MANAGEMENT OF PRODUCT DEVELOPMENT PROCESS IN BRAZILIAN FOOD COMPANIES: A COMPARISON BETWEEN MODELS AND CASE STUDIES
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1 MANAGEMENT OF PRODUCT DEVELOPMENT PROCESS IN BRAZILIAN FOOD COMPANIES: A COMPARISON BETWEEN MODELS AND CASE STUDIES Mirela Guedes Bosi Dário Henrique Alliprandini José Carlos de Toledo Federal University of Sao Carlos - Department of Production Engineering C.P. 676 CEP São Carlos SP BRAZIL Telephone: / extension: 240 Fax: / extension: 232 mirela@dep.ufscar.br ABSTRACT The competitiveness among food companies has increased and developing products has become a key factor for organizational success. This requires a better understanding of product development process management, its practices, how activities are sequenced, how work is organized, and how problems are solved. This paper aims to help fulfill the necessity of studying the way product development process (PDP) is led in the food industry, what kind of problems and difficulties companies face, as well as the tendencies of the PDP in Brazilian food companies. These results are part of an ongoing project. Also, it is presented a discussion about two theoretical models and the findings of field research. This paper is a case study research and two cases were developed. Although the studied companies present a lack of structured process for product development, the classic stages of development process take place in a nonstandard way. Due to Brazilian market potential on manufactured product, food companies tend to grow and improve their structure which will affect PDP. Keywords: management of product development process, food industry, food product development. INTRODUCTION Until the decade of 1990, Brazilian food industry operated only in the internal market, working isolated from the international market. Starting from the end of 1980, the national market opening to manufactured products restructured Brazilian food industry. Consumers chose the quality and diversity of imported products. Therefore, a process of globalization began and food companies were forced to seek for competitive advantages in order to differentiate their products in the market. As a result, product development process started to have more importance. 1
2 Increasingly, food companies from all over the world need to change to survive due to pressures that intensified competitiveness. Some of these pressures are: (i) increasing global competition; (ii) developing technologies, leading to increased knowledge levels and expectations of consumers; (iii) demographic economic and political changes, as well as the potential environmental impact. Costs, competitor actions, market conditions such as shortening product life cycles bring additional pressures. Besides, consumers are becoming more discerning in terms of the perceived quality, value, appearance and functionality of the products they buy (Mcllveen, 1994). The fast technological changes and the improvement in the consumers' standard of living resulted in great opportunities for product development (Earle, 1997). Companies have discovered the returns that can be generated by adding value in the form of convenience, nutritional factors, variety, economy and quality (Mcllveen, 1994). To develop products more quickly, with efficiency, lower costs and appropriate to the consumers' needs provides the organization important competitive advantages. An effective PDP should allow companies to perceive tendencies quickly, obtain flexibility, avoid the entrance of their competitors in new markets, and explore opportunities of new markets. However, the development process tends to present high failure rates. Rudolph (1995) quotes Morris who estimated that 80 to 90 per cent of new products fail within one year of introduction. These are just the products that made the retail cut. There are also those products whose efforts fell short and retail introduction never took place. Besides, only about 25 per cent of new food products launched are novel, not only line extensions. It is expected a success rate of less than 12 per cent for food product development process. Therefore, it is necessary to understand, analyze and adapt the product development process in order to achieve greater success (Rudder, Ainsworth, & Holgate, 2001). This paper is organized in six sections. Next section presents the objectives and method used to develop this research. Theoretical background is in third section. In this section we discuss product development process and the models used to demonstrate the research findings. These findings are presented in the fourth section. Finally some considerations and recommendations are addressed. OBJECTIVES AND METHOD This paper aims to present the preliminary results of an ongoing research project about management of product development process in Brazilian food companies. During the project, about thirty food companies will be analyzed. Specifically, the objective of this paper is to describe and analyze the management of product development process in two Brazilian food companies, including its practices, how activities are sequenced, how work is organized, and how problems are solved. This paper aims to help fulfill the necessity of studying the way product development process is led in the food industry, what kind of problems and difficulties companies face, as well as the tendencies of the PDP in Brazilian food companies. As well, this paper seeks to compare two theoretical models with field research findings. This research is a case study method with characteristics of qualitative research. Firstly, a theoretical background on food product development process and PDP models was written. A questionnaire was developed in order to guide the interview and the research. The 2
3 questionnaire is divided into sections that include questions about general organizational characteristics, the structure of PDP that the organization follows, PDP management, the results of PDP, and problems faced along the process of development and its tendencies. Figure 1 presents a reference model of the field research. Two food companies were researched. One of the companies develops and manufactures candies. The other company develops and manufactures biscuit. In both of them, PDP is carried out rapidly and in a very simple structure. Big multinational companies were not included in the study because the focus was defined for typical Brazilian companies. Food product development process Product development process Problems, tendencies and general characteristics Approach made by different authors Questionnaire Food companies characterization Data analysis Findings: Practices, problems, and structure. Figure 1: Reference model of the field research The findings from field research are described, analyzed, and compared to the models proposed by Fuller (1994) and Wheelwright & Clark (1992). THEORETICAL BACKGROUND Product development has always been at the heart of the food industry. The food industry started to develop from a craft into a technology 100 years ago, with the introduction of large-scale, on-line manufacturing, new preservation processes, and faster distribution systems (Earle, 1997). Many companies are actively involved in the development of new food products and in the extension or enhancement of their present products so that they increase their company s share of a particular market. Food manufactures cannot stand still and must be aware of opportunities available to them to improve their profitability (Rudder, Ainsworth, & Holgate, 2001). Product Development Process Models Some authors (Earle, 1997; Rudolph, 1995; Fuller 1994) have presented a food product development model. In each model, product development process is divided into stages that follow a similar sequence. In general the sequence of stages is: definition of the organizational strategy, evaluation of the market, ideas generation and screening, technical development of the product, launch and post-launch evaluation. The exact number of stages, the denomination of each stage, and its details vary according to each model. 3
4 In this paper, the model presented by Fuller (1994) was chosen to describe and analyze the research findings. This author quotes that the model stages should not be understood as a sequence, they don't finish with the beginning of the following stage. On the contrary, a project can return to previous stages to complete a concept as new information appears. The first step in the development process is to determine business objectives and to identify consumers needs. Then, the company generates new ideas for new products that should be associated to the business objectives and the satisfaction of consumers' needs. In the following stage, all the ideas should be gathered and the best ones should be selected. The technical part of development begins and prototypes are developed. Other departments of the company begin their activities on the new product. The financial department analyzes the business plan. The marketing department is responsible for the product label development, packing and strategy planning for the product launch. The production department determines the production requirements and equipments. During the development process, important decisions need to be taken, including decisions regarding the continuity of the project. The production stage begins and tests of the product are made. Before the definitive product launch, the marketing department can execute mini-tests in order to test the product in one or two cities, or to do a regional launch directly. The last stage of any development is the evaluation of this test. If the market test was not well conducted, the company should learn with this mistake and make the necessary corrections before developing a new product. If the test succeeded, the positive aspects of the process should be pointed so that they can be used in future developments. Table 1 summarizes this product development model. Table 1: Product development model presented by Fuller (1994). Ideas Development Launch - Technical development - Ideas generation - Product tests (prototype) - Ideas screening - Market tests - Production Besides the model presented by Fuller (1994), the model presented by Wheelwright & Clark (1992) is also used to show and analyze the findings of this research. This model is based on six elements: project definition; project organization and staffing; project management and leadership; problem solving, testing, and prototyping; senior management review and control; and real-time/midcourse corrections. Figure 2 presents this model. Although the six elements interact to create a detailed pattern of development, they involve different issues and need to be understood on their own terms. Therefore, each element is explained individually: - Project definition: determines how the firm sets the scope of the development project, establishes the bounds for what is and is not included in it, and defines the business purposes and objectives of the project. - Project organization and staffing: defines who will work on the project and how they will organize to accomplish the work. - Project management and leadership: includes the nature and role of project leaders and the way in which project tasks are sequenced and managed. 4
5 - Problem solving, testing, and prototyping: focuses on individual work steps, the way in which they are conducted, and the means by which the knowledge required to solve problems is developed. - Senior management review and control: defines the way in which senior management reviews, evaluates, and modifies the project and its goals over time signals to those working on the project, and creates powerful incentives and motivation during the course of the project. - Real-time/midcourse corrections: deals with issues such as ongoing measurement and evaluation of project status, rescheduling, resequencing, and redefining the remaining tasks, resolving differences between problem solving in the lab and on the consumer site, and determining when the organization is ready for production scale-up. Senior management review and control Pre-project planning Project definition Project organization and staffing Project management and leadership Problem solving, testing and prototyping Product Real time/midcourse Figure 2: Product development model presented by Wheelwright & Clark (1992). These six elements are like the components of a product. The elements must fit well together in order to create a coherent system, and the system must be well matched to the development challenges it faces (Wheelwright & Clark, 1992). FINDINGS Case study 01 is a company that develops and manufactures candies. This company has 881 employees and its annual revenue is nearly U$23 million. The main products of the company are: gum candies, peanut sweets, granulated chocolate and chocolate tablets. Case study 02 is a company that develops and manufactures biscuits. This company s annual revenue is nearly U$60 million. Its main products are: butter cookies, crackers and wafer. The company employs 920 people. In the company referred as case study 01, product development process has a sequence of stages and activities relatively common to all of the projects. The process usually starts with an idea that is given by senior management. Senior management tells development department the idea for a new product. This department gets in touch with suppliers who send samples of raw material and other ingredients to be used on tests in the production line, once the company doesn't have a pilot plant. After accomplishing tests, the most 5
6 appropriate formulation of the new product is selected and production is started. At this time, the necessary adjustments on the equipments are made in order to adapt them to the new process. The following stage is the evaluation of the product and its packing. The period shelf life is established according to previous experience and to other products that are in the market. Sensorial analysis of the product is made along the whole period in which the new product is appropriate for consumption in order to check this shelf life. There is not an evaluation of the new product after its launch. The company has a phone number to detect complaints about products in general. If a consumer complains about a certain product the necessary modifications are made. In the company referred as case study 02, new product development also follows a sequence of stages and activities. Development process starts when ideas are generated in relation to business strategy. A consultant company specialized on product development is hired to help researching and selecting the best ideas. The consultant company is aware of the tendencies on biscuits mainly in European market that, according to the company, is similar to Brazilian market. The feasibility of the product to be developed is analyzed, including market, financial, and technical feasibility. Next, suppliers are contacted and packing and necessary raw materials are requested. Lab tests are made, including sensorial and physiochemical analyses. In the lab there are kitchen equipments and some production equipments. However, there is not a pilot plant in this company either. Therefore, production has to be stopped so that tests can be made in the production line. Adjustments on the product are made and production is started. The product is launched and its acceptance is evaluated by market research. If the new product does not have good acceptance in the market, it is returned to the company, modifications are made, and the product is launched again. The company also evaluates the product shelf life. Samples of the final product are kept and periodic sensorial analyses are made. Table 2 illustrates the sequence of stages and activities of product development process in case study 01 and case study 02. Table 2: The sequence of stages and activities according to the model presented by Fuller (1994). Ideas Development Launch Case study 01 Case study 02 The idea is generated and screened by senior management. The development department gets informed about this idea. Ideas are generated in relation to business strategy. The viability of the product is studied and analyzed. A consultant company helps selecting ideas. Technical development: a prototype is not developed. Suppliers send samples to be used in tests that are made in the production line. A formulation for the new product is selected and production is started. Suppliers are contacted and samples are sent. Some analyses are carried out in a lab and production tests are made in production line. After concluding the required adjustments on equipments and on the new process, production is started. After production the shelf life is determined and the product is launched. If a consumer phones the company and complains about the product, the development team modifies the product as necessary. Product is launched and its acceptance is evaluated by market research. If it is not well accepted it is modified and is launched again. 6
7 The model proposed by Wheelwright & Clark (1992) includes six elements that are used to complete the analysis of PDP management. Table 3 illustrates this analysis. The company referred as case study 01 is a family company and its owners form senior management. As a result, senior management makes most decisions and defines which project should be developed. The problem is that many times decisions are based on personal opinions and consumers are not listened. In case study 01, development success rate observed in the company is of 70 per cent. This rate is the ratio between the number of projects that succeeded and the total number of projects. The value is not greater due to the need of developing products in a short period of time. A long development time increase costs. Thus, when an appropriate solution is not found within development time the project is cancelled. Case study 02 is also a family company. However, different from case study 01, employees form senior management. Moreover, a specialized consultant company supports development process. In this case, PDP is more structured although it faces some problems as well. The development of some kinds of products requires the acquisition of new equipments. The company has bought a new equipment recently to be able to produce a new product. Consumers did not like this product and it failed. Now the company needs to develop another product that is accepted by consumers to justify such investment. Table 3: PDP management according to the model presented by Wheelwright & Clark (1992). Elements Case study 01 Case study 02 Project definition Senior management defines project. The development team does not participate on project definition. Project definition is related to business strategy. The viability of the new product is analyzed. Project organization and staffing Project management and leadership Problem solving, testing, and prototyping Senior management review and control Real time/midcourse corrections There is a development team that includes development and production. The team communicates via s and periodic meetings. The same team can lead up to 3 projects simultaneously. The project leaders are one employee who works on production and one who works in the development lab. The team focuses on problems related to adapting the existing equipments to the new process and selecting the most appropriate new product formulation. A prototype is not developed due to relatively low costs of testing different formulations empirically. There are periodic meetings to evaluate development results. The project leader responds to industrial management. Problem solving via empirical tests and project cancellation in case a problem solving takes too long since there is not much time available for development. A development team that includes development, quality control, and production leads project. The same team may lead up to 5 projects simultaneously. The project leader is the new product development manager. The team focuses on problems related to adapting equipments and changing the production process to adapt it to the new product. Some testes are carried out in a lab and others in the production line but a prototype is not developed. The project leader responds to the company president. Problems on low production flexibility due to equipments restrictions. Some of these problems cannot be solved and project has to be cancelled. 7
8 FINAL CONSIDERATIONS The model presented by Fuller (1994) focuses on food product development process and its sequence of stages and activities. The author does not mention PDP management or the way the company should get organized to develop new products. The focus is on development stage and the practices that are typical of food companies. In contrast, the model presented by Wheelwright & Clark (1992) focuses on product development process management. This model is not only on food industry since it fits all kinds of industries. The model describes the way a company should conduct development process and how a company can learn from development process. Therefore the focus is on pre-development stage and post-development stage. Because of the different approaches showed by these authors, the comparison between the cases and each model individually enables to provide a useful understanding of an organizational PDP management. It is possible to describe the development process stages and to point managerial aspects of this process. The stages were acknowledged in the studied cases although there are not standard proceedings for product development. This lack of standardization results in great dependence of tacit knowledge and people s memory. In the two studied companies, there is a lack of structured process for product development due to the origin of the companies. They are family companies and have grown quickly in the last ten years. Senior management determines the main new product characteristics in both technical and marketing aspects. It makes product development process faster but decisions may be based on personal preferences. Food product development process has a relatively low cost. Therefore, any limitation results in project cancellation. It is not financially feasible to insist on a project that brings many problems. In Brazil, there are national and multinational companies. Multinational companies as well as few national ones aim at high and middle class consumers. Most of national companies compete for low class consumers. It has an impact on PDP since companies seek simple innovations and focus on cost reduction. The model proposed by Fuller (1994) is applicable for the studied companies in spite of the lack of standardization, which has already been discussed. A more detailed comparison would be necessary to describe development method and tools, and technical and managerial capabilities. These among other factors are not included in this paper. Finally, the two study case findings show that Brazilians companies have taken actions to develop process technology in order to achieve both product improvement and diversification. Such actions play an important role in product development process and require more managerial ability. REFERENCES Earle, M. D. (1997), Changes in the food development process, Trends in Food Science & Technology, Vol. 8, pp Fuller, G. W. (1994), New Food Product Development from Concept to Marketplace, CRC Press, Boca Raton, FL. Mcllveen, H. (1994), Product Development and the Consumer: the Reality of Managing Creativity, Nutrition and Food Science, No. 6, pp
9 Rudder, A.; Ainsworth, P.; Holgate, D. (2001), New food product development: strategies for success?, British Food Journal, Vol. 103, No. 9, pp Rudolph, M. (1995), The food product development process, British Food Journal, Vol. 97, No. 3, pp Wheelwright, S. C.; Clarck, K. B. (1992), Revolutionizing product development: quantum leaps in speed, efficiency and quality, Free Press, New York. 9
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