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The second issue is the huge swing to a high profit on introduction of the product. The company would like to make this as high as possible and as steep as possible (Figure 6).
Figure 6: The profit and sales cycles for a typical product’s introduction, maturity and decline, highlighting the introduction and growth phases.
A higher graph suggests larger profits and a steeper graph will increase the length of time the product stays at a premium market price before decline in profits occur. There are two ways to do this:
- Early, or if possible, first entry into the market. Again, a fast development process is required, and this aspect is described above.
- Good promotional activity of the right product. An awareness of the market and its customers is required to highlight potential market sectors for product launching. This information would be provided by marketing functions, but the development team is responsible for:
- Ensuring the product only satisfies the requirements of the customer. Development time and cost can easily be wasted on adding unnecessary functions to a product.
- Ensuring the developed product is of the best quality. This is a powerful product differentiator that improves a company’s reputation, sales margins, price potential and product sales life. A poor quality product can have a disastrous effect.
These both add up to ‘total customer satisfaction.’ Tools such as QFD would be useful here—this will be described in later columns.
Issue 3
The third is the slow decline in profit as the product matures and declines (Figure 7).
This is inevitable, as the price will reduce to sustain sales when the competition increases and undercuts your own prices. Reducing the manufacturing costs would maximize the profits at this stage and allow sales functions flexibility when promoting the product. Tools such as Lean Manufacturing would be helpful here[6].
Figure 7: The profit and sales cycles for a typical product’s introduction, maturity and decline, highlighting the maturity and decline phases.
Requirements List for the PLC Process
We can now derive a list of requirements for an organization’s PLC process.
1. Develop the Right Product: We must first make sure we understand the market we are introducing our products to. The marketing functions must make sure it is the right market and provide added value if we are competing with other similar products. The development team must provide correct functional specifications with any options offered to ensure the development energy is focused on the right product. They must benchmark against competitor’s products if available.
2. Fast development process: Once we know what the product is supposed to do we must develop that product as quickly and cheaply as possible.
3. Cost-effective manufacturing process: If the product is cheaper to manufacture than the competitors’ products, there will be greater profit margins, a faster ROI, and more scope for sales functions to undercut competitors.
4. Quality products on time, every time: The aim is to provide total customer satisfaction.
For PLC to work cost-effectively, we need to use appropriate tools to increase the efficiency. What some of these tools are, and the areas where they can be applied in relation to the flow chart (Figure 8), is the subject of new product introduction tools, to be discussed in future columns. Stay tuned!
Figure 8: Flow chart of a typical product development process.
References
1. To be covered in column #21, the “10-Step Business Plan.”
2. Functional specifications will be covered in Column #16, “QFD.” (September).
3. Benchmarking will be covered in more detail in Column #13 (August 2016).
4. Break-even time will be covered in Column #14, “ROI-BET.”
5. DfM will be covered in more detail in Column #10, “DFM/A.”
6. Lean Manufacturing will be covered in Column #23.
Happy Holden has worked in printed circuit technology since 1970 with Hewlett-Packard, NanYa/Westwood, Merix, Foxconn and Gentex. Currently, he is the co-editor, with Clyde Coombs, of the Printed Circuit Handbook, 7th Ed. To contact Holden, click here.
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