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PROJECT MANAGEMENT ON NEW PRODUCT DEVELOPMENT AND NEW PRODUCT LAUNCHIN THE AUTOMOTIVE INDUSTRY

Prof. dr. Virgil POPAProf. dr. Dorina TANASESCU

Masterand Corina DINCAUniversity of Valahia Targoviste, RomaniaMihai NICOLAEDacia Renault Romania

virgilp51@yahoo.comdtanasescu2212@yahoo.frcorina_raluca@yahoo.com

AbstractSuccessful innovation has become a key driver for revenue growth, competitive margins and, in somecases, even for survival. The ability to bring this innovation to market quickly, efficiently and ahead ofcompetition is becoming increasingly important. An efficient product launch requires integration and

coordination among multiple functional areas, including product design, procurement, planning,manufacturing, sales and marketing. In addition, as organizations increasingly leverage core capabilitiesof other companies, innovation has to be delivered through virtual networks, working with partners in acollaborative environment in order to bring products and services to the market faster, smarter andcheaper. Consequently, organizations need to integrate itselves internally and also externally withsuppliers and customers, creating end- to- end supply chain processes and capabilities which imposedifferences on product and customer requirements.The innovation as a business model is made up of all decisions that a company makes including sixmain elements, namely: who, what, when, where, why and how much a company needs to provide itsgoods & services and receive value for its effort. Some of the changes in business that has thepotential to impact a new product development (NPD) include: 1. increased levels of competition; 2.rapidly changing market environments; 3. higher rates of technical obsolescence and 4. shorter productlife cycles.

Moreover, the importance of being the first on the market is discussed extensively in various sources.Besides the instinctive idea of being first, other measurable benefits are possible for those that get onthe market sooner with innovative products and services: 1. Increased sales through longer salescycles; 2. Increased margins; 3. Increased product loyalty; 4. More resale opportunities;5. Greatermarket responsiveness;6. A sustained leadership position.A new product launch and a management change in the automotive industry refer to all activities andmeasures linked to planning, control, execution, development of a new product, till it reaches the wishedlevel of production.By referring to new products launch in the auto industry we see that these trends include time forcompetition, globalization and strategy, extension of new product portfolios and a new management,outsourcing, cooperation and collaboration, support processes such as the informatics systems,modularization and complexity of products, research and development, production and distribution aswell.

Keywords: Innovation, Project Management, New product development, New product launch,Automotive industry.

1. Overview of innovationInnovation as a business-model is defined as the discovery of different business model in an

existing industry. If successful, new business models enlarge the overall market by attracting non-consumers into the market or by encouraging existing consumers to consume more.(Constantinos C.Markides Game-Changing Strategies, Jossey-Bass, 2008, San Francisco)

Successful innovation has become a key driver for revenue growth, competitive margins and, insome cases, even for survival. The ability to bring this innovation to market quickly, efficiently andahead of competition is becoming increasingly important. An efficient product launch requires

integration and coordination among multiple functional areas, including product design, procurement,planning, manufacturing, sales and marketing. In addition, as organizations increasingly leverage core

mailto:virgilp51@yahoo.commailto:dtanasescu2212@yahoo.frmailto:corina_raluca@yahoo.commailto:virgilp51@yahoo.commailto:dtanasescu2212@yahoo.frmailto:corina_raluca@yahoo.com

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capabilities of other companies, innovation has to be delivered through virtual networks, working withpartners in a collaborative environment to bring products and services to market faster, smarter andcheaper. Consequently, organizations need to integrate internally and also externally with suppliers andcustomers, creating end- to- end supply chain processes and capabilities which differentiate on productand customer requirements.

If the world was stable, there would be no need to change business operation and methods, or tounderstand what has changed and what works well. However, firms operate in dynamic environments,not stable ones. Both the competitive and internal environments in which firms operate evolve over time.In response, management processes must also change over time so that firms can remain effective andprofitable through the changing situation. Some of the changes in business with the potential to impactthe ways in wich new product development (NPD) is practiced and managed over the last five yearsinclude:

increased levels of competition (more firms competing for the same markets) [34, 40, 59]

rapidly changing market environments [8,53]

higher rates of technical obsolescence [49] and

shorter product life cycles [3, 58].

A primary impact of these environmental changes is to drive firms to implement changes which helpspeed products through development, and improve process efficiency and overall NPDeffectiveness.

Part of the Product Development & Management Associations (PDMA) mission, is to createand diseminate knowledge about managing and improving new product development.Theobjectives of best practices research were to:

Determine the current status of product development practices and performance

Understand how product development has changed from five years ago

Determine whether differences exist in NPD practice or performance across industrysegments

Investigate process and product development tools which differentiate product

development success.

FIGURE 1-1 The entire innovation process may be divided into three parts: fuzzy front end (FFE),new product development (NPD), and commercialization.The division between the FFE and the NPD is often less than sharp, since technology developmentactivities may need to be pursued at the intersection.

NEW CONCEPT DEVELOPMENT MODEL

The NCD model shown in Figure 1-2 consists of three key parts: The engine or bulls-eye portion is the leadership, culture, and business strategy of the

organization that drives the five key elements that are controllable by the corporation.

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The inner spoke area defines the five controllable activity elements (opportunity identification,opportunity analysis, idea generation and enrichment, idea selection, and concept definition) ofthe FFE.

The influencing factors consists of organizational capabilities, the outside world (distributionchannels, law, government policy, customers, competitors, and political and economic climate),and the enabling sciences (internal and external) that may be involved.

Several characteristics of the model are worth noting. The inner parts of the NCD are called elements,as opposed to processes. A process implies a structure that may not be applicable and could force theuse of a set of poorly designed controls to manage FFE activities. In addition, the model has a circularshape, to suggest that ideas are expected to flow, circulate, and iterate between and among all fiveelements.

FIGURE 1-1. The new concept development (NCD) construct is a relationship model, not linearprocess.

INFLUENCING FACTORS (THE ENVIRONMENT)The FFE exists in an environment of influencing factors. The factors are the corporations organizationalcapabilities, customer and competitor influences, the outside worlds influences, and the depth and

strength of enabling sciences and technology. Sustained successful product development can occuronly when FFE activities can be accomplished whit the companys organizational capabilities.Organizational capabilities determine whether and how opportunities are identified and analyzed, howideas are selected and generated, and how concepts and technologies are developed.

Enabling science and technology is also critical, since technology typically advances bybuilding upon earlier achievements. Sciences and technology become enabling when they can be usedrepeatedly in a product or service. Enabling is not the same as mature, which is defined on atechnology trend line or penetration curve. It is the point when the technology is development enough tobuild it into a manufactured product or regular service offering. Enabling technologies usually providesome degree of enhanced utility, cost avoidance, value, or quality improvement for the customer.Technologies typically become enabling early in their life cycle.

The outside world, government policy, environment regulations, laws concerning patents, andsocioeconomic trends all affect the FFE as well as the new product development or Stage-Gate part of

the innovation process. Some of these factors are indicated in Porters five force model (1987).Porters model evaluates the relative power of customers, competitors, new entrants, suppliers, andindustry rivalry a power relationship that determines the intensity of competition and often inspiresinnovation.

THE ENGINE (LEADERSHIP, CULTURE, AND BUSINESS STRATEGY)The element of leadership, culture, and business strategy sets the environment for successfulinnovation. Proficiency in this element distinguishes highly innovative companies from less innovativeones (Koen et al. 2001).In their study of thirteen highly innovative companies, Zein and Buckler (1997) identified seven factorsthat set these companies apart:

Leaders demonstrating in every decision and action that innovation is important totheir company.

Encouraging purposeful evolution and encouraging employees to try new things Developing real relationship between marketing and technical people Generating customer intimacy by encouraging their employees to interact closely

with customers. Engaging the whole organization in understanding that innovation is the

fundamental way that the company brings value to its customers. Continuing to value the individual and set an environment that is conductive to high

motivation. Telling powerful stories that reinforce the principles and practices of innovation.

OPPORTUNITY IDENTIFICATION

In this element the organization identifies opportunities that it might want to pursue. Business andtechnology opportunities are explicitly considered so that resources will be allocated to new areas of

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market growth, operating effectiveness, and efficiency. This element is typically driven by the businessgoals. For example, the opportunity may be a near-term response to a competitive threat, abreakthrough possibility for capturing competitive advantage, or a means to simplify operations, speedthem up, or reduce their cost. It could be an entirely new direction for the business or an upgrade to anexisting product. It could also be a new product platform, a new manufacturing process, a new serviceoffering, or a new marketing or sales approach. Overall opportunity identification defines the market or

technology arena the company may want to participate in.Opportunity identification in many cases precedes idea generation and enrichment. It also may

enable linking unanticipated notions to business or marketplace needs that were not previously known.

OPOORTUNITY ANALYSISIn this element, an opportunity is assessed to confirm that it is worth pursuing. Additional information isneeded for translating opportunity identification into specific business and technology opportunities.

Opportunity analysis may be part of a formal process or may occur iteratively. Businesscapability and competency are assessed in this element, and sponsorship fur further work will bedetermined. However, despite all the effort, significant technology and market uncertainly will remain.

A typical analysis for a large-scale opportunity would include:

Strategic framing. Market segment assessment. A

Competitor analysis.Customer assessment.

IDEA GENERATION AND ENRICHMENTThe element of idea generation and enrichment concerns the birth, development, and maturation of aconcrete idea. Idea generation is evolutionary. Ideas are built up, torn down, combined, reshaped,modified, and upgraded. An idea may go through many iterations and changes as it is examined,studied, discussed, and development in conjunction with other elements of the NCD model. Directcontact with customers and users and linkages with other cross-functional teams as well ascollaboration with other companies and institutions often enhance this activity.

Idea generation and enrichment may be a formal process, including brain-storming sessionsand idea banks so as to provoke the organization into generating new or modified ideas for theidentified opportunity. A new idea may also emerge outside the bounds of any formal process such asan experiment that goes awry a supplier offering a new material, or a new user making an unusualrequest. Idea generation and enrichment may feed opportunity identification, demonstrating that theNCD elements often proceed in a nonlinear fashion, advancing and nurturing ideas wherever theyoccur.

IDEA SELECTIONIs most instances, the problem is not coming up with new ideas. Even when businesses are beingdownsized, there is no shortage of new ideas. The problem for most businesses is in selecting whichideas to pursue in order to achieve the most business value. Making a good selection is critical to thefuture health and success of the business. However, there is no single process that will guarantee a

good selection. Most idea selection involves an iterative series of activities that are likely to includemultiple passes through opportunity identification, opportunity analysis, and idea generation andenrichment, often with new insights from the influencing factors and new directives from the engine.

Idea selection is expected to be less rigorous in FFE than in the NPD portion, since many ideasmust be allowed to grow and advance. Additional effort will be invested to define the concept after theidea has been selected.

CONCEPT DEFINITONConcept definition is the final element of the new concept development model. This element providesthe only exit to the NPD or technology stage gate (TSG). In order to pass through the gate, theinnovator must make a compelling case for investment in the business or technology proposition. Someorganizations refer to this as a win statement. Other call is a gate document. The investment case

consists of both qualitative and quantitative information, which the gatekeepers use to make a

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determination. Most companies specify guidelines for gatekeepers, who to make decisions at the outsetof the development process. These may address:

Objectives Fit of the concept with corporate and/or divisional strategies Size of opportunity, such as financial impact Market of customers needs and benefits

A business plan that specifies a specific win/win value proposition for value chainparticipants

Commercial and technical risk factors Environmental, health, and safety showstoppers Sponsorship by a receiving-group champion A project plan including resources and timing

Companies that lead in innovation stakes keep a sharp eye on technology and consumers, butthey have both an innovation process in place and staff with solid management skills. Processesrequired for creating innovations are effective and efficient in these companies because the generalorganization is in good working order. Managers in these well-organised companies are able to assessthe potential of each innovation during the entire creation process.The innovation process ensures

speed-which is critical for success by using parallel work streams. Six steps need to be differentiated inthis process:

Step 1: Developed, collect and screen ideas

To nurture innovations, companies need to collect ideas, ideally from internal and external parties.Generating ideas is the heart of the innovation process-without it, everything else will be built onquicksand. To make sure that the creativity for idea development is channelled in the right direction andthat it is not squandered, lead consumers and trend scouts need to be thoroughly analysed, met andunmet consumer need to be identified, market trends analysed, expert interviews conducted andethnographic research completed. By observing consumers in their everyday activities, companies canrest assured that they are not taking only internal and subjective criteria into consideration fordiscussion but they have true insights at their disposal.Rough ideas are the end result of the first step

in the creativity process, which need to be screened by using basic evaluation criteria. Only when thispre-selection has been completed and the remaining promising ideas can be allowed to carry onthrough the first gate, the project gate, a key decision point for prioritising ideas.

Step 2: Feasibility check

Innovative ideas that have made it through the first hurdle-the project gate-then need to undergo asystematic feasibility check. The idea needs to be examined in detail, paying attention especially tomarketing mix and value chain. A bottom-up estimation of the potential target group should be part ofthis feasibility check. A preliminary rough business case is essential at this stage. If the innovative ideasget the green light after they have been examined for their conceptual and financial feasibility then theyhave managed to pass through the second gate.

Step 3: Capability check

A third step in the innovation process involves an internal capability check that examines all aspects ofthe concept. The content of the capability check will be one of the points highlighted in further detail inthe next section of this article dedicated to organisational success factors. Only when specific gatedocuments are fulfilled companies should consider launching the product.

Step 4, 5 and 6: Launch preparation and market launch; Post launch evaluation; International Roll-out

In order to prepare for the innovations launch, above-the-line (ATL) and below-the-line (BTL) medianeed to be developed. Additionally, sales and supply chain functions such as sourcing, production anddistribution need to be streamlined before the product is launched on the market. Regardless of all thework that has gone on beforehand, this is the moment when the consumer sees the product for the first

time either on store shelves or in an advertising campaign. The rollout needs to ensure that marketing,distribution and sourcing go smoothly and without any more hick-ups. The innovation process, however,

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does not stop when the product is launched. The post-launch evaluation of the innovation concept andthe roll-out performance are critical and valuable for future innovations. After having introduced a newproduct in one national market, the international roll-out plans the steps needed to enter additionalmarkets in an international setting.(Schmidt, Regina $ Co. - Organising innovation factors that drive success, Executive Outlook, Volume6, Number 4, December 2006)

2. New Product Development & Launch2.1.New products development

New products development and new services development are one of the most importantvalue-creating processes in every industry. New products and services create interest, excitement andnew business opportunities by providing consumers with better, more convenient or lower priced ways

to fulfill their needs. While distributors and suppliers agree on the importance of developing andintroducing new products, many voices concern that inefficiencies have crept into the new productdevelopment and introduction/launch process. They believe that distributors and suppliers workingtogether as allies can both reduce the costs of product development and introduction and, moreimportantly, develop more and better products than those that are being produced today.

Those companies that invest in their technological processes, introduce products with morevalue added and gain a well position on the market.

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Source: IBM Global Business Services analysis

Over the last decade, the growing number of new product launches has triggered

challenges and inefficiencies on organizational and process levels across R&D- and production

networks in the global automotive industry. While automakers tend to rely more heavily on outsourcing,

deficits exist in the successful delivery of new product launch projects in regard to launch time, launch

costs, product and process quality. In this context, the complex tasks of fast and sustainable integration

and successful collaboration with suppliers and engineering partners moved into the center of attention

of automotive original equipment manufacturers. As launch collaboration requires standardized but also

flexible processes with hundreds of partnering organizations, deficits exist in the implementation of

support tools for more efficient project coordination and for the monitoring of project- and product

maturity levels.

2.2. Automotive industry

In recent years, the global automotive industry underwent a series of significant changes,influencing product portfolios, organizational structures, and value creation processes from a rigid andvertically integrated to a more cooperative, flexible jointventure type of interaction with other automakersand partnering companies. A further result was the establishment of a mutual understanding and illustration of a launch and

change-over management framework that could be used for the quantitative analysis.Product creation processes:Pre-series: Comprises the test of the serial tools and machinery at the suppliers

plant.Null series: Contains the production tests at the suppliers plant. Usually, three

rounds of production tests are conducted. Production tests areoften referred to as Try Outs.

Production ramp up: Represents the timeframe from start of serial production (SOP)until it has reached the full production capacities.

Practitioners revealed the central processes in the context of launch and change-overmanagement in the automotive industry. These processes were differentiated in product developmentprocesses and logistical processes, particularly material scheduling and management, management of

demands and capacities, management of inventory, and transport planning. The classic performancemeasures time, cost, and quality of launch processes and products were confirmed.(Christian Witt -Interoganizational New Product Launch Management, Dissertation of the University of St. Gallen, 2006)

Major differences and success factors of productivity are quality, costs, and flexibility in newproduct launch projects over several industries. The work accentuated the importance of design,construction, logistics, and engineering processes and their interweavement among productdevelopment scenarios. With their view on channel outcomes, the authors also laid the foundation forthe concept of performance measurement in product creation processes and in the context of launchingprojects.

The concept of performance measures was soon picked up and referred to as a keyperformance indicator (KPI). In the context of new product launch management, relevant performancemeasures for launch projects as project performance measures are time scheduale, cost measures

(including all costs associated with the product launch), and product performancecharacteristics (suchas quality, weight, or size). We clustered in this study the following three outcome dimensions as

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relational outcomes: overall launch time, overall launch costs, and launch quality of products andprocesses.

In todays competitive environment, time is one of the most distinct resources of competitiveadvantage and, meanwhile, is managed consequently and effectively as companies manage costs,quality, or inventory. Today, companies in every part of the world compete with flexible manufacturingand rapid-response systems, expanding variety and increasing innovation. Factories are close to the

customers they serve and re-organize organizational structures enable fast response systems.Since costs play such an important role in todays business environment, both manufacturers

and suppliers of original equipment have to focus on cost reduction. Manufacturer has to balance costlytechnological innovativeness of car models with competitive prices in the market while the supplier mustsucceed in allocating its resources most effectively in order to be able to offer the largest value andlatest innovation for the best price possible.In the automotive industry in particular, a paradigm shift took place in quality management fromproductto process orientation. In the early 1990s, quality management was associated with the avoidance oferrors and disruptions throughout the final assembly of the product or part.

From the perspective of an automotive industry, the globalization of production plants demandsstandardized workflows and risk analysis as prerequisites for robust launch processes.

3. Project Management of Both New product Development and Launch a in the Automotive Industry

Project Management represents the combination between know-how, abilities, instruments and projectstechniques in order to fulfil its requirements.In this chapter we will present some of the concepts that generate new products. We will show the stepsthat are followed to launch new products from early stage to the final.

The concept of interaction between project management processes is PDCA cycle (as defined byShewhart and modified by Deming in the ASQ manual page 13-14, American Society for Quality in1999).This cycle is linked to results - the result of other parts of the cycle is following part of the other.

Fig. 1.3. PDCA Cycle: Plan-Do-Check-Act

Sursa: PMBOK Guide, Third Edition 2004

Fig. 1.10 . Managementul lansrii unui nou produs

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Source : [9] Wangenheim, S., Integrationsmanagement fur neue Produkte, Stuttgart.

There are different sorts of processes:

process for product development

logistics processes

software process materials

demand management processes and capabilities

processes for innovation management

Measuring the success of launching a new product is based on measuring the following factors: time,

cost and quality.

Figure Process groups interaction

Sursa: PMBOK Guide, Third Edition 2004

Start a group, define and authorize the project or project phase.

Planning process, define and set goals, and the action plans necessary to achieve the objectives and

purpose for which the project was undertaken.

Implementation process. Includes humans and other sources to carry out the management plan.

Monitoring and process control, measure and regularly monitor processes to identify changes in the

management plan and collect the decisions to be taken of compliance objectives for the project.

Project Closure

The need for change. We need change at different levels, including systems, practices and

philosophies. Some of these changes are needed in industry (eg, implementation of global standards),

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but others may be bilateral arrangements between various trading partners. Each company needs to

learn to "work for us."

Several priorities:

We need to develop a common vision of the value created by disseminating the informationthrough all the participants to the value chain. This fact implies the exact definition of the way in

which value can be created both for the manufacturers and for retailers. A win in information is

a win-win strategy, but in order to succeed, the whole chain must agree on its importance.

We must agree on what type of information can be disseminated deliberately and what

information is secret.

We need to develop a frame, a schedule that must be approved in industry for the data that has

to be standardized.

Companies must be prepared to exchange the basic standards, in fact the data, freely or inreturn to an available rate of costs recovery. Common standards will help you minimize the

costs of sharing data.

Once we have accepted that the value doesnt mean rude information, but analytical

capabilities linked to it, we should not regard the share of data as a revenues engine.

Security controls must be placed on each platform of information. Trust in companies,

between them, between the companies and the customers, will be improved only when the

information is shared properly.

The start is simple. Pilots must set up on the available information flows and on collaboration

flows and they must start with the known data and then regard the unknown data flows.

It is the right time for a radical improvement to the access toward the information value

chain.

Figure 1.9. Process of new product development and planning

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Source: Global Commerce nitiative, nformation Sharing Raport, 2006

3.1 New gearbox launch project

The project must meet the increased demands posed by the client but also it should be able tofold the production and the groups quality policy. It is a 6-speed gearbox which addresses tolow-consumption engines. The gearbox the engine assembly embodies perfectly a new

technology and car models that are mounted on both current and future models. They servelow-cost models in the range of vehicles in the city.

The project is included in Dacias Renault Romania Company Mechanical Department.

3.1 New Project performance axes:

Application of Renault production standards in design and manufacturing;

Use industrial network in Romania (30% of investment);

Capitalization of best practices used in all Renault plants producing gear boxes (France, Spain,Portugal, Turkey, Chile);

Mining engineering-design team dedicated to achieving project objectives;

120 Romanian engineers and technicians; 25 French engineers;

Support for all product-process experts from Renault.

3.2. Statement of purposeProject objectives:

"Making a new type of gearbox to the engine with low fuel consumption "

Products:

Market surveys

Technical Research

The final product

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Benchmarking:

Study of domestic and international car market;

Technical & Economic Evaluation for new product;

Concept development;

Build a prototype product;

Achieving Zero series and developing the process; Product manufacturing in series;

Study the impact on market.

Technical requirements:

The product must enrol in technical enforced norms;

It must be reliable;

The implementation should be as simple as possible.

Constraints:

Budget surpluses must not exceed 2.5% of total budget; Price for customer should be 20% lower than competitions price;

Conduction of the project should not last no more than 2.5 years;

Overtime allocation shall not exceed 3% of the assigned number.

Work Breakdown Structure

WBS is a tree structure that captures all project activities in an organized manner. Large, complexorganized and understood projects, by dividing them into pieces of increasingly smaller size until itbecomes a collection of "work packages" which may include a set number of tasks.

Conclusion:Compared with previous similar projects, the present one reveals a number of factors that gives it ahigher score of excellence:

a much more assertive involvement of the management;

a more efficient use of resources in order to obtain information (benchmarking studies, andcomparison with competitors achievements, reference projects);

effective communication to all the persons involved for a better understanding of the objectives;

creating an atmosphere within the team in order to stimulate constructive criticism;

better training, including a project manager;

better understanding of customer needs, the more efficient feed-back came from the finalcustomers;

defining an employee incentive scheme;

ongoing assessment on the degree of achieving the objectives at any given time are wellestablished.

3.3 Enclosed papers:We have used Microsoft Project in order to offer a more significant picture of all processes used in thenew product launch and we have attached a .jpg format file.

References:Markides, C. Constantinos (2008),Game-Changing Strategies, Jossey-Bass, San Francisco

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Schmidt, Regina and Co. (2006), Organising innovation factors that drive success, ExecutiveOutlook, Volume 6, Number 4, December , BruxellesWitt, Christian (2006), Interoganizational New Product Launch Management, Dissertation of theUniversity of St. Gallen