Developing a new product is always an exciting process but it does present some challenges. Once a product is well defined, with features and functionality that meet the expectations of its target market, the preliminary design phase begins. In this article, we will see how product development and sourcing strategy are intimately linked throughout the realization process.
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The Preliminary Design
It is exciting to propose a new product, but before doing so, it is important to spend the necessary time engineering and designing the product to define the inventory of components and materials needed for its production. Collaboration with suppliers in the product development process then allows for a quality product to be designed at a lower cost.
The objective is to design a product that meets the customer’s needs and that will ideally simplify its manufacture and assembly. The time spent in this will further reduce production costs and contribute to the desired standardization. This effort will have a direct impact on future purchasing volumes.
The volume of components purchased determines the design choices. A large production volume will allow the use of manufacturing processes that require a greater investment at the beginning but will generate a reduction of the part cost later on.
As we have just seen, the involvement of suppliers in the product development process is essential. The more complex it is, the earlier they should be involved in the process to give their opinion on the suitability of the components according to the processes selected by the development team. Suppliers can also propose modifications to optimize the added value of the product. With less assembly or subcontracting, the cost of manufacturing the product will be lower.
Procurement Issues
Supply management must therefore be integrated into the product development process to facilitate operations: from a strategic point of view, the availability and costs of the various components are evaluated and compared among the selected suppliers. The quality of the parts as well as the expertise and alternative solutions proposed by the suppliers in case of stock shortages or production stoppages play a determining role in the final choice.
Lower prices are not just a guarantee: a higher quality, more expensive component may also save on some of the manufacturing or assembling costs that occur while creating the new product. For example, a local supplier specializing in plastics could be considered preferable to a competitor with competitive pricing and less expertise in the manufacturing process. The place of manufacture and the costs related to the production logistics thus influence the purchasing decisions.
Design-to-Cost
Traditionally, the product was first designed and then priced. To improve or modify the initial design to facilitate the manufacturing of the product, Design-to-Cost is now a tool to consider. This organizational methodology makes it possible to integrate cost management into the decision-making process from the product design phase.
To design the right product at the right price with reduced costs, the customer’s expectations regarding functionality and quality are a priority. Thus, quality or performance are not affected. However, the profitability and the perceived value of the product increase considerably.
Purchasing managers have a good knowledge of prices and technical solutions and, as they are used to working with suppliers and several departments, they play a fundamental role in its elaboration. If this methodology appeals to you, our Merkur experts organize Design-to-Cost workshops and can help you with your project !
Conclusion
Purchasing the various components needed to develop a new product always raises the question of cost. In this article, you have seen that product design and supply management determine the profitability and value of the project. If you too have product development projects, our team of experts will be happy to assist you. Do not hesitate to contact us!
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MERKUR is a firm of experts in manufacturing performance and innovation and has been doing so for over 25 years. From strategy to execution, its sole objective is to make Quebec’s manufacturing companies more efficient by offering innovative solutions in product development, operational excellence, manufacturing engineering, automation and smart factory. Merkur is proud to contribute to innovation and productivity in Quebec!
KHROME PRODUCT TRANSPORT is a manufacturing integrator located in Drummondville specialized in the design and manufacturing of train car interiors and exteriors. Its strength comes from its great engineering capacity and its manufacturing agility. Among its customer portfolio, there are major manufacturers such as Alstom, Bombardier Transportation and Kawasaki Rail Car.
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