Profitiviti - New Product Development Case Study Example

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The New Product Development (NPD) process is a critical enterprise process for most product / service related companies. Understanding the true costs and talent associated with the NPD process can improve operational efficiencies and profitability. Let us know what you think.

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Profitiviti - New Product Development Case Study Example

  1. 1. 1<br />EXAMPLE CASE STUDY<br />New Product Development<br />PROACTIVE Business Optimization<br />
  2. 2. COMPANY BACKGROUND<br />Consumer Products Company<br />Main Issues<br /><ul><li>Strong Cost Control / Reduction Pressures
  3. 3. Improving Efficiencies Around Product Launches</li></ul>Approach – Develop a Process-Based-Costing Organizational Model<br /><ul><li>Define List of Business Processes
  4. 4. Rank Each Business Process
  5. 5. Strategic Value
  6. 6. Contribution to Growth
  7. 7. Maturity
  8. 8. Align Resources, Department Budgets & Capital Project Spend to Business Processes</li></ul>2<br />
  9. 9. IMPROVING EFFICIENCY<br />New Product Development (NPD) is Considered a Strategic & Growth Oriented Business Process<br /><ul><li>Do you know the true cost of the New Product Development process?
  10. 10. Do you know the level of resource talent working on this process?
  11. 11. Do you know the amount of Sales which are needed to cover just the product launch process?</li></ul>“Between 33% and 60% of all new products that reach the market place fail to generate an economic return.”<br /><ul><li>Academy of Management Article (Shilling & Hill)</li></ul>3<br />
  12. 12. UNDERSTAND THE TRUE COSTS<br />NPD is an Enterprise Business Process<br />NPD PARTICIPATION<br /><ul><li>Includes Resources from 17 Departments
  13. 13. Includes Collaboration with Corporate, Regional & Country Resources</li></ul>NPD COST “BUBBLE”<br /><ul><li>$22,000,000 USD Fully Loaded, Including:
  14. 14. Resource Costs
  15. 15. Manufacturing Costs
  16. 16. Licensing Costs
  17. 17. Etc.
  18. 18. Average $2,750,000 USD Per Product Launched
  19. 19. 8 Products Launched / Year</li></ul>4<br />
  20. 20. RATIONALIZE WITH SALES<br />Based on Margins, Every $1 Spent Required $7 in Sales<br />Therefore, $2.75 Million in Launch Costs = $19.25 Million in Sales<br />So, What Happened?<br /><ul><li>Minimum Sales Targets Led to 46% Decrease in Product Pipeline
  21. 21. Product Executive Committee Now Approved All Projects with Lower Projections
  22. 22. Sales & Marketing Focused Spend on Bigger Ticket Launches
  23. 23. Resource Bonuses Were Tied to Product Sales Performance
  24. 24. Resources Focused on Fewer Products; Increased Quality & Project Management
  25. 25. Process Improvement Project Kicked-off to Further Streamline NPD Process
  26. 26. Mitigated Cost Impacts of Future “C” & “D” Rated Products
  27. 27. Fewer New SKUs for Supply Chain to Plan & Manage
  28. 28. Lower Overall Inventory& Warehouse Space Usage
  29. 29. Less Expedited Air Freight & Inventory Scrap</li></ul>*** By the way, this is just to cover the costs of the launch. It does not cover the inventory costs, carrying costs, ongoing planning costs, etc. to keep that product in stock.<br />5<br />
  30. 30. PROFITIVITI<br />Profitiviti as a company has deep roots in management consulting, strategy, business operations and continuous improvement. For over 15 years we’ve been conducting organizational health checks for senior leaders that have the desire to better understand their business operations.<br />Our software product, Business Optimizer™, utilizes a proven Process Based Costing methodology for improved operational insight. Because our framework aligns resources and spend to the business processes they enable, company’s now have the ability to quickly assess and analyze their business operations by process, department, division and/or location.<br />Profitiviti’s software provides valuable and quantifiable insight leading to improved cost control, enhanced growth strategies and better organizational efficiencies.<br />6<br />
  31. 31. ADDITIONAL INSIGHT<br />Improve Profitability & Productivity<br />PROCESS INVESTMENT REPORT<br /><ul><li>Understand True Costs of Business Operations
  32. 32. Take Costs Out of Enabler Processes & Re-invest in Growth Processes
  33. 33. Track Project ROI Through Trending</li></ul>PROCESS BENCH STRENGTH REPORT<br /><ul><li>Understand Resource & Process Alignments
  34. 34. Quantify Costs of Low Performing Resources & Evaluate Their Process Impacts
  35. 35. Monitor Resource Risk on Your Business Operations</li></ul>7<br />
  36. 36. ADDITIONAL INSIGHT<br />Improve Profitability & Productivity<br />PRODUCT LINE CONTRIBUTION MARGIN REPORT<br /><ul><li>Improve Understanding of Product Profitability
  37. 37. Conduct Threshold Analysis for SKU / Product Rationalization
  38. 38. Easily Identify Targeted Profit Improvement Opportunities</li></ul>WHAT-IF ANALYZER<br /><ul><li>Create & Share Scenario-Based Business Assessments
  39. 39. Improve Ability to Understand Transformation Impacts for Enhanced Change Management Programs
  40. 40. Define Realistic Cost Targets Prior to Changes</li></ul>8<br />
  41. 41. CONTACT INFORMATION<br />Profitiviti<br />5000 Birch Street<br />West Tower, Suite 3000<br />Newport Beach, CA USA 92660<br />949-260-2029<br />www.profitiviti.com<br />Steve Raack<br />310-259-1248 mobile<br />sraack@profitiviti.com<br />Please Contact Us with Questions – Look Forward to Hearing From You<br />9<br />

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