Product Development

A successful product development requires a total-company effort. The most successful innovating companies make a consistent commitment of resources to product development, design a new product strategy that is linked to their strategic planning process, and set up formal and sophisticated organizational arrangements for managing product development process. The product development process for finding and growing new products consist of eight major steps as explained below;

  • Idea generation
  • Idea screening
  • Concept development and testing
  • Marketing Strategy Development
  • Business analysis
  • Product Development
  • Test marketing
  • Commercialization

We shall briefly describe these steps:

Idea Generation: It is a systematic search for new product ideas. A company has to generate many ideas in order to find good ones. The search for new products should be systematic rather than haphazard. Top management should state what the products and markets to emphasize. It should state what the company wants from its new products, whether it is high cash flow, market share or some bother objective. To obtain a flow of new-products ideas, the company can tap many sources. Major sources of product ideas include internal sources like customers, competitors, distributors and suppliers. It has been found that more than 55 percent of all product ideas come from internal sources.

 Idea Screening: The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding stages is to reduce that number. The first reducing stage is idea screening. The purpose of screening is to spot good ideas and drop poor ones. Most companies require their executive to write up the new product ideas on a standard format that can be reviewed by a new product committee. The write up describes the product, the target market, the competition and makes some rough estimate of market size, product development time and costs, manufacturing costs and rate of return. The committee then evaluates the idea against a set of general criteria.

Concept Development and Testing: Customers do not buy product ideas, they buy the product concepts. The concept testing calls for testing new product concepts with a group of target consumers. After being exposed to the concept, consumers then may be asked to react to it by asking a few questions.

Market strategy development: The next step is market strategy development, designing an initial marketing strategy for introducing the concept to the market. The market strategy statement consists of three parts:

  • The first part describes the target market; the planned product positioning, market share and profit goals for the first few years.
  • The second part of the marketing strategy statement outlines the product planned price, distribution and marketing budget for the first year.
  • The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy.

Business Analysis: Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of its sales, cost, and profit projections for a new product to find out whether they satisfy the company‘s objectives.

 Product development: If the product concept passes the business test, it moves into product development. Here, R&D or engineering develops the concept into a physical product. The R&D department will develop one or more physical versions of the product concept, R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced quickly and at budgeted cost. When the prototype is ready it must be tested. Functional tests are then conducted to make sure that the product performs safely and effectively.

 Test Marketing: If the product passes functional and consumer tests, the next step is test marketing, the stage at which the product and marketing program are introduced into more 37 realist marketing setting. This allows the marketer to find potential problems so that these could be addressed.

 Commercialization: is introducing the new product into the market

 Standardization: This means fixation of some appropriate size, shape, Quality, manufacturing process, weight and other characteristics as standard to manufacture a product of desired variety and utility e.g. manufacture of television sets of standard size of the screen using standard components and technology; shaving blades are made of standard size and shape to suite every kind of razor. The concept of standardization is applicable to all factors of production namely men, materials, machines and finished goods. These standards can become the basis to evaluate the performance of various components of production in a manufacturing process. In the words of Behel, Smith and Stackman:

“A standard is essentially a criterion of measurement, quality, performance, practice established by custom, consent or authority and used as a basis for comparison over a period of time. The setting of standards and the coordination of the industrial factors to comply with these standards and to maintain them during the periods for which they are effective is known as industrial standardization”

According to Dexter S Kimball of production control operation in the manufacturing sense is the reduction of any one line to fixed types, sizes and characteristics.” Standardization becomes the basis of production control operations and works as a catalyst in directing and operating the working of business enterprise. It identifies and compares various products, systems and performances in an enterprise. It is the function of the department responsible for designing the product to provide the guidelines and infrastructure for standardization of the whole system keeping into consideration the designing stage towards standardization may be too expensive to be rectified.

For an organization designing of the product without considering standardization aspect is of no value of significance. Franklin F. Folts has described the concept of standardization as,” simplification of product lines and concentration on a restricted predetermined variety of output is one common application of the principles of standardization may be extended to all factors in the production process”. Standardization is an instrument to manufacture maximum variety of products out of minimum variety of components by means of a minimum variety of machines and tools. This decreases working capital requirements and reduction in manufacturing costs.

Standardization also implies that non-standard items are not to be manufactured except when consumers order them specially. Some standards are enacted by law viz. automobile windscreen which must be made of safety glass. Usually there are institutions, societies and governmental departments that regulate the standards. In a factory, it is best to have standardization committee drawing its members from sales, engineering, production purchasing, quality control and inspection. Sales department and engineering department have to work closely in effecting changes towards standardization because the older products that have been sold are affected for after-sales service needs. Within an organization, it is the engineering department who sets standards for the materials to be procured and specification of the end products and the mode of testing the products.

Advantages of standardization

  • Standardization in designing, purchasing of raw material, semi finished and finished goods and of the manufacturing process tries to eliminate wastage and reduces the cost of production. Reduction in varieties of raw materials means reduced investments in stocks and less attention to stock control.
  • Standardize product components reduce tool cost, permits larger and more economical lot sizes of production, avoids losses for obsolescence and reduces capital requirements for work in process.
  • Production in larger quantities can be planned which results in less set-up costs.
  • By minimizing the operations in production process it provides facility to introduce mechanization and use of more specialized tools and equipments.
  • Service and maintenance costs as well as marketing expenses are reduced.
  • Encourages the manufacturer to products of new style, use and performance with an object to generate more customers.
  • The value of the standardized product lying in stocks or in stocks or in transit can be easily for the purpose of advancing loans.

Disadvantages of Standardization

Product standardization leads to some disadvantages also. These are:

  • Too much standardization has an adverse affect on the efficiency and morale of the workers. They in the long run feel bored and fed-up in doing the same routine again. The spirit of challenge and initiative vanishes with passage of time.
  • During the initial process of product Development where frequent improvements and changes may be necessary to bring the product and production process up to the mark, standardization may create obstacles in innovations.
  • For small scale enterprises standardization may not be advantageous.

Simplification: In production, simplification can be done at two places namely (i) for product or) for work. Simplification in product development is used for products; In fact simplification should be done before standardization.

In the words of F. Clark and Carrie, “simplification in an enterprise connotes the elimination of excessive and undesirable or ‘marginal lines’ of product to hammer out waste and to attain economy connotes the elimination of excessive and undesirable or ‘marginal lines’ of product to hammer out waste and to attain economy coupled with the main object of improving quality and reducing costs and prices leading to increased sales.”

W.R Spiegel and R.H Lansburg also defines,” Simplification refers to the elimination of superfluous varieties, size dimensions etc.” Simplification can be advantageous to both producer and the consumer of a product. These can be listed as:

To the producer:

  • Eliminates surplus use of materials to provide economy in production cost
  • More production increases the inventory size which avoids delays in supply
  • Less obsolescence of materials and machinery
  • Due to simplification in operation the efficiency of the production process increase
  • And this leads to more productive due to scope of better training and learning facility
  • With simplification operation.
  • Human efforts become more productive due to scope of better training and learning
  • Facility with simplified operation.
  • After-sales service prospects are minimized.
  • Production planning and control operations become easy and simple.
  • Reduction in cost of production leads to more sales.

To jobber-wholesalers and retailers:

  • Increased turn over
  • Sales effort on fewer items
  • Reduction in storage space4
  • Less overheads and handling expenditures

To the consumer:

Specialization: Specialization implies expertise in some particular area or field. It is experienced that as the companies expand the range of their products, manufacturing system, involves more and operations for transforming inputs into output. This often result an increase in operation cost and decline profits. The problem can be solved by identifying the products contributing to losses and then eliminate their production. This will lead to confine the production of profitable items only and consequently a reduction in number of operation required in the process. The minimization of operation can lead to use of expert knowledge, skill and techniques in production system, the nature and the type of product. Operation required manufacturing it and the nature of the market. Specialization implies reduction in the variety of products manufacturing by the organization.

Advantages of specialization are:

  • Specialization and standardization leads to higher productivity.
  • Incase in output and reduction in per unit cost of production,
  • Savings in purchase of raw material and improvement in the quality of the finished goods.

Disadvantages of specialization are:

  • Less flexibility in adjustment to changed situations.
  • Monotony and boredom may adversely affect the efficiency.

Diversification: It implies policy of producing different types of products by an enterprise. Thus it is reverse of simplification are associate with the nature of the industry e.g. in the case of capital goods industry simplification is more important as the customers give preference to economy, accuracy and performance of the product, whereas in an consumer goods industry diversification leads to produce variety of goods in ;terms of style, shape, color, design etc. The establishment facing tough competition is forced to diversify this activates to capture the market. In general diversification can be adopted for the purpose the market. In general diversification can be adopted for the purpose of (a) utilization of idle/surplus resources, (b) stabilization of sales, (c) to cope with demand fluctuations and (d) for survival of the organization.

Due care and precautions should be taken in the formulation of diversification policy. Proper and extensive market analysis at different levels of the quality and quantity of the products should be done to determine the levels of profitability. This will help in selection most appropriate diversification strategy under the prevailing circumstances.

Advantages of Diversifications are:

  • Increase in sales due to production of different kind of products. This also leads to increase in volume of business.
  • Needs of wider section of consumer are fulfilled.
  • Risk minimization’ in the case of quick and unpredictable demand variations
  • Uniform and balanced production programme can be chalked out without any consideration of wastage by production by products.
  • Elimination of wastage by producing by-products

Disadvantages of Diversifications

  • Due to increase in number of operations the production process becomes quite complicated and sometimes expensive.
  • Production Planning and control operation becomes complicated and time consuming requiring extra Efforts.
  • The size and the variety of items in; the inventory increases with diversification introducing more problems.
  • Worker of different types of skill and expertise are required.

Automation in Business Enterprises: The concept of automation has brought another revolution in industrial world. This has resulted in phenomenal growth in industrial arena by providing wide range of products with minimum cost and efforts.

Automation implies use of machines and equipments for performing physical and mental operations in a production operation in place of human beings. Automation can be visualized as an electronic brain with capacity of taking routine and logical decisions connected with control and planning functions of management. Routine decisions can be like scheduling, routing, dispatching and inspection of modifications of operations to see that the whole system operates according to the planned strategy.

In the absence of any human intervention or activity automation can be considered as a self regulating and controlling system. Mechanization provides the self regulating property and performing manual operations by means of mechanized operations.

Thus automation can be defined as “A system of doing work where material handling, production process and product design are integrated through mechanization of thoughts and to achieve a self regulating system.

In automation the machines and equipment required to perform various operations process are sequent arranged in order of hierarchy of operations. Electronic devices are used to record, store and interpretation of information at various stages of production .Machines is used to operate other machines.

Automation can be done at various levels of the manufacturing system in parts or as a whole. Some of the situations can be:

  • Handling of raw materials, semi finished goods or finished goods. Instead of doing the work manually the operation can be done by means of trolleys, conveyer belts, overhead cranes, lifts etc. This eliminates chances of losses due to handling and saves valuable time.
  • Sophisticated, reliable and efficient machines and equipment can be used in production process. This will ensure both quality and quantity of the product desired.
  • Inspection and quality control operations can be done by means of mechanical devices. This eliminates chances of human bias and error.

Use of machines and equipment in automation ensures production of high quality products at minimum cost. This also increases the confidence of consumers in the product and stabilizes the demand for the product. There is a general fear that automation leads to unemployment. But on the other hand operation of machines and equipments in the system need highly skilled and qualified manpower. So the technical skills of the system increase with reduction in size. It goes without saying that automation ensures high level of efficiency and capacity utilization.

Advantages of automation are:

  • Better quality of goods and services,
  • Reduction in direct labor cost,
  • Effective control on operations,
  • Greater accuracy, more output, greater speed,
  • Minimization of waste,
  • Production planning and control is to be done in the beginning only,
  • Working conditions can be improved greatly since much of the work follows an orderly path,
  • The waste does not come into much contact with the equipment; also the design of the special purpose equipment is usually superior to that of general purpose equipment. This improves overall safety considerably,
  • Direct and indirect costs, Inventories, Set-up times and lead times are all reduced. The space and equipment utilization is improved,
  • Since the human inputs in the production are minimized, the quality is also improved. Human beings are more erratic than machines,
  • Throughput time is reduced and therefore service to the customers is enhanced.

 Disadvantages of automation are;

  • High capital investment,
  • High maintenance costs and requirement of labor of high caliber,
  • Requires highly skilled manpower,
  • Can create unemployment,
  • Scheduling and routing operations are difficult and time consuming,
  • Restriction in designing and construction of buildings,
  • Larger inventories,
  • Continuous power supply,
  • Automation equipment is highly inflexible i.e. if a new product is to be introduced the existing equipment may have to be salvaged entirely,
  • Any break down anywhere would lead to complete shut-down.

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