Reasons for redesigning:

• Economic reasons (cost pressures, low demand, etc.)

• Social/demographic reasons (shift in market segments)

• Legal/political reasons (safety issues, standards, etc.)

• Competitive reasons (competitor’s new products, etc.)

• Cost/availability reasons (improvement opportunities)

• Technological reasons (obsolescence, incompatibility)

4 Phases of the Product Life Cycle 

1. Introduction 

Product is new to the market. Sales may start off slowly and heavy promotion may be needed to 

• Create awareness 

• Encourage sales 

• Develop an image 

2. Growth 

As sales increase, the firm will produce more items and use capacity better. The firm will be operating more efficiently, which could bring unit cost down. 

• If the market is lucrative, new competitors may try to enter the market and pose a threat to the company's sales. 

3. Maturity 

Sales will stabilize and remain constant. Promotion will still be needed to remind people why the product is so good. 

• Cash flow will be positive and profits will be made. 

• Often money from mature products is used to support products in development or newly introduced products. 

4. Decline 

The final stage is the decline where sales start to fall. 

At this point the firm can: 

• Withdraw the product 

• Wait for competitors to withdraw products

• Use extension strategies 

What Is Innovation? 

• Historically a lot of companies have defined innovation rather narrowly as product and technology. 

• Innovation is the brand in addition to the product

  • It’s the design of shopping and usage experience, in addition to functional attributes or benefits

  • It is the business model

  • The way we go to market and supply chain

  • The way we create a cost structure 

Innovation Review Process 

• All the critical players and leaders are there, the right people all in the same place at the same time. 

• We try to integrate the innovation strategy program and process with the business goals, strategies, and processes. 

• If we aspire to grow x percent over the next five years, do we have the innovations in development that will actually deliver that growth in the marketplace. 

• How does our innovation program and strategy stack up against our best competition? 

• What will it take to deliver the stream of innovation through development, through qualification, through commercialization to the actual marketplace. 

Role of CEO in Innovation 

• Are we on strategy? Once we have chosen a business strategy and an innovation strategy to make sure that what we’re doing is very closely aligned with that strategy. 

• Push hard to identify and address any killer issues. I want to do the hardest thing first. 

• I ask a lot of question about resources. 

New Product Development:

1. Idea generation

• New Ideas 

• Reverse engineering competitors product

• Research and development

2. Feasibility analysis

• Can we do it?

  • Analysis of different aspects

3. Product specifications

• Detailed description of product

4. Process specifications

• How to manufacture a given product

5. Prototype development

• Make a prototype and identify weaknesses and adjust process

6. Design review

• Finalize design. Make any necessary changes

7. Market test

• Test product in field with customers (first customer contact)

8. Product introduction

• Launch, promote, and advertise

9. Follow-up evaluation

• Monitor product performance, competitors, customer complaints

Job Shop (Manufacturing process)

• Small scale production 

• High variety

• Not constant production

• Highly skilled workers 

• Flexible

Batch Production (Manufacturing process)

• Production in groups

• Changeovers/retooling may be required

• Low production volume

• High variety

• Specialized production equipment

• Less skilled workers

Repetitive Production (Manufacturing process)

• High production volume

• Low product variety

• No customization

• Continuous flow of production

• Production flow follows a line

• Low flexibility equipment 

• Unskilled labor

Continuous Production (Manufacturing process)

• High production volume

• Minimal product variability

• Low equipment flexibility

• Production almost never stops

Push System vs Pull System

Push System

• Make product BEFORE receiving customer order

• Is based on demand forecasts

• MTS: Make to Stock

Pull system

• Make product AFTER receiving customer order

• Reactive, waits for customer order

• Production begins from scratch

• No finished goods inventory

Facility Layout: Layout of facility with a goal to optimize work flow

• Facility layout determines how fast products and customers move through your facility 

• Product flows are connected to cash flows, so if product flows speed up then cash flows also increase. Facility layout directly affects your cash flow 

• Space utilization: Unused space loses money 

• Fast work flow: Faster product flow = faster cash flow

• Smooth work flow: People that go through your facility move through at a constant rate 

• Elimination of bottlenecks: Bottlenecks stop or slow down the work and cash flow 

• Occupational health and safety: You need to take OSHA guidelines into account to mitigate issues 

• Flexibility: Facility should be set up to accommodate these changes.  

• Easy maintenance 

Product Layout: Standardized processing operations 

• Every product follows the same path through the facility 

• Equipment is specialized for the product 

• High initial investment but high production volume to recover the investment 

Example: A fast food drive-through. Every customer goes through same process 

Pros:  

• High production volume 

• Low unit cost 

• High equipment utilization 

• Low skill requirements (Easy to schedule work) 

• Easy to calculate costs, manage and purchase inventory 

Cons: 

• Low employee morale (boring repetitive work) 

• Lack of flexibility 

• Susceptible to shutdown (If 1 part shuts down, all production stops) 

• Difficult to incentivize workers 

Process Layout: Varied process requirements 

• Each machine has a fixed place in the facility 

• Similar operations are placed together 

• Machines are general purpose and can be used for multiple products 

• Each product follows a different path from machine to machine depending on requirements. 

Example: A food court. Group similar restuarants together  

Pros: 

• Able to make a variety of products  

• Not vulnerable to local failures. Product can go to other stations if one station is broken.  

• Equipment is less costly 

• Easy to incentivize workers 

 Cons: 

• Higher inventory costs 

• Harder to schedule route and schedule production of product 

• Products and/or customers move slower 

• Lower volumes and higher unit costs 

• Lower equipment utilization 

• Difficult to manage costs, purchasing and inventory 

Fixed Position Layout: Pro Production stays stationary while workers, equipment, materials are moved around it 

Example: A boat being built in a wood shop. The boat doesn’t move as the workers build it. 

Standardization vs Customization: 

Standardization: Lack of variety in products / services 

What can be standardized: 

• Products / Services 

• Processes 

• Facilities 

• Parts, Supplies, Equipment 

Pros: 

• Fewer parts to deal with 

• Reduced training cost/time 

• Easy purchasing/handling/inspection routines 

• Orders fillable from inventory (Customer can only order one thing)

• Money saved from having fewer parts allows increased expenditures in other areas like design, quality control, etc 

 Cons: 

• High cost to change the design leads to you being less likely to change imperfections in the product 

• Decreased variety in product leads to less consumer appeal 

Mass Customization:  Standardized products with some degree of customization 

Capturing the best of: 

• Mass production (Low cost) 

• Craft production (customization) 

 Delayed Differentiation 

• Produce and store products that are half finished 

• The half-finished products can then be made into many different finished products 

• Once the customer orders product, the company can then finish the half-done product to the specification of the customer  

 Modular Design: 

• A form of standardization in which parts are grouped into modules that are easily replaced or interchanged 

• Assemblies can be combined in different ways 

• Multiple configurations 

Computer-Aided Design (CAD): Product design using computer graphics 

 Pros:  

• Increased designer productivity 

• Easy to revise 

• Easy to analyze designs 

• Integrated engineering and cost analyses 

Automation: (Technology, machinery, etc.) 

Pros:  

• Lower variable costs 

• Consistent quality 

• Efficiency creates availability 

• No feelings to deal with 

 Cons: 

• High fixed costs 

• Lack of flexibility 

• High maintenance costs 

• Can become out of date