New product development core process covering the complete commercial process, from quotation to project termination increased product margins.
The client is part of a large international conglomerate which develops customer-adapted products. This part manufactures electronic components to cars. Although the expected product lifecycle including stock keeping of spare parts exceeds fifteen years, the target market has a short period of handling quotations. In addition, profitability depends heavily upon the ability to initially offer the right price.
Mantec was brought in to analyse and improve the handling quotations and product development process. The total amount of risk associated with these processes was estimated to be several million dollars.
During an intensive pre-study period of three weeks, management from all levels was interviewed, processes were mapped, management information systems were analysed and the organisation’s view on management and leadership evaluated. Furthermore, statistics regarding cost relations and trends were processed.
Using the results of the pre-study as a base, the company and Mantec jointly entered into a project to develop and implement new processes and new methods of working. Key focus areas were:
- project startup – the transfer of objectives and processes from a product development project to production;
- material management – material dictates the majority of product cost;
- investments – how to approach and control project-related investment;
- alterations in description – how to prevent internal and external conditions and variations adversely affecting the management of a project; and
- project follow-up – costs and revenues derived from the project are central but even more important is to monitor the future profitability of the product being developed.
Workshops led by Mantec carried out process-mapping of:
- the progression from customer demand to internal decision making, to customer offer and finally negotiations and contracts;
- transfer between project organisation and operations; and
- project management and management information systems.
Problems and bottlenecks in the processes soon became evident and were the result of:
- lack of explicit specifications;
- vague interfaces;
- lack of distinct procedures when transferring project between units;
- indistinct responsibilities and authorisations; and
- insufficient follow-up.
The outcome of the project was a new core process covering the complete commercial process, from quotation to project termination, which was accepted and welcomed by the company’s highly committed management staff.
In addition, a new management report for continuous follow-up of profitability of projects and products was created, and to strengthen internal business culture, a training and coaching programme for project managers and assistant managers was designed and implemented.
The main benefits brought to the company by the successful implementation of the project were:
- increased process reliability, by controlling all activities from start to end;
- increased understanding of which internal and external factors affect successful product development project; and
- increased ability, through continuous follow-up on these factors, for management to act when deviations occur.
The combined effect of these benefits was that contribution margins increased, both on the products already in production and the products scheduled to be produced.