Supply Chain

A Proactive Partnership for New Product Introduction: Design and Supply Chain

Joe Kelly and Andy Schramm

While warning letters issued by the U.S. Food and Drug Administration may not be anyone’s idea of fun, when it is focused on the supply chain, it provides an inflection point around which companies can rally to take an introspective look at their supply chain business process. One key area to explore for manufacturers, regardless of industry, is the new product introduction (NPI) process.
All too often, suppliers are selected during the NPI process due to unique capabilities, personal relationships and geographic proximity as opposed to solid
data and information on the supplier’s capability to meet and deliver on precise specifications and performance requirements.

Joe Kelly

Main Areas of Supply Chain Risk in the NPI Process

Before beginning, it is important to define the current and future state of your company’s process flow and outline the main areas of risk during the NPI process. Key questions to ask include:

• Is there involvement from your supply chain team at the beginning of the process?

• Who actively sources components? Is it the design team or the purchasing team?

• Does the supplier have the capacity to meet future quality, delivery and volume demands?

• Does your company have visibility to know the supply base, component mix or competency?

• Upon product launch, will you be prepared with proper inventory levels, a predictable lead time and well-established supplier relationship?

These are some of the areas that can cause a back-end conundrum for a firm’s supply chain group, which manages the strategic and operational sourcing and external audits of all suppliers and components. Without reviewing these, a component may be single-sourced by a “do not use” or “phase out” supplier, or by a supplier who did not have an adequate quality system, leaving the manufacture at risk of quality and reliability issues in the future.

However, if the time is taken to evaluate the capabilities of suppliers and select those during the NPI process that present the lowest risk, additional cost and time associated with resovling supplier issues or potentially finding alternative sources of supply can be avoided. So, what are the steps an organization can take to have a successful NPI process, while mitigating supply chain risks?

Andy Schramm

Early Bird Gets the Worm; Participation from the Start

At the beginning of any new product development, it is important to engage and solicit active participation from the organization’s supply chain professionals during the selection process. By partnering with the supply chain team, design engineers can focus on the technical requirements and testing, while supply chain professionals determine the appropriate suppliers to fit the new conceptual component needs.

The first step in creating a more efficient NPI launch is to streamline the communication and information flow. It is important to align the organization’s supply chain review (SCR) process to the NPI phase gate product development process (NPI PDP) to integrate and balance the requirements of both teams with respect to component capabilities, supplier qualifications, manufacturing assessments, sales and operations planning, and product launch.

By formulating an SCR process that parallels NPI PDP, a unique collaboration between key stakeholders, design and supply chain is established from the initial planning stage, which is critical to new product launch and manufacturing quality control. In each phase of the SCR, critical elements are presented and reviewed at “gate checks” with senior management in conjunction with the design team prior to moving forward. By implementing the SCR alongside NPI PDP, accountability and responsibility is driven, tasks are finished and aligned, and speed to market is increased. Even more important, upon product launch, the supply chain model is sustainable and efficient.

Advantage of a Solid Database

Another weakness that many organizations experience is the lack of data and information on supplier performance. To drive improvement and establish a solid supply chain foundation from the start, organizations need a clear, comprehensive, well-defined matrix/database listing all of the suppliers, components, competencies and performance.

Supplier and Component Library

Develop an internal supplier database that links supplier segments (i.e., partnership, phase out, etc.), risk scores, and supplier competencies (i.e., electronics, plastics, etc.) into a searchable index. By creating this library of purchasing information, the sourcing process becomes more streamlined and the information available provides better sourcing decisions. This tool should be made available to all employees and used during the first phase of SCR, supply definition.

For example, if your company needs to source a new electronic component, the buyer could reference the library and search under the competency “electronic” to determine current qualified suppliers, the components that have been manufactured for you, and the most recent performance metrics. All of this information combined allows for an informative decision when preparing and issuing a request for information or request for quote.

Countdown to Product Launch

With a robust and integrated SCR/NPI process established, the supply chain team will have advanced notification of new products and a clear understanding of requirements at the development stage and

ramping up to production. Combine this with information from sales and operations planning meetings to understand demand requirements. The supply chain organization is now armed with the necessary information to finalize contracts, establish the bill of materials and create the necessary component inventory levels to ensure successful production.

Overall Benefits of an Integrated NPI Process

Developing an integrated, collaborative NPI process that includes the organization’s supply chain early in the process can lead to numerous benefits. Among them is a reduction in the risk associated with selecting the wrong supplier as a partner earlier in the selection process thus reducing the size and scale of supply chain issues during production. Additionally, benefits also are realized through:
Integration of NPI phase gate processes and supply chain review, which:

• Results in clear processes and coordination; and

• Allows for upfront supplier selection to ensure technological requirement, supplier quality audits and non-disclosure agreements.

The benefits are:

• Mitigation of supplier selection risk; and

• Ability to prepare for manufacturing and new product launch.

Development of a supplier database:

• Creates the ability for the entire organization to clearly view in summary form all the components and those suppliers capable of producing it; and

• Provides key supplier and component reports including supplier and component risk score, supplier segment and performance information.

The benefits are:

• Real-time information that is relevant and critical to making the appropriate prototyping and/or production sourcing decisions; and

• A focused supplier selection process to make an informative selection.

Preparation for market penetration regarding inventory, demand planning and sales forecasting:

• Ensures inventory stock levels are determined in advance, volumes allocated and bill-of-material established; and

• Ensures demand planning is established based upon sales/marketing analysis.

The benefits are:

•Inventory and system planning are ready for product launch and manufacturing volumes; and

• Clear lines of communication are developed for future sales and operations demand planning.

Organizations that implement an integrated NPI process including participation from the supply chain organization are able to hedge against future eruptions and non-conformances. By cooperating throughout the entire process, the design and supply chain team have established a relationship that will promote the initial market launch and assist as the product grows, develops and matures. The value of this internal partnership ultimately will translate to the product’s integrity and the customer’s perceived value, thus enhancing the organization and its market value.

Andrew Schramm is a partner at Tefen USA with more than 20 years of successful domestic and international experience in a variety of management, operations consulting, program management and engineering environments. Joe Kelly is a director with Tefen USA’s general manufacturing division. He has a 20-year combination of operations management and consulting experience with an operational background centered on the medical device and aerospace industries.