Explaining Product Development in Production Management!

A successful product development requires a total-company effort. The concept of the Study – Explaining Product Development in Production Management: Standardization – advantages and disadvantages, Simplification, Specialization – advantages and disadvantages, Diversification – advantages and disadvantages, and Automation – advantages and disadvantages. The most successful innovating companies make a consistent commitment of resources to product development, design a new product strategy that is linked to their strategic planning process, and set up formal and sophisticated organizational arrangements for the managing product development process. Also learn, Explaining Product Development in Production Management!

Understand and Learn, Explaining Product Development in Production Management!

The product development process for finding and growing new products consist of eight major steps as explained below;

• Idea generation
• Idea screening
• Concept development and testing
• Marketing Strategy Development
• Business analysis
• Product Development
• Test marketing
• Commercialization

We shall briefly describe these steps:

Following are:

Idea Generation:

It is a systematic search for new product ideas. A company has to generate many ideas in order to find good ones. The search for new products should be systematic rather than haphazard. Top management should state what the products and markets to emphasize. It should state what the company wants from its new products, whether it is high cash flow, market share or some other objective. To obtain a flow of new-products ideas, the company can tap many sources. Major sources of product ideas include internal sources like customers, competitors, distributors, and suppliers. It has been found that more than 55 percent of all product ideas come from internal sources.

Idea screening:

The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding stages is to reduce that number. The first reducing stage is idea screening. The purpose of screening is to spot good ideas and drop poor ones. Most companies require their executive to write up the new product ideas in a standard format that can be reviewed by a new product committee. The write up describes the product, the target market, the competition and makes some rough estimate of market size, product development time and costs, manufacturing costs and rate of return. The committee then evaluates the idea against a set of general criteria.

Concept Development and testing:

Customers do not buy product ideas, they buy the product concepts. The concept testing calls for testing new product concepts with a group of target consumers. After being exposed to the concept, consumers then may be asked to react to it by asking a few questions.

Market strategy development:

The next step is market strategy development, designing an initial marketing strategy for introducing the concept to the market. The market strategy statement consists of three parts:

• The first part describes the target market; the planned product positioning, market share and profit goals for the first few years.
• The second part of the marketing strategy statement outlines the product planned price, distribution, and marketing budget for the first year.
• The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy.

Business Analysis:

Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of its sales, cost, and profit projections for a new product to find out whether they satisfy the company‘s objectives.

Product development:

If the product concept passes the business test, it moves into product development. Here, R&D or engineering develops the concept into a physical product. The R&D department will develop one or more physical versions of the product concept, R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced quickly and at budgeted cost. When the prototype is ready it must be tested. Functional tests are then conducted to make sure that the product performs safely and effectively.

Test Marketing:

If the product passes functional and consumer tests, the next step is test marketing, the stage at which the product and marketing program are introduced into more realist marketing setting. This allows the marketer to find potential problems so that these could be addressed.

Commercialization:

Is introducing the new product to the market.

Tools for Product Development:

The following are various product development techniques adopted by different organizations: 

Standardization:

This means fixation of some appropriate size, shape, Quality, manufacturing process, weight, and other characteristics as standard to manufacture a product of desired variety and utility e.g. manufacture of television sets of standard size of the screen using standard components and technology; shaving blades are made of standard size and shape to suit every kind of razor. The concept of standardization is applicable to all factors of production namely men, materials, machines and finished goods. These standards can become the basis to evaluate the performance of various components of production in the manufacturing process. In the words of Behel, Smith, and Stackman:

“A standard is essentially a criterion of measurement, quality, performance, the practice established by custom, consent or authority and used as a basis for comparison over a period of time. The setting of standards and the coordination of the industrial factors to comply with these standards and to maintain them during the periods for which they are effective is known as industrial standardization”.

According to Dexter S Kimball of production control operation in the manufacturing, the sense is the reduction of any one line to fixed types, sizes, and characteristics.” Standardization becomes the basis of production control operations and works as a catalyst in directing and operating the working of a business enterprise. It identifies and compares various products, systems, and performances in an enterprise. It is the function of the department responsible for designing the product to provide the guidelines and infrastructure for standardization of the whole system keeping into consideration the designing stage towards standardization may be too expensive to be rectified.

For an organization designing the product without considering the standardization, aspect is of no value of significance. Franklin F. Folts has described the concept of standardization as,” simplification of product lines and concentration on a restricted predetermined variety of output is one common application of the principles of standardization may be extended to all factors in the production process”. Standardization is an instrument to manufacture the maximum variety of products out of the minimum variety of components by means of a minimum variety of machines and tools. This decreases working capital requirements and a reduction in manufacturing costs.

Standardization also implies that non-standard items are not to be manufactured except when consumers order them specially. Some standards are enacted by law viz. automobile windscreen which must be made of safety glass. Usually, there are institutions, societies, and governmental departments that regulate the standards. In a factory, it is best to have standardization committee drawing its members from sales, engineering, production purchasing, quality control, and inspection.  Sales department and engineering department have to work closely in effecting changes towards standardization because the older products that have been sold are affected by after-sales service needs. Within an organization, it is the engineering department who sets standards for the materials to be procured and specification of the end products and the mode of testing the products. 

Advantages of standardization:

• Standardization in designing, purchasing of raw material, semi-finished and finished goods and of the manufacturing process tries to eliminate wastage and reduces the cost of production. Reduction in varieties of raw materials means reduced investments in stocks and less attention to stock control.
• Standardize product components reduce tool cost, permits larger and more economical lot sizes of production, avoids losses for obsolescence and reduces capital requirements for work in process.
• Production in larger quantities can be planned which results in fewer set-up costs.
• By minimizing the operations in the production process it provides facility to introduce mechanization and use of more specialized tools and equipment.
• Service and maintenance costs, as well as marketing expenses, are reduced.
• Encourages the manufacturer to products of the new style, use, and performance with an object to generate more customers.
• The value of the standardized product lying in stocks or in stocks or in transit can be easy for the purpose of advancing loans.

Disadvantages of Standardization:

Product standardization leads to some disadvantages also. These are:

• Too much standardization has an adverse effect on the efficiency and morale of the workers. They, in the long run, feel bored and fed-up in doing the same routine again. The spirit of challenge and initiative vanishes with the passage of time.
• During the initial process of product Development where frequent improvements and changes may be necessary to bring the product and production process up to the mark, standardization may create obstacles in innovations.
• For small-scale enterprises, standardization may not be advantageous.

Simplification:

In production, simplification can be done at two places namely (i) for product or) for work. Simplification in product development is used for products; In fact, simplification should be done before standardization.

In the words of F. Clark and Carrie, “simplification in an enterprise connotes the elimination of excessive and undesirable or ‘marginal lines’ of product to hammer out waste and to attain economy connotes the elimination of excessive and undesirable or ‘marginal lines’ of product to hammer out waste and to attain economy coupled with the main object of improving quality and reducing costs and prices leading to increased sales.”

W.R Spiegel and R.H Lansburg also define,” Simplification refers to the elimination of superfluous varieties, size dimensions etc.” Simplification can be advantageous to both producer and the consumer of a product. These can be listed as:

To the producer:

• Eliminates surplus use of materials to provide economy in production cost.
• More production increases the inventory size which avoids delays in supply.
• Less obsolescence of materials and machinery.
• Due to simplification in operation, the efficiency of the production process increase and this leads to more productive due to the scope of better training and learning facility with simplification operation.
• Human efforts become more productive due to the scope of better training and learning facility with simplified operation.
• After-sales service prospects are minimized.
• Production planning and control operations become easy and simple.
• Reduction in cost of production leads to more sales.

To jobber-wholesalers and detailers:

• Increased turn over.
• Sales effort on fewer items.
• Reduction in storage space for.
• Fewer overheads and handling expenditures.

To the consumer:

Explain it to each one with Advantage and Disadvantage, the following are:

Specialization:

Specialization implies expertise in some particular area or field. It is experienced that as the companies expand the range of their products, manufacturing system, involves more and operations for transforming inputs into output. This often results from an increase in operating cost and a decline in profits. The problem can be solved by identifying the products contributing to losses and then eliminate their production. This will lead to confine the production of profitable items only and consequently a reduction in the number of operation required in the process. The minimization of operation can lead to the use of expert knowledge, skill, and techniques in the production system, the nature and the type of product. The operation required manufacturing it and the nature of the market. Specialization implies the reduction in the variety of products manufacturing by the organization.

Advantages of specialization are:

• Specialization and standardization lead to higher productivity.
• In the case of output and reduction in per unit cost of production,
• Savings in the purchase of raw material and improvement in the quality of the finished goods.

Disadvantages of specialization are:

• Less flexibility in adjustment to changed situations.
• Monotony and boredom may adversely affect the efficiency.

Diversification:

It implies the policy of producing different types of products by an enterprise. Thus it is reverse of simplification are associated with the nature of the industry e.g. in the case of capital goods industry simplification is more important as the customers give preference to economy, accuracy and performance of the product, whereas in a consumer goods industry diversification leads to produce a variety of goods in; terms of style, shape, color, design etc. The establishment facing tough competition is forced to diversify this activates to capture the market. In general, diversification can be adopted for the purpose of the market. In general, diversification can be adopted for the purpose of (a) utilization of idle/surplus resources, (b) stabilization of sales, (c) to cope with demand fluctuations and (d) for the survival of the organization.

Due care and precautions should be taken in the formulation of diversification policy. Proper and extensive market analysis at different levels of the quality and quantity of the products should be done to determine the levels of profitability. This will help in selecting the most appropriate diversification strategy under the prevailing circumstances.

Advantages of Diversifications are:

• Increase in sales due to the production of different kind of products. This also leads to an increase in the volume of business.
• Needs of the wider section of the consumer are fulfilled.
• Risk minimization’ in the case of quick and unpredictable demand variations.
• Uniform and balanced production programme can be chalked out without any consideration of wastage by production by-products.
• Elimination of wastage by producing by-products.

Disadvantages of Diversifications are:

• Due to the increase in the number of operations, the production process becomes quite complicated and sometimes expensive.
• Production Planning and control operation becomes complicated and time-consuming requiring extra Efforts.
• The size and the variety of items in; the inventory increases with diversification introducing more problems.
• The worker of different types of skill and expertise is required.

Automation in Business Enterprises:

The concept of automation has brought another revolution in the industrial world. This has resulted in phenomenal growth in the industrial arena by providing a wide range of products with minimum cost and efforts.

Automation implies the use of machines and equipment for performing physical and mental operations in a production operation in place of human beings. Automation can be visualized as an electronic brain with the capacity of taking routine and logical decisions connected with the control and planning functions of management. Routine decisions can be like scheduling, routing, dispatching and inspection of modifications of operations to see that the whole system operates according to the planned strategy.

In the absence of any human intervention or activity, automation can be considered as a self-regulating and controlling system. Mechanization provides the self-regulating property and performing manual operations by means of mechanized operations.

Thus automation can be defined as “A system of doing work where material handling, production process, and product design are integrated through mechanization of thoughts and to achieve a self-regulating system.

In automation, the machines and equipment required to perform various operations process are sequents arranged in order of hierarchy of operations. Electronic devices are used to record, store and interpretation of information at various stages of production. Machines are used to operate other machines.

Automation can be done at various levels of the manufacturing system in parts or as a whole. Some of the situations can be:

• Handling of raw materials, semi-finished goods or finished goods. Instead of doing the work manually the operation can be done by means of trolleys, conveyor belts, overhead cranes, lifts etc. This eliminates chances of losses due to handling and saves valuable time.
• Sophisticated, reliable and efficient machines and equipment can be used in the production process. This will ensure both the quality and quantity of the product desired.
• Inspection and quality control operations can be done by means of mechanical devices. This eliminates the chances of human bias and error.

Use of machines and equipment in automation ensures production of high-quality products at minimum cost. This also increases the confidence of consumers in the product and stabilizes the demand for the product. There is a general fear that automation leads to unemployment. But on the other hand operation of machines and equipment in the system need highly skilled and qualified manpower. So the technical skills of the system increase with the reduction in size. It goes without saying that automation ensures the high level of efficiency and capacity utilization.

Advantages of automation are:

• Better quality of goods and services,
• Reduction in direct labor cost,
• Effective control of operations,
• Greater accuracy, more output, greater speed,
• Minimization of waste,
• Production planning and control is to be done in the beginning only,
• Working conditions can be improved greatly since much of the work follows an orderly path,
• The waste does not come into much contact with the equipment; also the design of the special purpose equipment is usually superior to that of general purpose equipment. This improves overall safety considerably,
• Direct and indirect costs, Inventories, Set-up times and lead times are all reduced. Space and equipment utilization is improved,
• Since the human inputs in the production are minimized, the quality is also improved. Human beings are more erratic than machines,
• Throughput time is reduced and therefore service to the customers is enhanced.

Disadvantages of automation are:

• High capital investment,
• High maintenance costs and requirement of the labor of high caliber,
• Requires highly skilled manpower,
• Can create unemployment,
• Scheduling and routing operations are difficult and time-consuming,
• Restriction in designing and construction of buildings,
• Larger inventories,
• Continuous power supply,
• Automation equipment is highly inflexible i.e. if a new product is to be introduced the existing equipment may have to be salvaged entirely,
• Any break down anywhere would lead to complete shut-down.