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Working the Kinks Out of Decentralized Product Development

When the business migration movement began in the electronics sector, there was a fairly clear-cut disaggregation of product development and production — design in one location and manufacturing in another low-cost, developing region. As domestic demand in emerging economies has grown, manufacturers are increasingly looking to design products specifically to meet niche local customer requirements. Often, this means setting up satellite development centers in these regions with their own design and supply chain strategies.

This is a natural evolution of the electronics supply chain's penetration into emerging markets, and it clearly makes economic sense. The problems begin, however, when OEMs fail to maintain the integrity between the engineering and new product introduction disciplines among their regional operations.

We are seeing an increase in incidences where an OEM designs a product in one region, and when it is transferred to another region for production, the local design team will decide to tweak the design. This may be done to incorporate a less expensive component or alter the functionality to better suit the domestic consumer, but these intended improvements could end up adding cost and delaying new product introduction.

What these design teams fail to consider is that, when a new design is finalized, it is not just the product itself that is approved, but also the materials and production strategy. When even a slight modification is made to that design, the entire new product introduction (NPI) program is impacted.

For example, when Avnet works with a customer on a new product design, we will advise them of the life cycle stage of components that are being considered, so that they can make the most informed performance/cost/availability decisions. When the design is complete, we will immediately begin establishing a pipeline of materials to support the manufacturing process. Sometimes these components are NCNR (non-cancelable, non-returnable). If a redesign occurs, the substitute component may have a long lead time, which could impact the OEM's production schedule, causing a costly delay in time to market.

Clearly, an appreciation for and understanding of the nuances of the culture for which a product is being produced is critical to its success, but if teams from different regions are to work on the same design, the OEM must establish processes to make the collaboration effort as efficient and effective as possible.

In addition to more traditional forms of communication and collaboration, such as videoconferencing and instant messaging, best-in-class companies today are increasingly employing various social media tools and platforms to connect dispersed product development teams and their supply chain partners. For example, many-to-many content collaboration can be enabled through wikis, blogs, microblogging (Twitter-like updates), intranet or software-based ideation sites (like SharePoint), and “jam” social networking sites, according to a 2012 report on product development and innovation from Accenture.

OEMs looking to decentralize their design and development activities should take a page from the book on offshore manufacturing. Open communications and collaboration are key to enabling OEMs and their supply chain partners to best deploy their global resources, and therefore key to achieving the desired cost savings and competitive advantage targets.

7 comments on “Working the Kinks Out of Decentralized Product Development

  1. SP
    March 4, 2014

    Yes its almost universal that design happens in many parts of US and production goes to China. But it makes lot of business sense to get the production done in China. One can easily see the Dollar margins. And also its too risky to to give away or outsource the design work, if you do that you can easily another company selling the same design as yours. Its a difficult situation.

  2. apek
    March 4, 2014

    “This is a natural evolution of the electronics supply chain's penetration into emerging markets, and it clearly makes economic sense. “

    While it could certainly make Microeconomic Sense but it really does not make any sense from a Macroeconomic point of view. Decentralization of Product Development does make a lot of sense but for Decentralization to benefit the economy …. Decentralization has to happen in domestic economy.

    When the business migration movement began in the electronics sector, there was a fairly clear-cut disaggregation of product development and production — design in one location and manufacturing in another low-cost, developing region. As domestic demand in emerging economies has grown, manufacturers are increasingly looking to design products specifically to meet niche local customer requirements.

    To make this feasible both design and manufacture should be in closeby location especially since rapidly progressing technology needs a proximity of labs and fabs. Also, Manufacturing cannot remain forever in a low-cost region expecting the costs to remain low in that region forever.

  3. t.alex
    March 6, 2014

    Between remote locations, communication is very very very important! And companies really do need to have proper change management system in place as well.

  4. Daniel
    March 6, 2014

    “When the business migration movement began in the electronics sector, there was a fairly clear-cut disaggregation of product development and production — design in one location and manufacturing in another low-cost, developing region.”

    Lynn, that's the impact of globalization. This will help companies to lower the actual production cost and hence customers can avail the product/service at a better price.

  5. Daniel
    March 6, 2014

    “To make this feasible both design and manufacture should be in closeby location especially since rapidly progressing technology needs a proximity of labs and fabs. Also, Manufacturing cannot remain forever in a low-cost region expecting the costs to remain low in that region forever.”

    Apek, I feel decentralization is very much requiring for companies, so that their expenditure can be minimized. Apart from that many countries are offering single window systems and Tax sops for attracting foreign investments. Moreover, I won't think in near future none of the US/EU countries can beat Asian countries in terms of lower production cost.

  6. FLYINGSCOT
    March 7, 2014

    I heard that many products are “localized” with alternative parts being redesigned by local design and support people.  Most people do this (I think) with the exception of companies like Apple.  I'd be interested to hear what others have heard about this.

  7. Hailey Lynne McKeefry
    March 9, 2014

    What do you think are the biggest hurdles to decentralized product development? Do you think that's changed over time?

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