineering,” says Bair. “They know better than us how their factories run, and to think that we can design a part that not only serves our needs but is also the most cost efficient for them to produce would be pure guesswork on our part.”

Boeing uses a Product Lifecycle Management (PLM) solution from Dassault Systemes as its worldwide collaborative platform for product engineering across its core supply base. This allows for faster product development cycles because companies can work on their portion of the product at the same time instead of having to do sequential design and testing.

In some ways the 787 is not the best example of collaboration since its launch has been delayed seven times based on the failure of key partners and Boeing has had to negotiate late delivery penalties. The problem occurred on the “build” side of the “design/build” equation. The 787 is made of composite materials that key partners had no experience manufacturing. So, while deeper collaboration remains a clear trend, Boeing’s experience with the 787 also shows the risks of going too far too fast.

When most people think of R&D, they think of product design. There are other industries, however, where designing the manufacturing facility is tantamount to designing the product. You don’t design oil, for example, you design the oil refinery to process the oil. Oil & Gas, Chemicals, and Utilities are all examples of industries where facility design trumps product design. The collaborative platform tools used in those industries are Process Engineering Tools.

ARC recently completed a study on this market and one of the authors, Tom Fiske, spoke at our recent company meeting about a growing type of collaboration occurring in this area. “Now instead of designing a facility and then building it, companies get the design to a certain level of completion and then start building.” As the design proceeds further, more work on the building can be done. This more collaborative process, rather than the traditional sequential one, can shave months off the opening of a large, complex facility.

Cross-functional and cross-enterprise collaboration will remain at the core of supply chain management, and these concepts increasingly encompass a broader value network than what we have traditionally called “the supply chain.” And with the Internet, mobility, and advanced enterprise cloud applications continuing to march forward, we will continue to see new forms of collaboration.

A Front-End Approach to SKU Rationalization

Consumer Packaged Goods (CPG) | By Steve Banker • 08/26/2009

Last month, I wrote a posting on how Walmart is reducing its SKU selection to improve merchandising and reduce complexity. In response, Kate Vitasek, founder of Supply Chain Visions, sent me an article she wrote with Eric Tinker and Shawn Bhimani called “Rationalizing SKU Introductions.”

In her email to me, Kate commented that we should “step back and think of [an] alternative approach. What if companies approached the problem from the other angle of ‘Rationalizing SKU Introduction’ [on the front end] vs. ‘SKU Rationalization’ on the back end? If [companies] can attack it on the front end… that will prevent billions of dollars in waste on the back end.”

When you flip this and think about focusing less on cutting the number of SKUs you already have and more on introducing fewer new products to start with, then we enter the realm of product lifecycle management. The article provides data on how incredibly unsuccessful the vast majority of new product introductions (NPIs) are:

The failure rate of consumer products is 95 percent in the U.S and 90 percent in Europe (Harvard Business Review, Don’t Blame the Metrics, Kevin J. Clancy and Randy L. Stone, June 2005).
Research shows fewer than two hundred of the hundreds of thousands of products introduced over a recent ten-year period earn sales of more than $15 million a year (The Origin of Brands: How Product Evolution Creates Endless Possibilities for New Brands, Al Ries, 2005).
Only 45 percent of new products experience an on-time launch, a key driver in the long-term success and future viability of a product (Industry Week, Failure To Launch, Kill Jusko, Sept. 2007).
At most, only 10 percent of new products are successful after three years (Marketing Management, SURVIVING Innovation, Kevin Clancy and Peter Krieg, April 2003).

Many companies use the stage-gate process to make “Go/No-Go” decisions, using predefined criteria, at defined points in the new product introduction process. To move on to the next stage, teams from different departments must typically complete a prescribed set of related cross-functional tasks at each stage.

Source: Stage Gate International (www.stage-gate.com); click to enlarge

I view SKU reduction programs as a form of complexity reduction, a way to decrease the number of ingredients, components, and subassemblies used to make a product. Ideally, in building the business case, the “product definition and analysis” sub-step would include looking at whether parts (or ingredients) commonly used in making other products can also be used in making the new product.

The article urges that the “Testing and Validation” step include a sub-stage—market testing—that companies often omit. Market testing is a trial production of a product before the company does a full roll-out. “Testing gives a company the ability to obtain a better idea of whether or not the product will succeed in the market and meet these goals,” the authors write. “It also offers the added bonus of being able to demonstrate the potential issues of the product’s marketing, packaging sizes, compatibility, etc. Lastly, market testing allows for collecting end-consumer feedback. By using testing, a company can not only ensure that it only delivers products which stand a chance in the market, but it also helps strengthen the full product launch to be as successful as possible.”

However, being more selective about product introductions, which probably reduces the number of SKUs, is not the full story. This may slow the speed with which the “SKU tank” fills up, but it does not empty the tank when it gets too full. Thus, as the authors state, “products should be introduced with the expectation that they have a finite life and are to be actively managed throughout a defined lifecycle. The lifecycle is criteria-based and considers the total effect on the product portfolio as well as the supply chain. In addition to implementing a defined stage gate process to get products to market, leading organizations actively manage the portfolio and have defined exit strategies for every product (emphasis mine).” What we are talking about here goes beyond new product introductions to encompass managing SKU profitability on an ongoing basis.

The stage gate product innovation process is widely known. In contrast, the process for managing SKUs on an ongoing basis – emptying the SKU tank before it gets too full – has not been written about much. What would this process look like? Does your company have a process for managing SKUs on an ongoing basis? We’d love to hear about it.

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