Achieving the Next Level of Component & Supplier Management: Integral Design and Procurement

Transcription

1 Achieving the Next Level of Component & Supplier Management: Integral Design and Procurement Why CSM is Vital to Success Today Global outsourcing, competition, price erosion, environmental regulations, compressed development cycles: these are just a few of the challenges product development companies are facing every day. At the crux of a company s ability to meet and rise above these challenges is component and supplier management, or CSM. Every product today requires dozens sometimes hundreds of people and parts working together. And, with over 70 percent of the cost of a product locked in during the initial design stage, choosing the right parts and suppliers at the beginning of the design process is critical. The logistics can appear overwhelming and for many companies they are with crucial missteps revealed only late in the product lifecycle when design changes are most expensive and product delays can mean missing the market window. A recent PTC Comprehensive Best Practices Survey, with executives from 500 of the top electronics companies in the US and Asia, revealed that companies with superior market performance have, on average, the following characteristics: 33% less investment in R&D, yet twice the profitability 16% more revenue from new products 12% greater success in new product development 2-month advantage in time-to-market Page 1 of 7 Component & Supplier Management

2 A careful analysis of what makes these companies different reveals that they operate their design and procurement processes differently than underperforming companies in two key ways: 1) they standardize the process of external supplier collaboration 2) their designers have early access to enterprise and supply chain data In other words, these companies have made their component and supplier management (CSM) processes integral to the product development process. The fact is, only with an integral approach to CSM can a company provide their designers with greater visibility into important supply chain data, and the ability to collaborate with suppliers early in the design process. The result? These organizations can make informed, intelligent design choices that reduce costs, increase profits, improve product quality, and save valuable time. Current State of Component & Supplier Management In a typical design process today, an engineer makes decisions and choices that through no fault of their own often result in numerous issues later in the design cycle. For example, during a standard design process, an engineer might: perform a cursory internal search for an existing part, but not find one; then search the Web for components that meet his requirements and bake them into the design, making it difficult or impossible for procurement to switch components or suppliers; or design a new part that will be overly expensive to produce because procurement has limited time to engage potential suppliers to identify potential reductions in cost or supply chain risk. The problem: these parts may not be compliant with procurement sourcing initiatives (i.e., supplier consolidation), or they may not be environmentally compliant, which forces procurement to make changes later in the process that potentially cause significant and costly engineering rework. 100 % % Cost Committed >70 % First BOM Concept Functional Physical Mfg Prep Mfg Volume Service End-of-Life Design Design Handoff Production Product Design Sourcing Manufacturing & Support More than 70% of the cost of the product is locked in after the initial design stage. Selecting the right part early in the design requires visibility to important supplier change data including supplier preferences, cost, lifecycle and compliance. Page 2 of 7 Component & Supplier Management

3 Today, many product designers simply can t make informed decisions because their company s design and procurement processes are disconnected and disorganized. With large amounts of key data spread haphazardly between design, procurement and outside partners, there is little chance that a product designer can make the best design and sourcing choices at the beginning of the design cycle. The following section discusses several key challenges that make CSM so difficult for product development companies, and discusses the root causes of these challenges. Key Sourcing and Compliance Challenges Difficulty achieving cost targets. Low target-cost confidence. With 70 percent of a product s cost locked in during the initial design stage, design engineers play a crucial role in determining the endcost of a product. However, without access to detailed supply chain data, designers struggle to understand the underlying cost drivers for parts and assemblies, making it difficult for them to predict costs for new designs. Engineers are also frequently unaware of suppliers manufacturing constraints, which results in unrealistic designs and unplanned, late-stage design changes without regard to supplier impact. Frequent supplier cost adjustments and multiple design changes during manufacturing are expensive and erode a company s ability to accurately predict the final cost of a product. Complying with the Explosion of Global Environmental Regulations The inability of designers to access valuable supply chain information early in the design process is just the tip of the iceberg for many organizations. New environmental regulations, such as RoHS and WEEE, have also had a major impact on product development. These directives restrict hazardous materials in products, and set recycling and disposal standards for electronics, equipment and automobiles. Companies must declare the material contents of their products, requiring the management of a high volume of compliance data. Each country, or each state in the USA, has or will soon have its own variation of these regulations. Keeping track of all the regulations a product must comply with, and determining whether the product is in compliance, is daunting. Mistakes can be extremely expensive, potentially leading to product recalls, fines, or the inability to ship product to a country. Design for Environment (DfE) requires awareness of substances, waste management, and toxicity, right from the beginning of the design process. This increase in environmental compliance is part of a larger trend towards social and environmental stewardship in the corporate world, including eco-design, product sustainability, green procurement, and obsolescence. As environmental sustainability has become a permanent concern, companies are switching from a tactical cost of doing business approach, to a strategic DfE approach that incorporates DfE into the entire design process, resulting in a corporate green differentiation. Ever More Complex Products with Shorter Lifecycles The concept of mass customization is familiar to many product companies, especially those in high tech. As consumers demand more product variants, companies must deliver increasingly complicated designs in shorter time periods. This massive time-to-market pressure compresses the outsourcing partner selection process, potentially leading to uninformed choices and outsourcing difficulties later in the product lifecycle. Suppliers frequently do not have the ability to rapidly ramp up the production of complex products, causing delays and missed target dates, as well as increased costs. The increased specialization of products, and the increase in supply chain tiers necessary to create these products, has added unprecedented complexity to product development. Global Outsourcing Continues Not only have products become more complex, but how and where they are manufactured has also become increasingly complicated. More and more often, companies are outsourcing innovation and design to keep pace with product demand. When using an original design manufacturer (ODM), companies must decide which pieces of a design to outsource, how to protect IP, and how to efficiently manage the collaboration process. These are difficult decisions, made even more complex by the large number of supply partners a company must juggle at any given time. There is an increasing need for companies to reduce the number of suppliers, and to integrate strategic supply partners earlier in the design cycle. This approach also includes the careful selection of strategic regional suppliers that are low cost and offer competitive capabilities. As global competition causes product price erosion, companies must make informed global outsourcing decisions in order to stay competitive. Page 3 of 7 Component & Supplier Management

4 Key Root Cause: Disconnected Design and Procurement Processes The challenges discussed above stem from problems shared by most product development companies and mostly caused by design and procurement processes that are disconnected and inefficient. One core issue is that component and supplier information is scattered throughout multiple, disconnected systems. Engineering teams typically lack access to the procurement systems, and therefore lack sufficient information to find and reuse preferred existing parts, resulting in the introduction of duplicate or unnecessarily expensive parts. For the same reason, supply chain and regulatory compliance information is frequently not accessible by product development teams. Another common issue is that a company s engineering and procurement functions are disconnected and do not collaborate on new products. Consequently, there s no systematic process for engaging suppliers early in the design process. Because time-to-market pressures are so intense, engineers are frequently forced to choose supply sources without getting valuable input or knowledge from procurement. This results in leading edge technologies and manufacturing processes being chosen from unqualified suppliers, or engineers failing to adopt emerging technology from a trusted strategic supplier who could provide competitive advantage. These are practices whose true impact becomes painfully clear only later in the product lifecycle, when late-stage design changes the result of poor part and supplier choices cause missed target launch dates and derail target costs. Enterprises need to shift from these disconnected practices to an integral approach of design and procurement. The Integral Process Approach to CSM With integral design and procurement processes, a company can establish a collaborative team, ensuring that engineers are choosing the right parts and suppliers from the beginning of the design process. An integral approach must include cross-functional sourcing teams for new products, with membership to include employees from design, manufacturing, procurement and compliance who will draw on each other s expertise to select the best sources of supply f or critical design elements. These stakeholders must also work together in identifying supplier capabilities and risk, as well as performing supplier selection and qualification, determining supplier roles, and setting milestones. In an integral process, cross-functional teams use their combined knowledge to perform comprehensive technology reviews, and to identify time, cost and quality drivers with suppliers. The collective expertise of a cross-functional team far surpasses that of an individual engineer, and decisions made by these teams will consistently lead to informed, more profitable decisions. An integral approach to CSM also allows companies to establish formal process controls for creating and sharing new design data. These controls include systematically enabling and enforcing the reuse of existing qualified components, as well as standardizing and automating the new part request process, which enforces part classification and AML/ AVL designations. By applying standard controls, you can capture the data necessary to create an up-to-date enterprise component record. At the same time, other sources of data, such as environmental compliance or quality data, can be integrated into the component record. This record resides in a central system where all component information can be either stored or linked from, making critical information accessible to all approved users. The example used above, of integrating environmental data into the enterprise record, is a critically important aspect of the integral approach to CSM. By enabling engineers to assess environmental and sourcing compliance data early in the design phase, they can get immediate feedback on how compliant their designs are, and make necessary changes early on, rather than passing the design to procurement for input later in the process, which costs time and money. Engineers can select parts based on more than just performance criteria; with an integral CSM process, they can select parts based not only on procurement and environmental data, but also on supplier capabilities, time-tomarket milestones, and target costs. Lastly, by using an integral Product Development System (PDS) to manage CSM processes, designers can interact with component data on multiple levels, from searching and selecting preferred parts to sharing a design with an ODM in real time. Only with this integral approach to CSM can a product company keep pace with today s massive market pressures. The following sections discuss the specific capabilities and benefits of using a comprehensive Product Development System (PDS) to achieve integral CSM processes. Page 4 of 7 Component & Supplier Management

5 Focusing on Process: Product Development System from PTC The Product Development System from PTC is a single, integral system that manages and standardizes all product development processes, including detailed design, regulatory compliance, and component and supplier management processes. PDS Capabilities The Product Development System from PTC is enormously powerful and offers dozens of capabilities to streamline and integrate CSM processes. One of the most fundamental and important capabilities is the management of an enterprise component record a comprehensive and dynamic information store of all relevant characteristics of the components used in products. Users can also integrate component reference data gathered from external sources into the enterprise record. Once entered into the record, component data is organized using a hierarchical classification system. Concept Design Systems Design Analyze Designs Identify Critical Design Parts Requiring Supplier Involvement Component & Supplier Management Establish New Product Sourcing Teams Align Critical Components to Suppliers Capabilities Critical Engage with Suppliers to Understand the Drivers for Time, Cost, Quality Make/Buy Detailed Design Predict Cost Review Historical Date Review Historical Date Manufacturing Outsourcing Design Outsourcing Tooling/Materials RFQ DFM/DFA Analysis Perform RFQ/Request Samples Target Criteria Achieved Component & Supplier Management Establish Formal Control of Sourcing Date Detailed Design Transfer to Production Volume Sourcing Change Management Analyze Target Cost Confidence Monitor Design Changes that Exceed Cost PTC s Product Development System centrally manages relevant component data, maximizes the reuse of preferred parts and suppliers, and allows cross-functional teams to collaborate on new products. Page 5 of 7 Component & Supplier Management

6 Designers and component engineers can then easily locate and reuse parts with high-speed parametric search capabilities and guided navigation. The component record also includes all information needed by functions and outsourcing partners to effectively perform their roles, including: Technical data Environmental data/compliance declarations Supply chain data Compliance & dismantling data Datasheets, PCNs & EOL notifications Manufacturing process data Quality information From the beginning of a new product, the PDS allows internal users to collaborate as cross-functional product sourcing teams. The PDS gives teams the tools necessary to manage the product design and sourcing processes, such as workflows, milestones, tasks, discussions and role-based supplier controls. Every person working on the new product has fast and easy access to a single source of supply chain information, which ensures the right part selection and fosters part reuse. In the enterprise record, part preferences are defined and maintained for each supplier, AVL/AML creation is automated, and designers follow a formal new part request process, which automatically captures relevant component data. In addition to streamlining internal processes, the Product Development System (PDS) allows a company to manage relationships with suppliers and outside partners at a detailed level, making those relationships much more efficient. With the PDS, users can create sourcing contexts to organize sourcing policies and preferences by plant locations, product lines, function, etc., with the ability to roll up material quantities in different sourcing contexts. Users can also manage supplier preferences based on commodity. Once designers are ready to collaborate with outside partners, the PDS provides a secure, collaborative environment for sharing target cost and product IP with key preferred suppliers during the design phase. Internal product teams and outside suppliers can then conduct cross-functional reviews throughout the design process to assess the quality and manufacturability of assemblies. In order to create a viable and successful product, companies must be aware of global compliance regulations throughout the product lifecycle, especially during the design phase. The PDS from PTC gives companies the ability to constantly manage global regulations. All compliance documentation is stored and maintained in a central system under change control, ensuring that companies have proof of compliance for global markets, and that relevant compliance data is captured for future projects. During the design phase, teams can evaluate a product s compliance against multiple regulations, and users can define environmental regulations based on material concentration thresholds, while the PDS simultaneously gives users a graphical view of non-compliant components within the product structure. Benefits of a Product Development System for CSM Using PTC s Product Development System to enable integral design and procurement processes vastly improves a company s product development cycle. From the very beginning of the design phase, the PDS empowers product designers to make better decisions, ultimately leading to better products. Reuse of preferred parts is maximized because designers can quickly search an up-to-date component record for existing parts. With the PDS, designers have access to supply chain data, such as cost, lead-time, environmental regulatory compliance and technical performance, leading to the selection of the right parts. Supply chain risk is evaluated early on by looking at the quality, volume and timeframes of individual suppliers before deciding to work with an outside partner. Likewise, collaboration between design, procurement, manufacturing and suppliers is a major benefit of working with the PDS. Collaboration lowers product costs by eliminating bad-part decisions and late-stage design changes that cause product delays. And, early access to knowledge also lowers the risks and costs associated with compliance regulations. With the PDS, companies can reduce the cost of compliance analysis by validating product compliance against multiple regulations early in the design phase. That improvement in compliance also reduces the risk of fines or penalties, and even product recalls. Page 6 of 7 Component & Supplier Management

7 Conclusion Adopting an integral approach to CSM is a crucial step forward for any product development company. The complexity of today s products and markets demands a robust, integrated system to manage the huge volume of data and complex business processes required to bring a new product to market more cost-effectively. The PDS from PTC centrally manages relevant component data, maximizes the reuse of preferred parts and suppliers, and enables cross-functional teams to collaborate on new products. At the beginning of this paper, it was noted that a PTC survey found successful product companies do two things differently: 1) they standardize the process of external supplier collaboration, and 2) their designers have early access to enterprise and supply chain data. Integral design and procurement processes achieve both of these initiatives, which are the core of the PTC Product Development System. With product development continually becoming more complex, the PDS from PTC is the only Component & Supplier Management system that offers a comprehensive, integral solution. 2012, Parametric Technology Corporation (PTC). All rights reserved. Information described herein is furnished for informational use only and is subject to change without notice. The only warranties for PTC products and services are set forth in the express warranty statements accompanying such products and services and nothing herein should be construed as constituting an additional warranty. References to customer successes are based upon a single user experience and such customer s testimonial. Analyst or other forward-looking statements about PTC products and services or the markets in which PTC participates are those of the analysts themselves and PTC makes no representations as to the basis or accuracy thereof. PTC, the PTC Logo, Windchill, and all PTC product names and logos are trademarks or registered trademarks of PTC and/or its subsidiaries in the United States and in other countries. All other product or company names are property of their respective owners. The timing of any product release, including any features or functionality, is subject to change at PTC s discretion. J0301-Component & Supplier Management-EN-0612 Page 7 of 7 Component & Supplier Management