THE ROLE OF IT IN NEW PRODUCT DEVELOPMENT

THE ROLE OF IT IN NEW PRODUCT DEVELOPMENT

By

M. R. Muhamad and S. Ariyanti

School of Mechanical engineering

Universiti Sains Malaysia

Engineering Campus

14300, Nibong Tebal

Seberang Perai

Pulau Pinang

Abstract

The key to a company's future survival and growth depends on the capability to continually innovate and introduce new product and to improve current product and processes. The new product development effort will help reduce over-dependence of the national economy on the more industrialized nations; while at the same time encourages and increases indigenous technological capabilities. With increasing sophistication of the information technology (IT), it is important that innovative manufacturing companies be aware of the support that IT could provide in their effort to introduce new product and processes. In a wide range of industries competitive advantage could be gained through IT in helping to meet many different customers requirement. Widespread use of IT such as the internet will dramatically reduce transaction cost, leading to a growth in electronic commerce and productivity.

New product development process consists of a group of activities that draw a multiple functional skills. IT could solve problem such as the coordination of information flow and data transfer between design team and other teams of the new product development project. The purpose of this paper is to present the result from a resent survey on new product development activities. The random sampling method was used and the data was collected using written survey and interviews. Discussion will be focused on the extent and nature of application of IT in the various stages of new product development.

Introduction

The continuous inflow of new product is a fundamental condition for a well-functioning market economy. Hence, product development must be looked upon as one of most basic activities in market economy. In this paper Product development is interpreted as a fundamental activity involving either the introduction of totally new product or major changes of existing product. Identify customer requirement and to proceed with design and development according to the requirement.

Significant changes can occur in both the customer needs of a product must address and the technologies that are employed to satisfy these needs between successive product generations. Therefore, in each project there is a requirement to understand how these changes should be incorporated into design (MacCormack, 2001). Application of IT in the new product development processes will allow a common information-processing base with the potential to be combined into more comprehensive production systems. IT is used in the area of generation, processing and handling of information. Information and data in manufacturing can be divided into two major categories: management and technical. Management information relates to production scheduling, capacity planning, bills of material, inventory control, purchase, order, sales, forecasting and financial management. Technical information relates to product design, engineering drawing, manufacturing data as well as inspection and testing (Rahman, 1999). In this context IT refers to hardware, software, telecommunication, database management and other information processing technologies used in computer based information system. In addition, IT is helping businesses in a wide range of industries gain competitive advantage through better knowledge of customer.

Some of the advantages of applying IT in manufacturing are as follows (Rahman, 1999):

1.      Improve customer service-this can be achieved by providing fast, up-to-date and accurate information.

2.      Improve managerial strategic decision by providing the latest available information.

3.      Increase productivity for information searching.

4.      Integration of with business function - integration all level within and between organization enable quick decision to be made and improve efficiency of the business.

Application of IT influences the success of new product development process, from idea generation to product launch. In idea generation firms must respond to new information. The new information about market needs and technical opportunities are expected to emerge as a project proceeds. There is a greater need to keep the product concept open to change, maintaining design flexibility for a longer proportion of development. An even greater challenge comes from the need to respond to new or changing information during a development project (MacCormack, 2001). IT will ensure the efficiency of their work in understanding the actual products that customer want.

The internet and the emerging global telecommunication "info structure" pose new opportunities and threats to businesses. Firms are using the internet to improve innovation, production, sales, and service processes. Lower communication and coordination costs impact business practice and strategies. Widespread use of Internet will dramatically reduce transaction costs, leading to a growth in electronic commerce and productivity.

IT application in 13 stages of new product development process

New product begins as ideas that evolve into comprehensive marketing program designed to meet the needs of potential buyers and other market stakeholders. Throughout this evolutionary process, people both within and outside the organization will challenge the definition of core product concept. As the needs of buyer and other market stakeholders are considered, changes to core concept may be necessary or original concept may be reinforced. Generally, new product development consists of thirteen-step process as described by Cooper (1988). After the new product strategy determined, the process proceeds through the following stages:

1. Initial Screening

The new product development plan begins with definition of a product idea. An idea occurs when technological possibilities are matched with market needs and the market place-a competitor's new product, recognition of unsatisfied customer's needs, or direct request from customers. Such market-pull ideas represent the majority of new product projects. But technology push idea - which are generated by research or find other word discovery-also play an important role, particularly in radical innovations or breakthrough products. IT application such as internet can be used as a tool that help to get new product idea, because they can provide access to information that needed in this stage.

The next part of the idea stage is screening. Screening is the first evaluation of new-product idea, and represents the first decision to commit resources to the new product project.

2. Preliminary Market Assessment

The task is to find out information about market size, growth, segments, and competition by specified deadline, to determine whether the proposed product has a hope of market acceptance, and to identify and assess sales, promotion, and distribution procedures.

Given its limited budget and short duration, this type of market assessment is clearly not a professional and scientific piece of research. Rather, its 'grunt work': getting hold of available market information in-house. (For example, through a meeting with sales force): examining secondary sources (for example, reports and article published by trade association, research bodies, and government): and canvassing outside sources (such as industry expert or potential customers). It's hard work, much like playing detective and following up on leads, but it's surprising how much information about a new product's market prospects can be gleaned from several days of solid sleuthing. Strategic application of IT is helping businesses in a wide range of industries to gain competitive advantage through better knowledge of customer wants and marketplaces.

3. Preliminary Technical Assessment

This stage involves subjecting the proposed new product to the firm technical staff-R&D and engineering-for appraisal. Occasionally, outside expert will be used. The key questions concern the technical viability of the product. Can it be developed? How long will it take? Can we produce or manufacture it? What resources will be required? What kinds of problem will be encountered?

Technical assessment is to making decision about technology should be based on a comprehensive, quantitative analysis. The decision-maker should scan range of technology option, calculate the consequences, and then select an option that satisfies a reselected decision rule.

IT tools such as the inspection system and statistical analysis software can help answer the questions concern the technical viability of the product and process. And get information about latest technologies and competitor’s technologies information the internet can help.

4. Market Research

Market research is concerned with obtaining information to better understand customer preferences, want, and needs. It is used to assist the decision-making process for determining marketing and other business strategies. This research helps reduce the uncertainty associated with making such decision but does not totally eliminate it. When used effectively, market research will clarify how to understand the customer's decision-making process as well as understand the reason for liking or disliking aspect and features of product. This information will help the development engineer translate customer preferences, desires, and needs into product features. In many instances, the potential benefits of performing market research are not explored to their full potential because it is frequently used to determine only whether customers like or dislike a particular product. (Gevirtz, 1994)

The ideal new product process would balance technical and engineering research with extensive marketing research. Market information should be integrated into every stage of process, not just an afterthought at the time of the launch phase. Whether the project is market-pull or technology push, market information should be used not only in evaluation, but also in product design, engineering, and development activities.

In market research, people involved in the marketing function seek to identify the benefits desired by potential buyer to solve their needs and problem. Once identified, these buyer benefits not only help to reshape the core product concept, but can also be translated into more specific product features to better communicate the product's meaning to all involved. The marketing group often views itself as representing the voice of the customer within the organization. In gathering the data researcher can use internet to obtain information such as reviewing studies published in trade journals, reviewing previous studies, reviewing industry and demographic trends, and can use e-mail to send the questionnaires for customers. Data that are collected are coded and entered into a computer program that analyzes the data and determines any statistically significant issues.

5. Business/Financial Analysis

Financial concerns are important to business with financially strong companies because they will be more able to make the necessary investment to remain competitive and invest in a good quality assurance program (Gevirtz, 1994). The term financial analysis when applied to new product conjures up vision of sale forecast and profit calculation. There are good basic methods for doing financial analysis and there are excellent methods for doing sales forecasting. Forecasting methodologies are mostly based on many years. This model does an excellent job and serves as the basis for some very advanced mathematical system used by some of the most sophisticated new product marketers. And every firm has people who can make an income statement-based net present value calculation (using discounted cash flow method). Financial model requires information about product cost, prices, the current value of money, probable taxes on the future income, the amount of further capital investments (Crawford, 1996).   

Financial analysis can be accomplish using any of the six ratios include the quick ratio, asset turnover, and inventory turn over, debt to capital, capital expenditure, and times interest earned (Gevirtz, 1994). Using software computer available these analysis can be easier and faster.

6. Product development

In this stage, the actual product development begins in earnest. Technical resources people - the product design, R & D, and engineering departments - are deeply involved, and a prototype or product sample are usual out come of this stage. The product must be unique and superior in the eyes of the customer, not just in the opinion of the R&D department. The fact that the product may present a technological breakthrough or utilities a new material may excite the R&D group but leave the customer cold.

The firm must possess the technological and production expertise necessary to develop and produce the superior product. The product may be better because it uses new technology, or is better designed, or is produced at lower cost than its competitors. If the product is to deliver significant advantages and benefit to user, however, a clear understanding of the customer's needs, wants, preferences, and choice criteria are essential before serious product development begins. The value of a product is in the eye of the customer.

The challenge toward improved performance in the product design and development areas, particularly in terms of key factors such as quality, time to market costs, has resulted in a much wider and more intensive use of IT and automation tools. Throughout the year's design automation tool such as CAID (Computer aided industrial design), CAD (Computer aided design), CAM (Computer aided Manufacturing) and CAE (Computer aided engineering) have provided designer and manufacturers with some of the greatest productivity gains.

7. In-house Product Testing

The testing is a validation of product under both simulated and real-world conditions. In-house testing involved subjecting the product to a variety of tests under controlled conditions to ensure that no technical flaws exist.

Engineers are supposed to translate customer requirement and needs into product performance specifications as well as component and part specification. The design FMEA (Failure mode and effects analysis) helps to determine the required test program for a product component. QFD (Quality function deployment) helps to determine how well test program assures that the design meets customer needs.

8. Customer Test of Product

At the same time that the prototype testing is undertaken, a customer test of the product is conducted. The objective is to test the product under actual use conditions to ensure that the product performs as expected. Customer have an innate ability to find new ways to destroy products, ways that even the most thorough lab test could not anticipate. The second purpose of the customer test is to gain a more realistic appraisal of product from the customer's standpoint; customer tests can be used to gauge liking and preference. The outcome of these tests is the identification of defect and needed improvements, and expected customer acceptance of the new product.

Customer observation, focus groups, and field trials are means to uncover any remaining product problems before the product is released. Sample production units are obtained and are given to customers to use. Either they are asked to assess the product's performance from durability and features standpoint, or the customer's behavior is observed without his or her knowledge. (Gevirtz, 1994)

9. Test Market/Trial Sell

A test market selling the product using the proposed marketing plan, to a limited number of customers or in a limited geographic area - tests not only the product but also all the elements of the marketing mix. A pretest market, which is a lower - cost simulation of a test market, can also be used for some categories of new products. The identification of needed adjustments to the marketing plan and final estimates of market share and sales volume are two results of the test market.

Paralleling the development of the marketing plan. Here the result of the concept stage-target market selection, product strategy, and positioning strategy-are shaped into marketing plan. The supporting element of marketing mix pricing, distribution, advertising, sales strategy, promotion, and service-are decided. These supporting elements may require an additional market study of how customers buy the product, what influences their purchases, and the customer's source of product information.

Fortunately, technologies came along that helped fuel the development of other market testing methods-mathematical models for forecasting sales with much less than complete market data, store-loading system where it was no longer necessary to go to the trouble of "selling in" the inventory, scanner systems of retail store checkouts that compiled product data not even dreamed of in the good old days of test marketing, and communications system that permitted a form of trial marketing over areas far greater than test market cities and from which one could quickly roll on into the total market soon as assurances appeared (Crawford, 1996). This market study can be implemented more efficiently using software systems available to processing data into mathematical model and statistical analysis systems.

10. Trial production

A pilot production run tests the production method that will eventually be used for full-scale production facilities or methods are often required in order to solve unexpected problems.

The rationale for a pilot production run test is to put lots of the product through the entire system to detect deficiencies of the entire process. The need for this stage becomes necessary to determine whether the end product will meet the quality requirement of the customer.

Other important uses of computer are ones associated with inspection systems such as with coordinate measuring machines and vision systems. FMEA is analysis of the situations leading to the failure of process to produce of product that meets specification of customer.

11. Precommercialization business analysis

Precommercialization business analysis is based on the concrete financial data derived from test market and trial production. In this stage information about the economy and business is needed to ensure new product could be successful in marketplaces. The internet can help to get this information easier and quicker.

12. Production start-up

Production start-up is an ultimate stage within the product development process. Only if the team is able to manufacture and deliver product that pleases customers with its performance and satisfied their value needs can there be a successful completion of the product development process. The competitive need to shorten product development process and to improve product quality makes this stage critical to the timely introduction of superior product.

Process control methods are applied to critical processes and quality. FMEA is a method used to identify the potential causes for failure in the process and the means to prevent those failures from occurring. The basis for FMEA is to compare the design characteristics relative to the planned manufacturing or assembly methods, to ensure new products meets the customers value expectation.

      13. Market launch

The launch stage involves the start-up of full or commercial production and the implementation of the marketing plan in the total market area. All facet of the launch plan have been well tested. If the tests have been properly carried out, and barring any unforeseen or new circumstance, the launch should be simple matter of proficiently executing a well-designed plan of action.

A strong marketing effort, a well targeted sell and effective after-sales services contribute significantly to successful launching of new product. But a well-integrated and properly targeted launch effort does not happen by chance; it is the result of a fine-tuned marketing plan properly carried out.

Methodology

In this study we investigate the role of IT in every stage of new product development process. Using data from new product development activities 27 of companies involved in telecommunication and plastic products. Data were collected using a mailed questionnaire.

Result and discussion

All companies in the survey had carried out new product development activities during their operating years. The ability to develop and market a genuinely innovative product or to continue to launch new generation of product is central to most successful and fast growing corporation. IT is a tool can help in the new product development activities to improving and modifying the existing product. IT is helping businesses in a wide range of industries gain competitive advantage through better knowledge of customer.

Table 1. IT application in activities new product development process center

Activities in new product process	No. of companies
Initial screening	7
Preliminary market assessment	6
Preliminary technical assessment	7
Market research	14
Business/financial analysis	9
Product development	18
In-house product testing	14
Customer test of product	12
Test market/Trial sell	6
Trial production	14
Precommercialization business analysis	11
Production start-up	15
Market launch	8

Application of IT in every stage in new product development process is shown in Table 1. From the survey 18 companies were using IT in product development stage. The product development process is critical to the success of the product, because it is here that robust products with high customer value are created. To survive in competition new product must be designed using IT and automation tools. 15 companies were using IT in production start-up stage, to produce the products superior. Lack application of IT in every stage in new product development process causes long product development cycles. Some of common causes of long product development cycles: slow strategic and tactical reaction to new product demands, poorly planned prototype cycles, late and poorly quality tooling, poor response to customer requests for changes.

Table 2. Application of IT in companies’ activities

Activities	No. of companies
Customer survey	12
Selling product	18
Material procurement	21
Create new corporate value	15
Future business strategy	17
Improve performance	15
New relationship between business partner and customer	14

Table 2 shows that 21 companies using IT in material procurement activities to getting new material and to review the material management and production scheduling system to assure that on-time delivery performance is effective. Application of IT in companies’ activities is important, because IT is going to play a large role in helping it stay ahead of the competition and has even changed its corporate mission statement to reflect that IT will be a key factor in delivering health care solution.

Table 3. Communication equipment that used in companies

Equipment	No. of companies
Paper	19
E-mail	23
World wide web	8
Phone/fax	22
Intranet	13

Table 3 shows that 23 companies are using E-mail in communication system their organization. The use of E-mail is high because it is a communication system which quick, easy, cheap, and practicable. Communication technology as a critical functions within the manufacturing enterprise (such as product design, engineering, manufacturing/assembly, procurement, sales and marketing, operation servicing and training) extended enterprise involving supplier, customers and partners to collaboratively develop, build and manage products throughout their entire manufacturing value chain.

Table 4. E-commerce

E-commerce methods	No. of companies
Business to business (B2B)	13
Business to customers (B2C)	6
None	3

Table 4 shows 13 companies using E-commerce B2B method and 6 companies using B2C method. E-Commerce is new method in marketing; with this method new product can introduced to worldwide be quick and easy. Dramatically E-commerce can be reducing transaction cost. In electronics marketplace creating new opportunities to add value for customers. Retailers who think about and plan for these changes may be the industry leaders of tomorrow.

Conclusion

In this article, we have investigated the role of IT in every stages of new product development processes, based on 27 companies involved in telecommunication and plastic products. IT was used in areas of generation, processing and handling of information. Information and data in manufacturing can be divided into two major categories: management and technical. We have found IT has been applied in every stage in new product development process. And in communication system all companies in this survey are using IT. IT can ensure the efficiency of their work in understanding the actual products that customer want. Product and other data can be handled more efficiently and with higher accuracy using the IT tools.

Literature review

1.      Abd. Rahman Abdul Rahim and Robiah Ahmad, 1999, Information System in A Manufacturing Industry. Proceeding World Engineering Congress 1999. Kuala Lumpur.

2.      Crawford C M, 1996, New Product Management, The McGraw-Hill Companies, Inc.

3.      Cooper R G, 1988, Winning at Products, Kogan Page.

4.      Gevirtz C, 1994, Development New Product with TQM, McGraw-Hill, Inc.

5.      MacCormack A, Verganti R, Iansiti M, 2001, Developing Products on "Internet Time": the Anatomy of a Flexible Development Process, Management Science, Vol 7, No. 1, pp.133-150