Step 7.3

Estimate market needs and costs for production.

Primary Findings

Secondary Findings

Primary findings

Barriers

Enterprises rarely innovate without regard for economics, profit, etc. Orphan conditions are under-addressed due to lack of financial incentive.  
Case study findings
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Carriers

Decreases to any costs of production present new opportunities for innovation.
Research conclusions from conceptual framework
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Models

Design manufacturing integration is positively associated with NPD project efficiency, if product design and manufacturing personnel act in truly cooperative ways, overall project efficiency should increase.
Survey of 137 completed NPD projects. The degree of design and manufacturing integration significantly differed across the project groups in the expected direction.
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Methods

By using templates, the time required for new product development is drastically reduced. At the same time incorporating computer-aided process planning into the system gives the designer a better understanding of the cost implications of the modified design with respect to manufacturing. The major challenge in implementing of such system is that any changes in the manufacturing facility have to be incorporated in the process plans stored. This can be a tedious job but can be overcome by using hybrid process planning approach instead of variant based approach.
Author experience
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Cost Estimation — A product's costs include development, manufacturing, advertising, selling warranties and replacements. Relevant cost definitions include: Capital Cost — cost of borrowing money to finance entire development, production, commercialization process. Direct Cost — costs clearly traceable to a unit of output in terms of device or service unit. Manufacturing Overhead Cost - all costs excluding direct materials and direct labor. Prime Cost — total of direct material and direct labor.
Authors experience in industrial engineering, physical medicine and rehabilitation, and as Editor-in-Chief of the International Journal of Industrial Engineering.
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Create and maintain high levels of integration between Marketing and Research & Development functions and product prototype development, product launch and cycle times will all have increased proficiency. Market forecast accuracy and technological core competency fit will also be improved with function integration. Be sure to implement integration at step 4.1.
Survey. A multiple regression analysis revealed significance between integration and: product prototype development proficiency (F=70.80); product launch proficiency (F=122.74); product development cycle time (F=13.84), market forecast accuracy (F=75.65); and technological core competency fit (F=39.64), all interactions significant at the p<.001 level.
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Exxon/Mobil lists a key lesson as: Properly resource roll-outs of NPD work processes to avoid false starts; otherwise there may be fits and starts of activity with gaps in between because of resource problems.
Industry experience.
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Organizations should have coherent administrative procedures, including information-gathering systems reviewing new opportunities; flexible capital budgets that extend beyond two years; up-to-date capital budgeting manuals; full time capital budgeting staff; regular reviews of hurdle rates; and a capital appropriation committee to vet projects.
Survey with significant findings
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Process planning task involves the development of a set of work instructions used for part transformation from its initial to final form. In the proposed system, the process plan module provides detailed information and description of manufacturing processes and machine tools required. The information includes: list of required machines; specific cutting energy for the work material; standard set-up and tear down times; number of tools required; and cost per hour of operation. A search heuristic is developed for the selection of appropriate process plan. If a process plan is not found in the database, a new process plan will be generated based on the defined design features, dimensions and required tolerance for finished product. The information from the developed process plan is used to calculate the manufacturing time and cost.
Author developed template
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Product Demand Forecasting — helps an organization effectively manage issues including: monthly/quarterly/annual sales targets; estimating inventory on hand to meet orders without an excessive backlog; estimating raw materials necessary to meet manufacturing targets and deadlines; projection of time line for acquiring and stocking materials inventory for manufacturing; estimating labor force (workers, managers, technicians) required to commence and complete production schedule detailed above; effects of monetary value of forecasted activity on company's operating capital and profitability.
Authors experience in industrial engineering, physical medicine and rehabilitation, and as Editor-in-Chief of the International Journal of Industrial Engineering.
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Sound evaluation methods are needed for new product success, including strategic screenings of new product proposals; utilization of market research; and primary and secondary valuation using a variety of methods such as net present value or Payback.
Survey with significant findings.
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Tips

Higher levels of sophistication in capital budgeting are associated with new product development success.
Survey with significant findings.
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If operating as a defender, a company who focuses on existing products and stable markets, pay close attention to lowering costs and price in order to improve new product development performance.
Survey. The cost/price driver for NPD performance improvement was found to be significantly greater for defenders than for prospectors.
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Secondary findings

Barriers

Financial evaluation dilemma — Flimsy data may result in the elimination of potentially successful projects. However, failure to evaluate at an early stage (using any and all available data) results in new product development failure.
Source: Hayes & Abernathy, 1980; Hayes & Garvin, 1982; Pearson, 1986. In: Neale, C.W. (1994)

Methods

Use of methods such as design for manufacturing (DFM) to encourage the integration of product and process design decisions has been associated with lower product costs and better conformance quality.
Source: Youssef (1994), Swink (2002), Sanchez and Perez, (2003). In: Swink, M., Talluri, S., & Pandejpong, T. (2006)