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The new competitors think in terms of 'speed-to-market.'

Faster, faster, faster! We're in a world obsessed with speed. "Time" has become our most valued resource--from the food we eat, to computers, airplanes, automobiles, pharmaceuticals, and even written information. No longer is ordinary mail sufficient, we now have electronic mail. Why waste time typing? Just jot it down on a piece of paper and "FAX" it. Today, speed is everything.

Manufacturers, too, have come to grips with the competitive nature of speed. Executives have long known that "time is money," but only recently has that concept been widely accepted as a competitive advantage across all markets and product lines. Markets based on style, fashion, or fads have always felt this pressure, but today producers of semiconductors, industrial vehicles and equipment, and chemicals, to name a few, a feel the same effects.

Change and Time-to-Market

The emphasis in manufacturing companies during the 1990s will be "Time-to-market." The term is generally defined as the elapsed time between product definition and product availability. Time-to-market is doubly important when one considers another current trend: the pervasive nature of change. New products, improved products, new and improved products, extensions and expansions of product lines, revisions and enhancements of products, all are evidence of the requirement to keep a steady stream of new products going into the market. Product designers are having a field day. A plant manager was recently overheard to say that if God were an engineer, we'd have a new world every seven days.

The combination of continuous change and pressure to minimize time-to-market puts new challenges before today's managers. Led by the success of Japanese competitors, the electronics/computer industry, and select niches in the aerospace and automotive industries, U.S. firms are feeling the need to shorten product life cycles, minimize lead times, and adopt a new mentality toward the process of launching new products.

These time-sensitive competitors don't adhere to the old rules. Traditional management practice was based on having plenty of time: weigh the options, generate and evaluate several alternatives, play out the scenarios, product staff reports justifying decisions and directions. Heroes were the ones who operated within budget and on low-risk projects. The results of such a cautious and conservative approach were predictable: sluggish organizations, disgruntled employees, customer dissatisfaction, and eventual erosion of market share.

The Accelerators

The new competitors are time-to-market "accelerators." Their focus is on speed: in engineering, production, sales response, and customer service. They talk in terms of speed-to-market. Their product life cycles frequently look more like spikes than smooth flowing curves. To them, the marketplace is global and so is the competition. Niche marketing is crucial to understand customer requirements and concentrate resources on pertinent products and solutions.

Who are these accelerators? The bad news is that there a few corporations whose total enterprise can be categorized as accelerating. On the positive side, numerous examples exist where business units or product groups within the corporation have made great progress in reducing time-to-market.

Ford Motor Company created "Team Taurus" to develop the Taurus and Sable lines of automobiles. Team members included designers, engineers, and production specialists. Even customers were asked what they wanted in the car. The team addressed profitability and competitiveness in both the design stage and production cycle. In their effort to rationalize the car's mechanical components and the way in which it would be built, they replaced sequential engineering activities with simultaneous input from the diverse members of the group. Before the first clay model was built, they knew how the car would be assembled. Under the previous system, manufacturing managers never saw the cars they would build until eight or nine months before production started. The success of Team Taurus is cited as a significant factor in the renewal of Ford Motor.

The Ballistic Systems Division of Boeing Aerospace Corporation has implemented a program called "Developmental Operations." The goal is to simplify developmental practices. A multi-functional team is formed to develop a specific product and, in so doing, utilize process simplification techniques to speed the development effort, among other noteworthy goals. Design analysis was reduced from two weeks to 38 minutes (their goal is four minutes), the average number of engineering changes per drawing dropped from a high of 15 to 20 to a low of one. To accelerate production, critical inspection features were identified directly on the drawing. This helped reduce the ratio of shop-floor-inspection-hours to direct labor from 1:15 to 1:50. Seventy percent of all needed parts were in the factory within five days, and overall lead times were reduced by 30%.

Unisys Corporation's Roseville manufacturing plant won the 1990 Electronics Factory Automation Award. The achievement, presented by Electronic Packing & Production and Electronic Business magazines, recognizes the flexibility that Unisys built into its printed circuit board (PCB) assembly process. The production line can assemble up to 2500 PCBs per week in 64 different configurations with 1,327 different components. Time-to-market is reduced significantly because the components can be assembled in any sequence and in lot sizes of one. Result? The time needed to set up the line for a new configuration averages less than one minute, and each board takes only about 2 hours from start to finish.

There are numerous other examples of reducing time-to-market, although comprehensive programs to enhance time-to-time are, in most cases lacking. Sun Microsystems eliminated its New Products Group which had centralized responsibility for product development/introduction activities. Manufacturing was transformed into the "internal customer" and became a full partner in new product design, qualification, and in the transfer process. Amdahl Corporation defines new hardware but brings in key supplier AMP, Inc. to participate in the development of processes and assembly. Steve Jobs' NEXT, Inc. computer company has so streamlined the transition from design to production that its plant can manufacture a totally new board design in 20 minutes (on a high-volume circuit board production line).

Overseas, besides the well known activities of the Japanese, others are tuned to speeding product development. BMW's new 850i automobile is produced at a new development center called FIZ (Forschungs und Ingenieurs-Zentrum) where engineering and development are combined with production planning.

In 1975, Miller Brewing Company recognized two important market factors: (1) a trend toward lighter consumer products, and (2) the advantage of "market surprise," i.e., quick and quiet product development launched with no test-marketing, no press, and no rumors. Miller Lite beat Schlitz Light by one year and Anheuser-Busch Natural Light by two years. Three years later there were 22 other brands, but Miller still dominates.

Product Life Cycles and Profits

From the controller's perspective, speed-to-market means profits. A study by McKinsey & Co. consultants showed that a product that is six months late to market will miss out on one third of the potential profit over the product's lifetime (Table 1).
Table 1
The Cost of Arriving Late to Market
(and still on budget)
If your company is late to market by:
6 Mo. 5 Mo. 4 Mo. 3 Mo. 2 Mo. 1 Mo.
Your gross profit is reduced by:
-33% -25% -18% -12% -7% -3%
Improve time-to-market by only 1 month profits improve:
+11.9% +9.3% +7.3% +5.7% +4.3% +3.1%
For revenues of $25 million, annual gross profit increases:
+$400K +$350K +$300K +$250K +$200K +$150K
For revenues of $100 million, annual gross profit increases:
+$1600K +$1400K +$1200K +$1000K +$800K +$600K
Source: McKinsey & Company

Product planners are recognizing the financial implications of the new product life cycle. Traditional product strategy was based on accelerating through State I into the late Stage II, then extending the "cash cow" nature of State III as long as possible. Stage IV is to be avoided, if possible, but shortened if inevitable (Exhibit I).

The development effort is paid off during the Stage II phase of the traditional life cycle. In the 1990s, however, the product life cycle is in transition. The emphasis is on innovation -- avoiding becoming a commodity. The cycle is shorter, so short that the accelerators refer to product life cycle "spikes." Much of the shortness is in reaction to, or in anticipation of, stiffer competition. The reduced life cycle means less time to pay back the development effort. to maintain profit margins the accelerators are extending the product life cycle forward (Exhibit 2).

Becoming an Accelerator

It becomes readily apparent, then, that speed-to-market creates opportunities in market share, market leadership, and profits. So how can one become an accelerator? What propels products to market? With so many functions and activities involved in the time-to-market process, a clear target and a concentrated action plan are needed.

A useful starting point might be to eliminate some strategies that appear to be practical, but in actuality can be counterproductive. For example, we can't just "step on the gas," an approach that normally appeals to descendants of Attila the Hun. Not only must proper tools be in place, but the policies and procedures which tie various development functions together need to be established. No amount of intimidation can overcome these requirements.

Even when a change in operations is recognized as a necessary element in reducing time-to-market, managers have to appreciate the difference between incremental versus total change. Incremental changes is indeed useful in the early activities of tool building. Organizations should be given the proper resources to optimize departmental productivity, e.g., design engineers should be using computer-aided-design (CAD) systems, which have already proven their worth in engineering productivity. But on an interdepartmental basis, incremental change is inefficient to affect the development cycle. This safe, easily managed, easily reversed, slow approach makes people feel like something is being accomplished. However, only the symptoms are being treated. Speed-to-market requires a major or total change in traditional operations. That is, after the changes, the original procedures (and accompanying deficiencies) are no longer recognizable. Corollary: the action plan to becoming an "accelerator" is not sequential.

It's interesting to note that each example of accelerating business operations identifies various factors for its success. There apparently is no single application, no silver bullet that can be applied to the problem. In general, however, managers focus on a common set of activities. Speed-to-market has two premises:

(1) create an organizational environment
 where change and innovation come
 naturally; and

(2) adopt technology which gives people the
 most current, proven tools to perform
 their job.

Influence of Design Engineering

To the surprise of very few people, the time-to-market bottleneck in manufacturing firms is in the combined design engineering manufacturing activity. Here we should look to apply our two premises. Within that sphere of activity, the design engineering functions wields more influence than might be evidence at first glance. Exhibit 3 shows the inverse effect of design engineering on time-to-market. The influence of the design function does not arise from the intrinsic nature of the creative process. As mentioned earlier, productivity aids such as CAD have long ago solved that problem. It is the impact on downstream functions that makes the design decisions so critical.

Design changes, as reflected in Engineering Change Orders (ECO), are costly in both time and money. Exhibit 4 shows the range of time and money to implement ECO's in industries on opposite ends of the ease-of-implementation scale.

Furthermore, the later the changes, the more costly the implementation. Exhibit 5 shows that relative costs, and conversely the relative savings, attributed to the phase in which design errors are corrected. The message is clear: make significant reductions in the number of ECOs and implement changes as early in the development cycle as possible.

The organizational environment needed to minimize downstream product changes has been explained to us numerous times in many sources. Peters and Waterman, in their classic, In Search of Excellence, describe the innovation that comes from "skunk-works" development groups. Keep these developers away from the administrative nightmare of large, bureaucratic organizations and let genius prevail. Waterman follows up with "Adhocracy" organizations which react dynamically to changing conditions. "Intrapreneurship" has not been lost as a philosophy underlying these various structures, although to date the reviews of this technique are mixed.

There is nothing wrong with the judicious application of novel organizational structures to improve creativity and productivity. Most managers continually seek to simplify business units and eliminate organizational layers and middlemen where practical. Basically, the new innovation-oriented organizations are designed to enhance flexibility: static flexibility to adjust to changing market conditions, and dynamic flexibility for steadily increasing productivity through improved production processes and innovation.

Producing Manufacturable Products

The accelerators-to-market groups have such an organizational environment in place that they are able to consistently produce manufacturable products. Key to their success is the ability to remove the artificial barrier between the design engineers and manufacturing. Known primarily as concurrent engineering, but also as simultaneous engineering and producibility engineering, the goal of tightening this innovative team is to produce a manufacturable (and maintainable) product. An important point to grasp early on is that concurrent engineering is a people and communications issue, not an engineering technology.

Concurrent engineering is not new. Toyota and Honda have been using it in Japan for years. The well-known Japanese team approach and consensus orientation is the basis for concurrent engineering. Additionally, Japan's greater emphasis on research and development in process rather than product is complementary to the practice.

On the home front, GM and Ford have been at concurrent engineering for about four years now. Even the U.S. Air Force has jumped on the concept. At the Wright Research and Development Center they established a concurrent Engineering Office with the stated goal of increasing the productivity of the aerospace-related work force. Furthermore, concurrent engineering will be a Department of Defense mandate in the acquisition of future weapons systems.

The lesson learned thus far in concurrent engineering is that the more intelligence put into the design process, the less intelligence needed on the shop floor. In most U.S. manufacturing firms, today's process and quality are severely limited by existing product design. A simple shop floor costs less and increases speed through the factory. The concept applies equally to labor- or automation-intensive plants.

Designing a product for manufacturability doesn't necessarily reduce the number of engineering changes that occur throughout the product's life cycle. Most likely there will be fewer changes, but more important, they will be earlier in the development cycle. Exhibit 6 contrasts the timing of design changes in concurrent engineering versus traditional product development.

Accelerating-to-market means that engineering and manufacturing, as disciplines, share in the design process. It is more than an organizational interface: a new organizational entity is created so that a multi-disciplinary team produces the design.

Products cannot be "forced" through the factory. Material travels no faster than the information needed to produce the product. Therefore, time-to-market, with its inherent product and process design, is a function of the speed of information. All members have input to the concurrent design criteria (see Table 2).
Table 2
Concurrent Engineering Criteria
 * Simplicity of design
 * Use of standard parts
 * Number of potential
 suppliers and producers
 * Process repeatability and
 * Use of proven manufacturing
 technology at the scheduled
 production start
 * Ease and speed of assembly
 * Use of economical materials
 * Use of CAD/CAM
 * Confirmation of design
 * Minimize
 * Procurement lead time
 * Use of critical (strategic) materials
 * Special production tooling
 * Special test systems
 * Use of critical processes
 * Skill levels required in manufacturing
 * Unit costs
 * Design changes during manufacture
 * Use of limited capability items
 and processes
 * Use of proprietary items without
 "production right" releases
 * Removal of excessive material
 * Unrealistic tolerances

Technology as a Necessary Tool

Changes in information processing must accompany those in designing for manufacturability. In only a few instances will a large organization have a single computer system or even several systems all from the same computer vendor. A multi-vendor or multi-system information environment is the norm in U.S. manufacturing.

Integrating these systems is essential to ensure that all team members know what is happening in the product development cycle. Networks that tie various computer systems together enhance the speed and accuracy of communications within the group. Moreover, ancillary and immediate benefits can occur as redundant information is eliminated and more pertinent data relationships are established. "Open systems," a term designating a seamless flow of information throughout a computer network, ensures that all software packages are available for team audit.

In the speed-to-market companies, process engineers are using concurrent engineering to transform the traditional trade-off between efficiency and flexibility in manufacturing operations (see Exhibits 7 and 8).

If anything is needed in an environment that is rife with change and speed, it's flexibility. A Just-in-time manufacturing philosophy means more than the name implies--it means the elimination of waste. Waste adds time, as well as cost and complexity. Flexibility allows for reduced lot sizes, quick changeover equipment, minimal inventories, and simplicity. Process planners and manufacturing engineers have a key goal to gain valuable flexibility while maintaining efficiency.

During the design task, documents and files are tracked from concept to release. Reviewers receive automatic notifications and stiff response-time limits. All aspects of the design status are on-line to team members.

The ever-increasing time pressure on concurrent engineering teams motivates them to use high technology capabilities whenever possible. Engineering drawings are initiated in computer-aided-design (CAD) systems and quickly passed to more useful imaging systems. Imaging technology is a more efficient method of distributing the engineering design or drawing and allows reviewers to red-line, or mark and comment on the drawings without disturbing the original design. Alternative sketches can easily be entered by any team reviewer to enhance manufacturability. Artificial intelligence (AI) systems are also helping in the evaluation of manufacturable designs, although usually in a narrow and well-defined segment of the process.

The Role of Top Management

As in most successful major business changes, top management must be supportive (at the least) and, preferably, actively involved. The top-line executive must commit to a speed-to-market operating philosophy. What is commitment? Relating it to the proverbial American breakfast of bacon and eggs, the chicken is involved, but the pig is totally committed.

Top management provides a vision of the future and a time-to-market goal that product developers continually strive to meet and exceed. Inter-departmental processes must be put in place to fit the new concurrent engineering direction. Top management also provides the tools, in this case the computer systems and other high technology capabilities necessary for rapid communication of designs and information.

Lastly, top management never accepts the status quo. Change, innovation, and improvement are continual. The "accelerators" of tomorrow will, by definition, emerge from nowhere. The competitors and the market will be taken by surprise; market shares and profitability will be affected. Time-to-market is tomorrow's competitive issue.


Dumaine, Brian. "How Managers can Succeed Through

Speed," Fortune, February 13, 1989. Defense Manufacturing Management, Defense Systems

Management College, Ft. Belvoir, VA, April 1989. Gunn, Thomas G. Manufacturing for Competitive

Advantage, Ballinger Publishing Company, 1987. Reiner, Gary. "Lessons from the World's Best Product

Developers," Wall Street Journal, August 6, 1990. St. Charles, David. "Don't Toss it Over -- Break Down the

Walls," Automation, June 1990. Schonberger, Richard J. World Class Manufacturing, The

Free Press, 1986. Shumaker, Gerald C., Al Herner, Chuck Wagner, Tracy

Houpt. "Concurrent Engineering Initial Program

Strategy," Wright-Patterson Air Force Base, Ohio, July

1989. Yankee Group Special Report to Management, "Speed to

Market," Boston, May 28, 1990. Joseph T. Vesey, Director of Production Programs, Unisys Corporation Mr. Vesey, previously strategic planning manager for the industrial truck division of Eaton Corp., is also adjunct professor of management at Ursinus College, PA.
COPYRIGHT 1991 Society for the Advancement of Management
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Author:Vesey, Joseph T.
Publication:SAM Advanced Management Journal
Date:Sep 22, 1991
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