When you try to reverse engineer the secret sauce for a wildly successful new product, you probably don’t start by wondering how the procurement team worked its magic. Engineering and marketing get all the glory when the latest gizmo becomes a customer favorite. As consumer expectations for quality, innovation, ethics, and cost continue to rise, new products are critical to competitive advantage. And procurement is often the critical component to getting that product to market.
There’s nothing easy about taking an idea to fruition — from design to sourcing to manufacturing to marketing, pushing a new product through the value chain if often complex, risky, and too reliant on manual processes and guesswork. New markets, new production capabilities, and new business models push manufacturers and their suppliers to evolve rapidly and relentlessly. In the era of manufacturing management systems, big data, and global supply chains, it’s time to get smart about new product launches. Manufacturers and brands know this, and are striving to digitally transform every stage and process involved in new product development.
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In a recent Forrester report on smart procurement, the chief procurement officers (CPOs) surveyed identified their top roadblocks to strategic decision making: tedious manual activities that consume too much time, unreliable or hard-to-access data, and poorly integrated systems. IDC predicts that by the end of 2020, 50% of manufacturers will be extracting business value from the integration of supply chain, plant operations, and product and service life cycle management. For further insight into this value creation, consider IDC’s findings that by 2019, 40% of G2000 manufacturers will use design democratization and collaborative innovation to achieve revenue targets for new products.
That’s where smart procurement, sourcing, and supply chain management can show up as big opportunities to optimize quality, speed, control, and cost. It has always been procurement’s job to identify reliable suppliers and negotiate lower costs. But what if suppliers could be more than reliable? What happens when they become partners, key innovators, and product specialists? Moreover, what happens when the procurement team works closely with designers and engineers, starting early in the new product development cycle? When all the relevant capabilities and expertise extant in the value chain are easily accessed and brought together on a comprehensive platform, it becomes possible to move away from silos of manual processes, capture lessons learned, and make more informed and effective decisions and plans.
The primary challenges of new product introductions (NPI) are cost control, timing, quality, differentiation, and supply chain risk. Procurement technology solutions can address each of these issues.
The cost of new products often comes in above plan. Sometimes components were more expensive than initially estimated, or new suppliers had to be found midway through development. Often the design team didn’t perform due diligence with material requirements or suppliers, or didn’t account for enough rev cycles.
A product launch plan can be delayed due to supplier readiness, quality issues found during testing, or simply poor project management. Often, stakeholders have fallen out of alignment and sign-offs are pushed back. It’s important to have robust supplier selection processes, so that risk, quality, and cost are balanced. It doesn’t pay to go with the lowest cost supplier if they don’t have the financial stability to ramp up to production demand and sustain quality and inventory levels after launch.