Product Launch: Supply Chain Success

After finishing my MBA I shifted from the construction industry to oilfield services. I went from designing HVAC systems to managing the supply chain of upstream oilfield tools. This was my first step towards product management. Thus, as a product manager I always have a bias towards supply chain. When I look at or think about my products it’s always with an eye towards how is the product going to make it into the hands of my customer. This includes raw material sourcing, manufacturing, assembly, and logistics. Each one of these steps is a web of decisions, plans, and execution that result in a sale. In my experience, there are really two different supply chain mindsets depending on the phase your product is in; either new product ramp up or mature product optimization. This article will focus on my thoughts and experiences for supply chain during new product ramp.    

Supply Chain New Product Ramp Up

As soon as a new product starts to take shape, it’s critical to begin the supply chain planning process. Even if all you have are general shapes and rough dimensions, this can go a long way to determining the right vendors, processes, and costs. So many times, I’ve been involved with projects that didn’t plan for costs at the beginning of the design process only to find out that the design is cost prohibitive for the market and the process must start over. As the product becomes closer and closer to the final design, it’s important to know how changes affect the cost. Ask your vendors for quotes at initial quantities and production quantities. This will help you to understand how building at production volumes will affect the final cost and gross margin.

Even if you’re a part of an organization that has internal manufacturing, there will be some number of vendors that aid in the production. A full understanding of internal and external vendor capabilities, processes, and capacity will help with making the right decision on which vendor to partner with. Once the initial vendors have been selected, spend time with them, explain the purpose of the product or component that they’re helping with. They’re the experts in their field and may have some suggestions on how to make the part better, cheaper, or faster. Plus, this relationship will be key when trying to expedite production, making changes to design, or last minute requests. Without a good relationship, it will be easy for them to overlook your work when customers they “like” more are in need. I've benefited greatly from having personal relationships with my vendors, if you can, do not rely on your supply chain personnel to be the only contact with them. In several instances, vendors have gotten me out of a bind because of the relationships I've built with them.

During ramp up the concern will focus primarily on quality, agility, and future capacity. Though cost will be a consideration, there is a large component of market testing with new products. The primary concern will be to get initial sales or trials to verify the product market fit, before getting costs down is even necessary. Taking a loss on the initial products could be a strategy just to get a use history to fuel market acceptance. 

Cabinet Drawer, Housing Vernier Callipers, Turdor Barker

Quality

Because the initial runs/uses of the product are used to determine the market fit, quality is paramount. For some products, the design team will have spent over a year developing, designing, and testing the product. The goal will be to make sure the product will perform as designed. If the initial manufacturing delivers a product outside of what’s designed and there are issues, how will you know if the tested design had flaws or if it was low quality manufacturing? A failure during initial uses can lead to a long process of relationship rebuilding that could result in missing the market entirely. Push your vendors for 100% inspection if possible, witness their processes, and make sure you're confident in their abilities to meet the design requirements. This applies to internal manufacturing as well. 

Agility

Though speed and quality are sometimes at odds, speed is important as you start new product ramp up. Once you’ve gotten a customer to agree to purchase or use your product, meeting their delivery requirement to capitalize on these initial sales will be important. In addition to speed you need your vendor partners to understand that you’re in trial mode and some changes to the product may be necessary. This agility will help you to recover if there are issues with the initial uses of the product that require a change. One product we were trialing had some issues with the initial runs. After a detailed analysis, the engineering group determined that we would need to change one of the dimensions. This change to one component affected two vendors. Our relationships and the vendors' agility enabled them to quickly implement the change to satisfy the customer without delaying their operation.

Capacity

Once the product is proven, you’ll want to have a supply chain that can ramp up quickly to maximize the number of products that can be sold. For instance, one product I worked with had a molded component. During development, we utilized a prototype mold, made of aluminum and less expensive, to prove the product. We also used this mold for the initial product trials. After the trials, the product proved successful and we started to get more orders. Unfortunately, the trial mold was small and significantly slowed production. We had to wait 12 weeks to get the production mold that would satisfy the product’s demand. Though this is a good problem to have, the negative impact of missing initial demands is hard to calculate. These types of delays should be considered as a new product is delivered to the market. 

Once everything is in place, monitor the initial production, delivery, and use. This will ensure you are satisfying the customer and will give you insight into how the product performs. While in this phase of development focusing on the quality, agility, and capacity of the supply chain will help you to drive adoption of the tool as quick as possible.