Step 7.7

Review costs using preliminary bill of materials.

Navigate Findings

Primary findings

Methods

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.
(View full citation)

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
(View full citation)

Performance Drivers: One is the Quality of Execution. Eight activities distinguish best from worse performers: 1) Conducting a post-launch review (8.2); 2) Assessment of product's value to business (2.1); 3) Test market or trial sell to a limited set of customers (7.13); 4) Concept testing to determine customer reaction to product and gauging purchase intent before Development begins (4.11); 5) Idea Generation (1.3); 6) Customer tests of products under real-life conditions (6.3); 7) Detailed market study/research or Voice of the Customer (4.3, 4.13); 8) Pre-launch business analysis (7.7, 7.8, 7.9).
A quantitative survey of 105 business units, supported by team's experience in NPD modeling, consultation, application and analysis.
(View full citation)

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.
(View full citation)

Measures

Computerized methods of materials selection include Computer Aided Material and Process Selection (CAMPS).
Authors experience in industrial engineering, physical medicine and rehabilitation, and as Editor-in-Chief of the International Journal of Industrial Engineering.
(View full citation)

Tips

Guidelines for materials selection: — It is best to group materials related to principal shape generating processes used in discrete parts manufacture; — For initial material searches look at material categories rather than specific materials which is sufficient for early process/material decision-making. — For each process, it is best to have a super material that offers the best attainable properties of all materials in that category. Material trade-offs within the process can be made at a later date. — As detailed part specifications become available, one can eliminate the excess process and materials options. The final choice is usually one optimal material and the most compatible process. — Minimize material costs by using available mill forms, standard stock shapes gauges, grades and formulations whenever possible. Consider using pre-finished materials and match materials to functions.
Authors experience in industrial engineering, physical medicine and rehabilitation, and as Editor-in-Chief of the International Journal of Industrial Engineering.
(View full citation)

Higher levels of sophistication in capital budgeting are associated with new product development success.
Survey with significant findings.
(View full citation)

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.
(View full citation)

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)