The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06

The Lean Product Development
Implementation Strategy
Creating and Launching Superior World-Class New Products for a Competitive Edge
Presented by
Vel. Sreedharan
Section I
WCNPD Design Excellence Strategy
An Introduction
Ground Rules and Basic Tools
Some Tools to go with the Rules
The Magic of Toyota Motor Co
Six Sigma Deployment A closer look
2 of 302
World Class New Product Development- A presentation by Total Engineering Solutions
WCNPD - Design Excellency Strategy An Introduction
Ground Rules and Basic Tools
Recognize the 3 distinct dimensions of Product Development

The Methods of Five Whys
Avoid both overshoot & undershoot; Take a high altitude look
Six Sigma Avoid Blind Deployment

The Magic of Toyota Motor Co

3 of 302
- Why Toyota is 4 times more productive than anyone else in the world?
Highest Quality, Reliability, Dependability
Overall total customers confidence in trouble-free operation & performance
Best total Value through New Innovative features & options
A Fundamental paradigm shift in how it approaches Product Development
Competitive Pricing and focus on Continuous Customer care and Loyalty

Ground Rules and Basic tools:
A good first step toward getting a handle on the complex and

challenging and sometimes poorly understood activities of New
Product Development is to recognize the three distinct dimensions
involved. Refer to Fig 1 below
Manufacturing
Cost
Figure 1
Market
Price
Time-to-Market
The three distinct dimensions of new product development, focusing on

manufacturing cost reduction.
4 of 302

Market Selling Price Must be maximized, requiring creativity,

innovation & in-depth understanding of market needs
Cost of Manufacturing - Cost must be driven ever downward; achieve

lowest possible cost
Time to Product Launching Must be minimized, both to stay ahead

of the competition and be profitable during the life cycle of the product
Achieving optimal profitability demands that all three aspects be

addressed. Reducing manufacturing cost is the fastest and surest
way to achieve a measurable increase in profits.
Let us look at some ground rules that we must follow to play in the
design-excellence game For New Product Development.
5 of 302

Rule 1- The value of a product, from the customers perspective, can never be
compromised as a result of cost-reduction efforts.
Rule 2- Product Development must be executed by a cross-functional team, at

a minimum of Manufacturing, Marketing / Sales, Eng / Supp through parallel
and collaborative efforts and pull in the same direction.
Rule 3- All product development work must be prioritized both within a given
project and across all design activities within an organization. A sense of
urgency to launch products to the market place before competition does!
Question your assumptions
In my experience, a large % of the cost of most products is not intrinsically

necessary and that is why cost-reduction methods like VE/VA would strip
away all preconceptions and non-value added functions and features to
optimize design. The greatest enemy of innovation is a closed mind!
6 of 302
The Methods of Five Whys
Provides a way to crowbar open those close minds that surround you, when
you come across people with stubborn assumption, mindset or paradigm.

Some Tools to go with the Rules :

Designer: We have to make this product using high-cost materials.
Team Leader: Why do you think that is true?
Designer: Because the customer requires that the product withstands a
harsh use-environment.
Team Leader: Why do you think that high-cost materials are essential to
the product surviving in the specified environment?
Designer: Because when we tried using a cheaper grade of XYZ alloy, the
test results were terrible.
Team Leader: Why did we try a cheaper grade of the same material
instead of performing a survey of possible alternative materials?
Designer: Because we have always made this type of production from
XYZ alloy.
Team Leader: Why are you convinced that the choices of our ancestors
(previous design engineers) are still the best choices today? Hasnt
material technology advanced dramatically in the past few years?
7 of 302

We have only used four whys in the above example, and have already
uncovered the obstructive assumption (probably driven our designed friend
somewhat crazy!) Be tactful and diplomatic in your use of this technique.
Avoid
both
overshoot
and
undershoot:
Virtually, most of the products can suffer from either over or undershoot vs.
some optimal level and either way your profit will suffer. In other words, do
not over engineer the product anymore than what customer is wiling to pay
and perceives its value in his / her eyes, not the manufacturer
Every now and then, designers should take a high altitude look
It is critical that design teams consider synergies across products within a
firm to achieve break through cost reduction.
8 of 302
Questions like, Have we missed any opportunities to reuse previous

design work? Can we standardize, consolidate features in a family of
parts? Ask these questions

Six Sigma Blind Deployment:
9 of 302
This is an excellent methodology for the manufacturing, quality and

reliability world and there need not be any doubt on this statement.
But after some reputable executives of large corporations gave it a rousing
cheer in the press some years back, many companies embraced the
methodology, only to find the tools either not applicable to their critical
problems or too complex and time-consuming for their type of products.
The point here is applying six sigma as a blind deployment will add only
cost, complexity and higher product cost and not real value or benefit.
Therefore, it shall be employed only for those areas where critical
performance, safety, reliability, dependability are absolutely (100% of the
time) are required regardless of cost.
Examples: Automotive brake system, airlines components and systems,
Space craft launching programs. Wherever safety, flawless performance
and unquestionable reliability is warranted, six sigma will in most cases will
be cost justified. (this cost of quality should be built into the product)

The Magic of Toyota Why it is 4 Times more

Productive?
Compared to most of the global automotive manufacturers, Toyota

engineers and managers normally achieve significantly higher(50 -60%)
value-added productivity.
Toyota never misses its milestone dates for new product introductions. Has
totally different operating philosophy and cannot be easily copied or
duplicated.
It is a totally different, dedicated and in a way, culturally driven performance

of excellence and will serve as a benchmark
- A fundamental paradigm shift in how your company approaches product

development. It is human nature to resist change.
10 of 302

11 of 302
The Magic of Toyota-Why it is 4 Times more Productive?
What is product development? A useful definition is that it is the collective activities

or system that a company uses to convert its technology and ideas into a stream of
new products that meet or exceed the needs of customers and the strategic goals of
the company. Toyota does this better than most of the companies in the world.
In 25 years product development has changed significantly and added a lot of

complexity (structured teams equipped with CAD/CAM, 6-Sigma, Mfg experts,
defined processes etc), which was introduced for good reasons.
But complexity introduces numerous problems, like communication breakdowns,

loss of personal responsibility, true human interaction, pride of work, personal
passion etc.
I have incorporated as many selective concepts and ideas which are simple, proven
and most effective techniques towards NPD process strategy. I hope you will enjoy
this journey of NPD into a new way of thinking and try to adopt as many principles,
concepts, methodology & team work as feasible in your companys culture.
Section II
WCNPD The Business of Lean Design
Product Development for the Lean Enterprise

Whats Lean Mean
When is a Product Profitable?
Defining Target Cost
The 5 keys to developing Great New
Blockbusters Products
12 of 302
WCNPD - The Business of Lean Design

Product Development for the Lean Enterprise

-
The term Lean has a very specific meaning and intent in manufacturing
companies; the act of minimizing, if not out right eliminating all the non-value
added waste throughout the company to enable higher productivity, increased
profits, and improved overall competitiveness.
- This is done through systematic improved processes and methods, rather than
wholesale elimination of jobs. Actually, firms utilizing the lean design and
manufacturing tools will actually create jobs, increase shareholder value and put a
smile of satisfaction on the faces of their product designers/ engineers
In principle, Lean Design is similar to the concept of Lean Manufacturing. Systematic

identification, analysis and minimizing or total elimination of all non-value added
issues and optimizing the functions, performance, features, quality and total customer
value at the lowest possible cost.
The challenge is: Do it pro-actively and better than the nearest competitors
13 of 302

14 of 302
What s Lean Mean ?
The goal of Lean is to employ commonsense methods and tools

presented throughout this training class to seek out and destroy waste in
the design arena, thereby yielding products that maximize the cost
efficiency of a lean journey.
Another element that is associated with Lean is the concept of total

value.
In a nutshell, value is what customers are willing to pay for. The
first step in defining value of a product is to identify the problem that it is
intended to solve. This is the key element for the strategy of new product
development
Every product is the solution to a problem. The more important the

problem, the more effective the solution built in the product, as perceived
by customers, the more they are willing to pay.
Value does not always demand complexity, nor does it implies

technological sophistication and also not directly correlated to cost. All
that matters is the creation of value that successfully solve the customers
problem in a cost-effective manner!

15 of 302
The Five Principles of Lean Design
Principle # 1- Precisely defines the customers problem and identifies the

specific functions that must be performed to solve that problem.
Principle # 2- Identify the fastest process by which the identified

functions can be integrated into a high-quality, low-cost product
Principle # 3- Strip away any unnecessary or redundant cost items to

reveal the optimal product solution
Principle # 4- Listen to the voice of the customer frequently and

iteratively throughout the development process
Principle # 5- Incorporate cost-reduction tools and methods into both

your business practices and your culture to enable continuous cost
reduction

When is a Product Profitable ?
We all know profit growth is at least as important as boosting sales.
Hence, it is critical that designers understand where costs come from,

how they build up to determine profit margins, and what a design team
can do to influence them.
Key challenge facing designers and engineers is that by far the greatest
leverage for cost reduction occurs early in the product development
process as shown in the figure below.
Refer to Fig 2 ( Lifetime Product Costs) for the details on this.
16 of 302

Lifetime Product Costs (Cumulative Percentage) Figure 2.
100
80
Committed Cost
60
40
20
Incurred Cost
0
Concept Design
Prototyping Testing
Production
The Majority of product costs are committed early in the design process, even though the expended costs are
quite low. Once a product reaches production, there is frustratingly little that can be done to affect its
fundamental cost structure. Thus, the earliest stage of the product development cycle, preferably efforts
should be directed for lean design to reduce product cost
17 of 302

Defining Target cost
If you dont know where the Target is, You cant Hit a Bulls Eye! How much profit do we need to
make on this new product to justify the commitment of money, resources and time? In other
words, What is Our Target Margin? The margin that we select must be defined with care. A
good rule of thumb to use is that the target margin should be slightly (perhaps 5%) higher than
your firms current average gross margin.
This provides you some cushion and protection against unexpected cost growth during product
development and ensures that will at least maintain your current level of profitability. Obviously,
if you have hit a pot-of-gold product that can far exceed our average gross margin, we should go
for it!
The purpose of a Target margin / cost is to establish a minimum threshold, below which a new
product can never go without risk of cancellation.
Target Cost = Projected Selling Price Target (Desired) Margin
18 of 302
The Selling price, of course will be based and checked on the market price of competitors.
Never do the calculation the other way: Selling price = Cost + Desired Margin.
Why? Because you dont control the price, the marketplace and the final customer decide that,
even though you should try to maximize your profits within clear limits for a given type of
product. If the target cost cannot be met, and if there can be no recovery, the project should be
canceled. The Target Cost decision process is shown in Fig 3

Target Cost
Achievable?
Change
Market price?
Accept Target
Cost
Set New Target Cost
Launch Product
Change
Functionality?
Strategic
Product?
Cancel Project and

Reassign Resources
19 of 302
Accept Target Cost
Waiver or Set New

Target Cost
Figure 3 Target cost decision process

The Five Keys to Develop Great New Products

contd..
20 of 302
1. Commitment: Not Contribution of Senior Management: Blockbuster

teams should get the full cooperation of the highest level of management.
Senior managers are either intimately involved with virtually every aspect of
the process, or they completely backed the project.
Top management gave the entire team the authority and resources it
needed along with responsibility to proceed at full speed.
2. Clean and Stable Vision: Blockbuster teams stayed on course by

establishing project pillars early on specific, immutable goals for the
product that the team must deliver.
3. Improvisation: Blockbuster team did not follow a structured, linear path

to market. Instead they moved in a flexible strategy, trying all kinds of
different ideas and iterations in rapid succession until they developed a
prototype that clicked with their customers.

21 of 302
The Five Keys to Develop Great New Products
..contd
4. Information Exchange: Blockbuster teams did not limit their information

exchange to formal meeting. They shared knowledge in dozens of small ways
from coffee meetings to video conferencing to streaming in and out of a room
covered in Post-it notes to hundreds of e-mails.
The constant information exchange, communication and working together in an

informal way as a well-knit team made the difference. In other words, it is the
motivating culture and climate for best performance, which are essential to
nurture product development.
5. Collaboration Under Pressure: Blockbuster teams focused on goals &

objectives as opposed to interpersonal differences. They built coherent teams,
not concerned about building friendship or even insisting that everyone like each
other. They simply focused on the job and provided support to each other to get
the job done.
Section III
WCNPD Consider Cost
From the Very Beginning

22 of 302
Capturing the Voice of the Customer

Prioritizing Customer Requirements
Breakthrough Improvement in Product Design
Optimize, Balance for the Best Value at the Lowest Cost
Feasible
Better than your nearest / best competitor to quantum leap
WCNPD - Consider Cost From the Very Beginning
- First and basic strategy to controlling product cost

- Fundamental to product design & performance concept
- Must be done early to meet or exceed customers expectation & value
- Dont assume anything

- Dont take it for granted what features / options customer like & dont like
- Use the simple, proven and easy-to-use available tools cost effectively
- These tools may not be precise, but directionally correct to lead the team
- Remember! -Customers requirements, priorities and tastes are sometimes
dynamic. Thus, it could be a moving target that design team should be aware of
23 of 302

24 of 302
What do customers really pay for? They will certainly be willing to pay
for anything that benefits them in solving their problem effectively and
efficiently.
The critical part is-Benefits are not the same thing as product
requirements.
Benefits are perceived by the customer, in their own language, and are
independent of the specifics of a products features, performance,
configurations, material etc.
All these are requirements of the product that will presumably deliver the
benefits that the customers are looking for.
Hence, requirements should and must be derived from benefits to be

close to the voice of the customer (VOC).
A systematic process for the translation of customer needs and benefits

into language of product design is needed. A process to accomplish this
strategy in details is shown below in Fig 4

25 of 302

- Translation of customer needs / benefits into the language of product design
First, we attempt to understand the problems of our potential customers and

the real benefits they want and willing to pay for them
A list of functions is defined that are essential to solving all the customer
problems
Functions are described with simply a verb and a noun (e.g. the function of a
car engine is to power car) is developed. The design team will derive the
requirements that must be met or alternatively, the specifications that must be
achieved. These requirements will then become the basis for the LPD strategy
However, we want to be absolutely sure that our product delivers the benefits
that our customer desires, meet or exceed their requirements and provide
some excitement
First step of this goal - designers to learn how to listen to the Voice of the
Customer (VOC)

26 of 302
Gathering Customer Intimacy Information

Number of ways in which a design team can systematically gather

customer information. All of them have their advantages and
disadvantages
Fig 5 - shows the details customer intimacy ( advantages and

disadvantages)
If you understand the customers problem precisely and the possible

solutions are fairly clear and obvious, only a sold dialog may be required.
For unique & innovative products, however, design teams should be

chasing the customers to get feedback at every juncture.
This model for the iterative feedback approach is shown in Fig 6

A systematic process for the translation of customer needs and benefits into the language of product
design. Our goal: To understand the problems & benefits what the customers perceive and the solutions
(benefits) that they are willing to pay for (no more or no less)- as best as possible & practical that we can
provide to satisfy them Figure 4
QFD From Functions to R equirement

Function #1
Benefit #1
Function #2
Custom er
Problem
Benefit #2
Benefit #3
Design
Requirements
Function #3
Function #4
Function #5
27 of 302
Cell-Phone Example
Wireless
Transmit / Receive
Mobile / 24-Hour
Communication
Customer
out of
Contact
When on
Lightweight /
Easy to Use
Large
Service
Fits into
Shirt Pocket
Audible / Silent
Ring
Long Distance
Reception
Usable at
Night
28 of 302
Design
Requirements

Number of ways in which a design team can systematically gather customer information (all of them
have their advantages and disadvantages) - Figure 5
Focus Groups
Customer
Surveys
Indwelling
Disadvantages
Can be influenced by
facilitator; results often
inaccurate
Somewhat distant, and
"digital" in results
Can be an expensive drain on
resources
Probe-and Learn
Several versions of a product

are test marketed in semiprototype form
Reduces risk in new or

unfamiliar markets
Yields direct market data
Can be costly if there is no

inexpensive way to prototype
product
Alpha Customers
A real-world customer is asked

to participate in product design
and testing
Prototypes are created at
several points in process to gain
customer inputs
Employees are encouraged to
participate in activities that use
firm's products
Sales force is asked for new
product ideas
Almost assures early orders

High-value feedback from realworld users
Helps span the gap between
designers and customers
Reduces risk of major errors
Convenient, once developed
Designers become their own
customers
Quick and easy
Many new, but anecdotal, ideas
Product design may be "wired"

for just the alpha customer
Iterative
Prototyping
Internal
"Surrogates"
Polling the Sales
Force
29 of 302
Achieving Customer Intimacy

Description
Advantages
Potential customers are
Captures demographics
gathered and asked questions
Can yield many new ideas for
improvements
about product
Several questions are sent to
Easy to create and distribute
potential customer for statistical Large statistical basis
feedback
Employees are paid to spend Best source of direct feedback
time at customer's facilities and Can help develop alpha
on teams
customer relationships
Can take time and create

waste if not used judiciously
Great if you can find them, but
developing them takes time
"Shotgun" list of ideas, without
clear priorities
Lean
Design
Commercial
-
Search for
Technical
Solutions
Raw Concepts
Design and
Development
30 of 302
A model for the gathering of customer

feedback throughout the product development
process (note that iterative prototyping is
used to provide potential customers with
something tangible to consider and comment
on). Figure 6
Alpha
Prototype
Refined
Prototype
Formative
Prototype
Feedback
from
Lead Users
Refined
Models
Rough Models
Embodying Current
Knowledge
Into Prototype
Problems, Needs,
Preferences
Intimate Involvement
of Customers

31 of 302
Prioritizing Product Requirements Using the Lean QFD contd

Why it is important to establish priorities of product requirements?
Because value is not just performance delivered; it is performance
delivered at a given price, we will call it target cost which will later be
transformed (adding our target margin) into the target selling price.
Hence, some critical tradeoffs must be made regarding functions and

features to arrive at the optimum level of product development design
concept. This step is the first lean tool for product cost reduction
In the lean world, we all have no patience for misapplied tools, nor do
we tolerate unnecessary complexity. The Lean Quality Function
Deployment (QFD) is a simple, easy to use decision and prioritization
tool that can be applied intelligently at the beginning of a NPD project,
and as needed throughout the product development process.

Prioritizing Product Requirements Using the Lean QFD

32 of 302
contd
We discussed earlier about the translation of a product description from

customers problem, to customer benefits, to product functions, and finally to
detailed requirement. Reference: Fig 4, Fig 5 and Fig 6
We will use the Lean QFD to help fine focus and magnify these translations,
and to prioritize the design outcomes in two levels. There is a first-level and a
second-level applications of Lean QFD process as applied to New Product
Development strategy
The first-level application will help us translate customers problems, benefits
and solutions including product functions (designed to solve their problems) into
prioritized functions as shown in Fig 7 using the example of a cell phone (Fig
4) to illustrate how this tool is applied. The example has been kept very basic
and simple and clearly may not cover all the complete set of functions of a cell
phone
Once the design team has a prioritized QFD list (customer benefits and critical
functions ), the second-level application of Lean QFD focuses on deriving the
specific design requirements for each of the functions compiled shown in Fig
8
Let us use now apply the cell-phone product development example to illustrate
how this tool can be effectively applied.

The first-level application of Lean QFD is to convert customer benefits into prioritized
functions. The example of a cell-phone product is used to illustrate how the tool works.-
Figure 7
"Function" Lean QFD
33 of 302
C) Large
Service Area
Customer
Ranking of
Functions
2
5
0
2
4
3
1
0
0
3
0
1
0
5
3
0
3
1
1
0
1
0
1.5
5
0
0
5
0
0
0
0
0
0
Function Priority
No.
1) Wirelss Transmit/Receive
2) Fits into Shirt Pocket
3) Audible/Silent "Ring"
4) Long Distance Reception
5) Usable at Night
6) Voice and Data Capability
7) Color Display
8) Games
9) Text Messaging
10) Digital Camera
B) Lightweight
/ Easty to Use
Possible Functions that

Could Deliver Desired
Benefits
Weighting Factors for Key

Benefits
A) Mobile/ 24Hr. Comm
Key Customer Benefits
17.5
5
7
15.5
9
3
1
0
7
0
1
5
4
2
3
6
7
4
-

34 of 302
contd
First-level application of Lean QFD:
The example is a quick & easy illustration and may not be complete in all
respects. The first thing to note is that it takes the form of two-dimensional
matrix
On the horizontal axis, we capture the key benefits that our potential
customers demand from the new product. Better yet, ideally we would have
real-time customer participation during our first-level application of Lean QFD.
Remember, benefits are always viewed from the customers perspective and
in their own language, so who better to help you fill out this matrix?
Note that space has been provided for only 3 key elements. This is because
with the original version of QFD, teams tend to make this process too
complex.
I have chosen only selected few that are central in the minds of customers.
You are free to enhance and expand it in any way you wish, including adding
space for a few more benefits.
contd

35 of 302
contd
A weighting factor is identified for each benefit. The weighting factor is simply a multiplying
factor that captures the reality of customer perception that not all benefits are equal. The
weighting factor helps to provide an objective balance for the QFD process
The range factor is from 1 to 3. If you allow a larger weighting factor, it is easy for a strongwilled team member to skew the results by insisting on a huge multiplier. The team is now
ready to brainstorm the possible functions that might be needed to deliver the key benefits
desired by the customer.
Once all of the functions are listed, the scoring process begins. Suggest a subjective
scoring range from -5 to +5. A positive score indicates that the function under review
positively impacts a key benefit; a negative score implies that the function actually degrades
that benefit.
A zero score means no effect on that particular benefit. Conduct the scoring as a team, with
customers included, if feasible. The weighting factors need to be honestly evaluated and
put in.
Objectivity is critical to obtaining useful and meaningful results. If real customers could not
be present, have someone from the team designated as the VOC and defend customers
position

Prioritizing Product Requirements Using the Lean QFD contd

Total the scores by multiplying it in each box by the appropriate
weighting factor and add up each row. The higher the positive score,
the more critical that function will be for the ultimate product.
Low or negative scores should be eliminated.
Once the priority list is finally agreed upon and comfortable with the
team, you can move on to deriving design requirements for each
function, as show in Fig 8
Refer to Fig 8 In this case, we are translating our prioritized product
functions into design requirements. Note: that a separate matrix like
the one above should be created for each critical function.
Again, the cell-phone example has been used purely for illustration
purposes for capturing the Voice of the Customers in product design
development process.
36 of 302
1.5
Selected
Requirements
Possible Performance Requirements or Design

Tradeoffs
Time-to-Market
Option 1 1st Generation
Option 2 2nd Generation
-1
Option 3 3rd Generation
-5
-3
-1.5
Option 1 Low
Option 2 - Moderate
-2
-2
-3
Option 1 GMT
Option 2 - CDMA
-1
Weighting Factors
For Key Benefits
37 of 302
B)
Lightweigh
t Easy to
Use
C ) Large
Service
Area
First-Priority Function
Requirements
Wireless Transmit / Receive
A) Mobile/
24 HR
Comm
Key Customer Benefits
Unit
Manufacturing
Cost
The second-level of Lean QFD Figure 8
1) Type of Cell-Phone Chip Used
2) Power Utilization
3) Communications Standard
3.5


Second-level of Lean QFD: contd
contd
Refer to Fig 8- We are translating our prioritized product functions into design
requirements. Note: A separate matrix like the one above should be created for
each critical function. The 2nd level Lean QFD tool looks different from the firstlevel
The most important changes, from a process perspective, are that we dont
really want an external customer during these discussions. Reason: 2
additional columns have been included that are highly sensitive: unit
manufacturing cost and time-to-market. They need to be kept confidential, but
have impact on design requirements
The addition of two columns creates a good and balanced scorecard for our
design choices. If price is a critical factor for the product under consideration, it
should be included as a key benefit, not as a substitute for unit cost. Exactly the
same benefits and weighting factors used in the first-level application are used
here.
Begin your analysis with the highest priority function. You will use an entire
matrix to derive requirements for this function, a second matrix for the next
priority, and so on How far you need to go? The top 3 to 5 functions deserve
this special treatment, provided that the rest are minor, both from a customer
satisfaction and cost standpoint.
38 of 302

39 of 302
contd
For each function, list possible design tradeoffs, or alternatively, several levels
of performance. Goal is to compare apples to apples for each design
requirement and select the performance level that best balances customer
needs with the practical constraints of cost and schedule. The design
requirements that receive the highest positive scores are the logical choices for
the New Product designs.
A few helpful hints will be in order. I have normalized one of the choices for
each design requirement to zero. Since the Lean QFD tool is comparative in
nature, all that matters is the difference in scores among the options being
considered. In most cases, there will be some baseline or default choice for
each requirement which will be compared to possible alternatives.
Usually, the baseline is the low-risk, low-tech choice; something your firm has
had experience with the previous products. By setting the default option to
zeros, the other alternatives can be determined to be better (a positive total
score relative to zero) or worse (a negative total score total to zero).
Since this tool is quite subjective, a small difference in total scores between
options is really a non-decision. If there are just a few points separating two
alternatives, more study is needed to make that call. Another approach would
be to add one or more additional benefits to your matrix that might help make
the choice more clear. Keep it simple. Get 80% of the benefit from 20% of time
spent.

All Requirements are not created equal:
contd
We have reviewed so far prioritizing new products functions & its

requirements.
We should not prioritize this information to help us manage product cost and
achieve our target.
For successful New product Development, we need to integrate target costs,

cost models, functions, requirements etc and tie them all together in a
systematic framework to maximize customer satisfaction, which is the key!
We should assume that our competition is doing the same thing as we are
trying to do. Need to quantum leap the competitors. We must question
ourselves

40 of 302
How did they allocate their target cost?

What functions received the most attention?
Which were neglected or given limited or no importance?
What tricks did they use to reduce production cost?
What are the unique attributes or similar products offered by different competitors?

Prioritizing Customer Requirements contd
Let me illustrate this point; let us consider that you are shopping for a new car.
What are the attributes that you are most focused on? Price, price range, styling,
safety, performance, cargo space etc.
How about the muffler or the U-Joint, which are not likely to be of much interest
to the average buying public. Any decent car should have an acceptable muffler,
U-Joint, radiator etc. are not even worth comparison shopping, since they are
presumed to be adequate as compared to leather seating & extra HP
Let us look at the Fig 9 above, which is called the Kano Model which is a critical
factor in customer perception. Customers tend to focus on certain attributes of a
product and ignore others, based on a number of psychological market factors.
Many of the attributes of a given product may not even be on the customers
radar screen unless they fail to perform. These attributes were assumed by
customers to be adequate in both performance and quality, based on past
experience. Any violation of that assumption will trigger immediate dissatisfaction
with the product.
41 of 302

contd
Getting back to Kanos model, product requirements are divided into three
categories: Must-Haves, Should-Haves & Could-Haves, as shown
graphically in Figs 9 and 10.
It is a customer-sensitivity map in concept. As the performance of a given

product attributes increases, how sensitive is the market to that
improvement?
Does it excite customers, interest them, or is the increased performance

completely ignored? Obviously, heightened customer interest often translates
into higher price market share, or both.
Hence, we need to move beyond the must-haves (which really are only on
the customers radar screen if they to perform), to the should-haves, which
determine the lions share of price.
The concept of Must / Should / Could prioritization offers design teams an

effective and straightforward way to organize several different categories of
product needs, as shown in Fig11 below
42 of 302
Figure 9
The Kano Model for

Customer Satisfaction
Product
Performance
CouldHaves
Excellent
Poor
ShouldHaves
Must-Haves
Customer Satisfaction
43 of 302

Examples of must have Should have - Could have - Figure 10
Must-Haves
44 of 302
Should-Haves
Could-Haves
Horsepower
Handling
DVD Video
Sports
Package
Compatibility
Security
Exciting GUI
Digital Photos
Adequate Range
Acceptable Noise
Small Size
Color Display
GPS
Digital Photos
Attendants
No Overbooking
Legroom
Carryon Space
Decent Food
TV in Coach
Basic Memory
Good Optics
Lots of Pixels
Zoom Features
Miniature Size
Streaming
Video
Automotive
Adequate Safety
Free of Defects
Software
No Bugs
Adequate Speed
Cell-phone
Airline Service
Digital Camera

45 of 302
Let us look at the Fig 9 above, which is called the Kano Model which is
a critical factor in customer perception. Customers tend to focus on certain
attributes of a product and ignore others, based on a number of
psychological market factors.
Many of the attributes of a given product may not even be on the

customers radar screen.unless they fail to perform. These attributes
were assumed by customers to be adequate in both performance and
quality, based on past experience. Any violation of that assumption will
trigger immediate dissatisfaction with the product.
Let me illustrate this point; let us consider that you are shopping for a new
car. What are the attributes that you are most focused on? Price, price
range, styling, safety, performance, cargo space etc.
How about the muffler or the U-Joint, which are not likely to be of much
interest to the average buying public. Any decent car should have an
acceptable muffler, U-Joint, radiator etc. are not even worth comparison
shopping, since they are presumed to be adequate as compared to leather
seating, extra horsepower and so on.

The Must / Should / Could tool Some examples of the prioritization of product
requirements - Figure 11
Establish
Baseline
Performance
Rank-Order
Optional
Features or
Customization
Must
/Should/
Could Tool
Prioritize
Product
Versions,
46 of 302
Define M/S/C
Levels for
Testing,

An example of how Must / Should / Could requirements can be explicitly identified in a product design
specification. Figure 12
Priority
M S C
Requirements
4.3.8 Enclosure Dimensions
Each spec is
categorized at
the beginning
of product
design
M S C
Enclosure dimensions shall be:

Height = 27.5 inches +/-.01
Width = 35.4 inches +/-.01
Depth = 22.5 inches +/-.01
4.3.9 Enclosure Insulation

Enclosure shall be insulated with 0.5 inch-thick
Styrofoam to reduce heat ingress and ambient
equipment noise
47 of 302

48 of 302
The Concept
Requirements
of
:Must/Should/Could
Prioritization
of
Design
We begin with must-haves, setting tough limits on performance so that

we dont overshoot market expectations and thereby flush some profits
down the drain. The most common source of waste in product design
happens when the design team start the gold plating of must-have
requirements.
Certainly, we need to be careful not to undershoot; we dont want to ruin

our product reputation by allowing our must-haves to become noticeable
in a bad way.
On the other hand, anything we can do to reduce the cost invested in the
must-have requirements will yield a bounty when it comes to attacking
the more valuable shoulds and coulds.
Ideally, the Lean QFD will provide us with sufficient visibility into customer
priorities to enable categorization of requirements into musts, shoulds
and coulds. Let us summarize these 3 features for a quick display for our
ref:


- Must Have Indicators:
Little or no customer interest assumed to be acceptable
Doubling the performance/ quality of the requirement will yield a zero price
increase
A tendency toward a standardized level of performance an entire industry

uses the same requirement
- Should Have Indicators:
49 of 302
This is the area where we want to focus most of our time and allocated cost.
Customers directly ask for or demand this requirement
An improvement in performance / quality of this requirement would yield an

increase in price.
There are multiple levels of this type of requirement, based on the specific
needs of each market segment (i.e., it is a differentiating requirement)
Pricing power of the requirement is directly related to its customer priority or

importance

Could Have Indicators: I suppose the could-haves will be whatever is left over, but just in case,
use these Indicators to identify those risky but exciting wow-factor requirements
The feature or performance level is not currently on the market in the form you are
considering. Customers are not asking for it, but if they are told about it, they are interested,
and hopefully excited about the features and benefits.
There is some significant risk involved; market risk, technical risk, or both. Could-have
features tend to appeal only to a sub-segment of your product customers
Prioritization of Design Requirements
In Fig12, the prioritization information is clearly indicated for each system in product spec.
Design work should be prioritized to first deal with the must-haves, using a good-enough strategy
to keep cost and design time to a minimum. (Note that must-haves are prime candidates for
commercial-off-the-shelf components or other outsourcing strategies).
The should-haves come next, receiving the lions share of allocated target cost and development
time. Finally, if we are on schedule and within our target cost, we attack the could-haves, being
careful to weigh risks and benefits as we proceed
This general strategy is shown graphically in Fig.13 Remember, if you cant squeeze the couldhaves into the current product design, they can be carried over into a future version of the product.
All we need to do now is execute the design to our prioritized requirements.
50 of 302

Must / Should / Could Prioritization Tool Figure 13
Beginning of Project
Must
Haves
Launch of Product
Highest priority requirements

or features are front-end loaded
to allow scope flexibility at the
end of project.
Should
Haves
Could
Scope reduced
Haves
to meet target cost

or time-to-market goals
51 of 302
Section IV
Lean Product Development
Value Analysis/ Value Engineering Tear Down
A New Process For

52 of 302
Product Development Strategy for Innovation & Creativity

Outside-the-box thinking- Discipline and Philosophy
Cross Functional Team work (also suppliers & customers)
Competitive Product and Process Benchmarking
Includes customers and supplier community for synergy
A detailed analysis of Product Functions and its Value
Case Studies- VA/VE Tear Down and Cost Matrix Analysis
WCNPD - Value Analysis Tear Down A New process
Value Engineering / Value Analysis An Evaluation
VA / VE Application using the Creative Thinking Process
Product Development and Innovation
Breakthrough Improvement (Competitive Benchmarking & Reengineering)
Product & Process Benchmarking using the VA / VE Tear-Down Process
Functions and Analysis Foundation of VA / VE
Levels of Function Abstractions
Functions, Selection & Detailed Cost Matrix Case Study # 1 Pencil
Establishment of Product Cost Targets Case Study # 2 Toaster ovens
53 of 302

54 of 302
Value Analysis is defined as an organized effort directed at analyzing the

functions of goods and services to achieve those necessary functions and
essential characteristics in the most profitable manner.
It is normally directed at existing and current products. It is an after-thefact activity, practicing the value process following design release,
during the production of the product. A continuous improvement
philosophy. Example-tolerance, capability, help for lean mfg & non-value
added review
Value Analysis differs from other cost improvement initiatives by

questioning, defining, and analyzing the functions of components,
including areas as to how a part could be made easier, better quality or
less expensive
Understanding the function of the part can significantly alter the

components geometry, integrate its functions with other components, or
eliminate the need for the function and its part.
Value Engineering is exactly the same strategy and process as the Value Analysis,
except it is directed at the new products, during their development stage
VA / VE Tear-Down is a method of comparative analysis in which disassembled

products, systems, components, and data are visually compared and their functions
determined, analyzed, and evaluated to improve the value adding characteristics of
the project under study.
55 of 302
In other words, Value Engineering as a before-the fact activity, applying the

value methodology during the new product design / development phase.
Therefore, VE is a critical step for Lean Product Development strategy
VA & VE are the key elements, which describe and compliment the disciplined,
systematic approach of the VA Tear-Down strategy for the overall product
development process.

56 of 302
The Job Plan- Key to the VA methodology is the Job Plan which incorporates the
creative divergent-convergent thinking process, explained below:
Divergent thinking (sometimes called right-brain thinking or creative thinking)

explores the unique ideas by stimulating and applying the teams creative traits. It
involves randomness, imagination, visualization, synthesis, non-judgmental
scrutiny, irregularity and sensualityhence it is called divergent or lateral thinking
process
Convergent thinking (sometimes called left-brain thinking) explores relevancy,

applying the principles of logic and quantitative analysis techniques. Involves
logic, analysis, judgment and evaluation.
It is a also vertical thinking and is the antithesis of divergent and creative

approach of thinking process
Information, speculation & planning phases are viewed as Divergent Thinking
Execution, reporting and the subsequent implementation of actions fall into the
Convergent Thinking.

Figure 15 Job Plan Sequence the creative divergent-convergent thinking process
Job Sequence Planning
DIVERGENT
THINKING
CONVERGENT
THINKING
57 of 302
INFORMATION
SPECULATION
PLANNING
EXECUTION
REPORTING
IMPLEMENTAION

Product Development & Innovation
We are always improving existing things products, processes, systems etc

and creating new things. A company dies when these activities stop.
Companies must continuously improve and innovate to maintain market
position.
VE is innovation & creativity focused, while VA is more intended for

continuous improvement. Taking the best of both processes, the VA / VETear-Down method integrates these two disciplines to provide the creative
stimulus that is needed for Product Development process.
In our technology-accelerating, competition-oriented society, improvement

alone cannot provide the strategic advantage to win over competitors.
Some level of innovation is also needed to gain strategic advantage and
achieve a high level of success, with a minimum of investment and risk.
This cross-functional oriented process combines employees from product

engineering, manufacturing, marketing / sales, quality / reliability, product
costing, finance etc in a team environment. The investment in capital, time
and resources in VA/ VE Tear-Down activities is significantly less than that
needed for traditional applied research and development activities for New
Product Development
58 of 302

Breakthrough Improvement Product Design & Development
Break Through Improvement:
As opposed to Kaizen (gradual, incremental & continuous improvement) this

process strategy result from innovative and creative thinking motivated and
aimed at stretch goals, or breakthrough objectives of product design ideas
Stretch goals force an organization to think in a radically different way, and to

encourage major improvements as well as incremental ones. When the goal
is significantly higher, say 200 1000% improvement, one must be really
creative and think out of the box resulting in a paradigm shift!
The seemingly impossible is often achieved, yielding dramatic improvements

and boosting morale. Two approaches for breakthrough that help companies
achieve this strategy are as follows: Let us examine them now closely.

59 of 302
- Benchmarking
- Reengineering

Benchmarking:
Benchmarking is the search for best practices that will lead to superior performance
Benchmarking helps a company learn its strengths and weaknesses- and those of other
leading organizations & incorporate the best practices into its own operations.
The best practices refers to approaches that produce exceptional results, are usually
innovative in terms of technology or human resources, recognized by customers and
industry experts. It can provide motivation by helping employees to see what others can
accomplish. One example comes to my mind
Boeing set a stretch target of reducing the time to build a new 747 & 767 airplanes from
18 months (in 1992) to 8 months, teams studied the worlds best practices of everything
from computers, autos to shipbuilding. By1996, Boeing achieved the total lead time to10
months a quantum leap of 225% improvement!!
Modern competitive benchmarking / teardown analysis was initiated by Xerox, an

eventual winner of the Malcolm Baldrige National Quality Award. Two major types of
benchmarking are competitive and generic. Let us examine them in some detail
60 of 302

Competitive Benchmarking:
Usually focuses on the products & manufacturing processes of a companys best and
aggressive competitors
Generic Benchmarking:
Evaluates processes or business functions against the companies regardless of their

industry.
Benchmarking summary strategy:
As the circumstances dictate, it is probably best that the company improve all
businesses functions, processes, best practices & new product development for
globally changing economy. For example, the warehousing & distribution practices of
L.L. Bean were adopted by Xerox.
Motorola encourages employees to ask who is the best person in my own field and
how might I use some of their technique & characteristics to improve my own
performance in order to be best (executive, machine operator, chef, purchasing agent
and so on). Benchmarking should not be aimed solely at direct competitors only, rather
what it takes to be a world-class player overall
61 of 302

Examples practiced by Xerox, Motorola and GE:
These companies studied their competitors and discovered that:

Its unit manufacturing cost equaled the Japanese selling price in the United States. This and the
facts below helped the companies as a wake-up call. It made them understand the tremendous
challenge that would be required and to set realistic goals to achieve closing the cost gap to be
competitive. Competitive Benchmarking strategy helped them realize that goal
The number of production suppliers was 9 times that of the best companies, assembly-line rejects
were 10 times higher and product lead times were twice as long and defects per hundred machines
were 7 times higher. Benchmarking require the following 4 processes:

1. Determine which product, functions and processes to benchmark

2. Identify key performance indicators to measure to meet or quantum leap
Identify the best-in-class companies-both industry specific and generic as required
3. Measure the performance of the best-in-class companies and compare the results to your own
performance. Published information, site visits, in-depth interviews are the strategies used
4. Define, take actions and improve organizational systems to meet or exceed the best performance.
Simply trying to emulate the best is like shooting a moving target. Goal is to excel and leap frog the
competition, because competition will also be doing exactly the same thing
62 of 302

Competitive Benchmarking
Understanding your customers Key to effective

strategy
Who are they?

What do they value most?
What are their needs?
What are their key activities, problems and needs of their business?
How can our product solve their problem, needs or improve satisfactions?
Is there anything of product value or application that we can help enhance?
How do they see us versus our competitors?
How do they make buy decisions?

A Suggestion!
That exactly why, it is strongly suggested that customers along side with
other system suppliers should participate in a competitive tear down
Benchmarking
Who knows more about more product QFD, options and applications than
your own selective and target customers base. Suppliers interface with your
industry at large and their input and feedback is always of added value and
costs nothing.
63 of 302

Benchmarking Strategy Critical Factors for Success
Understand your process thoroughly first before evaluating your competition
Strong management commitment and total cross functional team work is vital
Team should be cross functional, empowered and preferably include suppliers
Benchmarking comparisons, if needed should also include outside of your

industry
Remember ! Benchmarking strategy is a never ending process
The team should be committed to implementing the findings & results
Benchmarking overview training prior to the actual workshop would be helpful
64 of 302

VISION WITHOUT ACTION IS MERELY

A DREAM.
ACTION WITHOUT VISION JUST PASSES

THE TIME.
VISION WITH ACTION CAN CHANGE

THE WORLD.
65 of 302
Joel Arthur Barker

Reengineering (also known as process redesign)-is focused on breakthrough

improvement to dramatically improve the quality and speed of work and to reduce
its cost by fundamentally changing the processes by which work gets done
Reengineering is often used when the improvements needed are so great that
incremental changes to the strategy will not get the job done. The usual question
always will be: Why did we ever do it like that in the first place? and the answer is
often, That is the way we have always done it.
Jack Welch of GE, compared his company to a 100 year old attic, which has
colleted a lot of useless junk over the years. Process redesign (called Work-Out in
GE jargon) is the process of cleaning all the junk out of the attic.
Thus we have seen that to achieve breakthrough improvements not only in product
design development, processes but also focus on the administrative and cultural
aspects companies and employees to achieve world-class status
66 of 302

- Competitive Benchmarking
What is Benchmarking? Another Perspective to Look

At!
Benchmarking is the practice of being humble enough to admit that someone

else is better at something and wise enough to try and learn how to match or
even surpass them at it. In other words it is striving for the best of the best!
If you know your enemy and know yourself, you need not fear the result of a
hundred battles. Benchmarking facilitates understanding of your own product
and process relative to your best competitors and therefore it creates value
Benchmarking compare your company to the applicable best practices for

your product functions and attributes regardless of the industry you are in. This
is key to understanding the concept of Benchmarking. It is the process and or
functions that we are evaluating, not necessarily the same product we are
manufacturing
Thus, Benchmarking encourage innovation to help meet or exceed all

customer requirements better than your nearest competition. It ensures that
our products meet or exceed the competition for those attributes and values
considered high priority by our customers
67 of 302

Why Benchmark?
Improve profits, product value and effectiveness for the customer
Accelerate and manage change in a globally changing economy
Identifies and help achieve breakthrough innovations and stretch goals
Create a sense of urgency and help accelerates the rate of required changes
Eliminate the not-invented-here complacency or sometimes arrogance,

depending upon individual companys culture and peoples general attitude
Creates a fact-based climate for generating cross-functional team consensus
Understand world class performance and help you see outside the box
thinking
68 of 302

Benchmarking is NOT:
- Copying, Imitating, catching-up or Duplicating competitions ideas or design

- Expose our own weaknesses or shortcomings
- Spying, espionage or only performing a competitive analysis for comparison
- Just a number crunching exercise, which is quick and easy
Benchmarking IS:
- Finding specific areas of improvements (product attributes and processes)
- Helps to understand your own processes & practices as to where you are now
- Determine as to the steps for improvement compared to world-class
- A disciplined process that facilitates areas of strategic importance and critical to your company. It can
cover product, process or anything of value to your firm
It can be executed in a collaborative process or performed independently
Understanding your customers--the key to effective product strategy
Who are they? What do they value most? What are their needs and key activities?
Problems & business needs How our product can solve problems & satisfy them?
Product value & applications that we can help enhance better than our competition
How do they see us versus our competitors? How do they make buying decisions?
Who knows more about product QFD, products and applications? Suppliers interface with your industry
at large and their input and feedback is of added value and doesnt cost anything!

69 of 302
70 of 302

VA Tear-Down & Competitive Benchmarking
Need to ask the questions to know where we are

71 of 302
Is our product sales, profitability / market growth are doing fine or we

are in trouble?
Are we truly responsive to customers need?
Do we have products features and functions the customer pays for
but doesnt need?
Does the customer need features and functions we dont furnish?
Have we investigated a range of alternative ways to satisfy the market
requirements?
Do we know which of our product features is value adding?
Do we know the cost of the above features & other costs all buried
in lump-sum total?
If there is room for improvement, it is better for us find out before the
competition does.

Focus on Function
Focusing on function as the way to improve value, is the simple relationship and
cornerstone of Value Analysis. Expanding function, the principle value elements will be:
Function
Value = ------------Cost
Utility Value or Need- This focus on the most obvious value. How effective is the
product at solving the customers specific problem or requirements
Esteem Value or Want - Somehow Increase our sense of well being/ self- worth
Exchange Value or Worth The product might have desirable value to others
Scarcity Value If the product has enough value and in short supply or demand
Therefore, incorporating all the above relationship
Value =
72 of 302
Utility + Esteem + Exchange + Scarcity

-----------------------------------------------------Cost

Figure 14
Some examples of how the four categories of product
value maanifest themselves in various types of products
Product Examples
Paper Clip
Gold Tie Clasp
Tap Water
Imported Bottled Water
Decorative Wall Poster
Original Oil Painting
Tickets to Local Movie Theater
Tickets to See Bruce Springsteen
Magnetic Compass
Portable GPS Locator
Generic Office Software
Fully Customized Office Software
Digital Alarm Clock
Swiss Grandfather Clock
73 of 302
Elements of Product Value

Relative
Use / Utility Esteem Scarcity Exchange Market Price

Product Functions and Governing Rules: The two major classifications

74 of 302
Function Analysis The foundation of Value Engineering / Value Analysis:

Function is the end result desired by the customer. It is what the customer is willing to pay for it.
Function analysis is the cornerstone of VA / VE and is the one discipline that separates from the
many problem-solving and processes available. Some examples of functions are:
- A spring does not move parts; it stores energy
- A screwdriver does not turn screws; it transmits torque
- An oil filter does not clean oil; it traps dirty particles
In the above, the verb identifies the action to be taken and the noun is the target of the action. In
the spring example, store is the action and energy is the target. Next we will examine a simple
electrical fuse to understand functions into primary and secondary
In the VA Tear-Down, competitors products are disassembled to determine how well the
functions are designed & effectively integrated to provide the best value at the lowest cost.
Addressing the functions to be provided, rather than the components selected to perform these
functions, broadens the creative boundaries in seeking innovative ways of improving the product.
Basic Function: The principle reason (s) for the existence of the product or service, operating in
its normally prescribed or designed manner.
Secondary Function: The method (s) selected to carry out the basic function (s) or those
functions and features supporting the basic functions. It is mandated by a customer as a
condition of a sale. Not satisfying these requirements could result in lost product sales
Figure 17
The Function of a Fuse

RANDOM FUNCTIONS
75 of 302
VERB
NOUN
Break
Circuit
Connect
Circuit
Protect
User
Protect
Supplier
Protect
Equipment
Identify
Failures
Advertises
Mfgr

Basic & Secondary Functions; Understand Levels of Abstraction:

Basic Function: The principle reason (s) for the existence of the product or service, operating in its
Secondary Functions: The method (s) selected to carry out the basic function (s) or those
functions and feature supporting the basic functions. It is mandated by the customer as a condition of
a sale. Not satisfying these requirements could result in lost product sales.
Levels of Abstraction:
A simple product like a fuse can have many functions basic and secondary. If we examine the
product in more detail, we can move to a lower level of abstraction and examine its components.
The fuse consists of a glass tube, a low electrical tolerance resistance strip, terminal ends, and a
bonding media to assemble the product.
Each component of a fuse performs many functions, and on its own level of abstraction, each has at
least one basic function. However, many individual basic functions become secondary when moving
the focus of the study to a higher level.
The glass tube & terminal ends are important to the fuse but less important when evaluating the
contributions of the fuse to the equipment it protects
normally prescribed or designed manner.
76 of 302

Levels of Abstraction (contd):

A cigarette lighter has about 19 parts. Each part, in isolation has its own basic
function. However these parts and their functions are designed to support the basic
function produce flame.
When the fuel is spent, the basic function cannot be performed & the lighter thrown
away, however all of the components of the lighter are still operable. Why it is thrown
away? Refer to the Rule:4 below, which says that the loss of basic function causes the
loss of the market value & worth of the product.
Governing Rules of Functions Analysis:
1. Once defined, a basic function cannot change

2. The cost of the basic function is usually a small part of the total product cost
3. Basic functions cannot sell without supporting (secondary) functions and
supporting functions must satisfy the basic function of the product
4. The loss of the basic function (s) causes the loss of the market value and
worth of the product or service

77 of 302
Let us review a case study # 1 of a standard lead pencil to understand a products

basic & secondary functions and they affect its cost matrix in general

Function Selection & Function Cost Matrix: Figure 18
Let us take a basic and a simple case of a standard lead pencil for examining this example
P e n c il F u n c tio n s
D e s c r ip tio n
F u n c tio n
P e n c il
M AKE M ARKS
E ra s e r
REM OVE M ARKS
M e ta l B a n d
SECURE ERASER
X
X
X
IM P R O V E A P P E A R A N C E
T R A S M IT F O R C E F O R T H E E R A S E R
Body
SUPPO RT LEAD
T R A N S M IT F O R C E
A C C O M M O D A T E G R IP
D IS P L A Y M F R S N A M E
P a in t
PRO TECT W OO D
Lead
78 of 302
T R A N S M IT F O R C E & M A K E M A R K S

Functions, Selection & Cost Matrix
79 of 302
The function make marks was selected as the basis function of the pencil
That function is accomplished by the lead in the pencil
All other functions are in support of the basic function and therefore, secondary.
These secondary functions are therefore, candidates for elimination, consolidation

or modification to reduce the cost of the pencil.
The manipulation of secondary functions is accomplished by the creative efforts of

the team & the basic function is not changed.
Pencil must retain its ability to make marks & satisfies the customers sense of
value and there may be other creative alternatives and scope to perform make
marks!
In VA, the manipulation of secondary functions is guided by reducing the cost

contribution of performing those functions.

80 of 302
Eliminating or combining many non-value adding secondary functions and their

parts achieves the objective of VA, to improve value by improving the cost-tofunction relationship of a product.
If you make longitudinal cut in the wooden body & remove the lead, you can write
(make marks) with just the lead without the benefit of any of the secondary
support functions.
It will reduce the cost to perform the basic function, but will not represent the best
value proposal for the pencil in the market place
The Function Cost Matrix is a function analysis approach, the objective being
is to draw the attention of the analysts away from the cost of components and
focus their attention on the cost contribution of the function. Let us review
the matrix
The components and their costs are displayed on the left vertical side.
The functions performed are at the top horizontal line
Each component is examined to determine how many functions it performs, and

the cost contributions of those functions.
Protect Wood
Percent
Cost
0.20
Support Lead
50
0.05
0.05
0.43
50
0.13
25
0.06
70
15
Cost
2.86
Percent
TOTAL
Cost
0.05
Percent
50
Accommodate Grip
0.10
Cost
PAINT
Percent
0.09
Transmit Force
10
Cost
0.94
Percent
BODY
Cost
1.14
Percent
LEAD
Make Marks
Improve Appearance
0.25
Cost
METAL BAND
Percent
100
Cost
0.43
Percent
Percent
ERASER
Components
Cost
Cost (in cents)
Secure Eraser
Remove Marks
Function
Display Information
Function Cost Matrix
0.43
0.13
29
0.84
0.84
25
0.06
30
0.30
40
0.37
27
0.79
0.05
0.05
0.05
0.05
40
13
0.35
0.35
Figure 2-6
81 of 302


Example the eraser cost $0.43 parts of a penny, and 100% of that cost is
dedicated to the function remove marks.
The metal band, costing $0.25 parts of a penny performs three functions
(secure eraser, improve appearance & transmit force, when using eraser).
A cost estimate roughly allocated the cost to perform those functions by

estimating the process and material cost of the metal band component.
To determine the cost of the function improve appearance, the

illustration shows that the metal band, body, and paint all contribute to
that function.
The analyst can now read the chart vertically to determine the cost
contribution of performing the function improve appearance
82 of 302


At this point in the process, it is more important to determine the relative cost
impact of the functions than to attempt to accurately determine the
manufactured cost contribution of those functions.
Detailed cost estimates become more important following function analysis,

when evaluating value improvement proposals.
Reading across the row marked total shows the cost and % contributions of
the functions of the pencil.
Here, approximately, 56% of the pencil cost supports two functions make
marks and transmit force.
Addressing the cost to perform functions, rather the cost to produce the parts
that carry out those functions, will help the VA tear-down team select which
areas to brainstorm for value improvement analysis.
83 of 302

Levels of Abstraction:

We may wonder at this point that the complexity of a product or system that
contains a great many more components than a pencil would be proportionately
more complex.
In other words, you can imagine what a Function Cost Matrix of an automobile or
large auto system would look like, after the pencil example.
However, the level of abstraction selected to perform the analysis governs the
complexity of the process and not the number of components of the product.
Using automobile as an example, a high level of abstraction could contain many

major subsystems as the components under study, such as power train, chassis,
electrical, body and passenger compartment.
The team can focus just on the power train for further analysis (less complex)
than moving to a lower level (engine, transmission, drive shaft etc) for a more
detailed (comparatively more complex) analysis.
Another approach to simplify the process, while maintaining its validity is to

select only the basic functions of the individual components for the function part
of the matrix.
84 of 302

Levels of Abstraction (continued):

A good approach for a simple product or assembly that has about 20 to 30

components.
Find the applicable functions for each component of the product, classifying
those functions as basic and secondary to that component.
Use only the components basic functions and display those functions on the
Function Cost Matrix.
Because the analysis will be moving to a higher level of abstraction by

evaluating the product, many of the components basic functions displayed in
the matrix will be secondary to the product.
To summarize, each component has a basic function. However, that basic

function may be considered secondary to the system the component
supports, unless the basic function of the component is also the basic
function of the system.
85 of 302

Value Analysis (Existing) and Value Engineering (New) Products:

The technique used in VA Tear-Down involves a search and evaluation of alternate

ways to meet required performance at the lowest possible cost.
The alternatives available for consideration are greater in a new product (Value
Engineering) than for existing products (Value Analysis). That is why VE which is
creative or innovation focused is critical during the early stages of NPD
Existing products will generally have design constraints, interchangeability and after
market services issues, not to mention procurement contract commitments, scrapping or
modifying existing inventories, design documents, modifying tooling / fixtures & sales
brochures New products have fewer constraints.
It also assures that the cost benefits occur in the initial production and the break-even
point for the investment of a value-engineered new product is far more favorable than
doing it later on after the production starts.
Existing and current products have a market that is constantly changing and cost
reduction & value-adding improvements require constant attention against competitors
and technology advancements. To improve market share and sales, current products
also should be considered for the VA Tear-Down strategy
86 of 302

The VA Tear-Down Process Steps:
1. Plan & procure competitive products or system assemblies

2. Disassemble and tear down to the desired level
3. Perform detailed analysis
4. Organize and document other required Information
5. Display parts and assemblies for team brainstorming 6. Develop ideas / recommendations for Immediate & Future Improvements
Step1. Plan & procure samples:

87 of 302
Research, study and select parts & assemblies from the best competitors
Picking up a limited sample of competing products will result in biased information
Too large samples will distract from the discipline of the process sequence and
dilute the final outcome.
The correct number of competitive samples is dependent on the scope of the
study, those target competitors (industry & market leaders) being benchmarked.
Need to decide as to how much, the extent of the analysis should cover either for
a complete product or subsystems or just component parts.

Plan & Collecting Samples (Contd)

In addition, the level of tear-down to be employed, the process for analyzing,

defining, and implementing improvement suggestions and timing mile stones.
It is important to establish study objectives that are within the VA tear-down
capabilities to achieve.
However, to facilitate bold innovation and achieve higher levels of technical and
process break through, comparison with products from other industries will be
useful. Collecting the right samples should be an important step.
Step 2: Disassembly:
The team should have clear understanding of what they are looking for before
disassembly and dissecting the product. The sequence of disassembly and time
should be recorded for future ref.
The function of each part be identified and recorded by the same team who are
doing the VA tear-down of product analysis and improvement proposals. Skilled
production/ technician staff members are valuable addition to the tear-down team
88 of 302
Disassembly (contd):

The analyst learns much through touch, smell, feel, sound and sight in the act of
disassembly and this first-hand experience provides the best information.
If certain parts are designed to perform some function in combination with other
parts or assemblies, the analyst may fail to recognize the complementary (or
dependency) relation between the parts unless observed first hand during
disassembly.
As a minimum, members of the VA Tear-Down team, as well as design and

production engineers must be at the site of disassembly to see and record the
details of the competitors techniques.
It is natural to get improvement ideas during the disassembly process and

therefore, all the required details should be recorded immediately.
The disassembled products are mounted on a display board in exploded view,

showing where each part was housed before assembly.
89 of 302

Step 3: Analysis:
Analysis is the core of the VA Tear-Down, focusing on analyzing differences, advantages,
and disadvantages of the selected product samples of the competitors. It is very important
that all the differences, major or minor, in function, structure, materials, processes, fit and
finish etc.
More importantly, the information should be documented with the reasons for those
differences, as the team feels appropriate. The goal here is not imitation, duplication or
copying the competitors design, rather ask the 3 questions below for exploration and other
opportunities to quantum leap competition

Why are these two products different?

Are there any advantages to the differences?
Why was that particular design or process approach selected?
On the basis of the answers, solutions can be found which can make a significant
contribution to the companys technology data bank. It is not sufficient to just focus on using
the results for modifying our products, but consider the timing factor and sequence of such
modifications.
Issues such as finished goods inventory, investments, immediate competition concerns
and general technology trends must be considered in planning major product upgrades.
Other cross functional departments needs to share their input and recommendations for
subsequent actions.

90 of 302

Step 4: Collecting other Information:

While collecting competitive product related information, we should also

focus on historical records of product failures, potential structural
weaknesses, and the availability of new and emerging materials, processes
and technologies that may be needed whether or not used on the
competitors product.
Equally important and helpful step is to research ideas about structure or

assembly of products from totally different industries and how they address
similar functions.
As an example, applying ideas derived from electric and home appliance to

passenger car temperature-control systems also resulted in a cost-effective,
functionally responsive quality solution.
Intentionally stepping outside the traditional product boundaries and

focusing on the functions of components and systems (regardless of the
type of industries it came from) offers a better creative perspective for
developing ideas, which can often translate into great success.
91 of 302

Step 5: Display:

The display process is divided into steps or levels to get the best attention of
others in the firm
The first step is to systematically capture all the comparative analysis

information including a number of suggested options representing different
ways of incorporating the improved functions and features are displayed
with our product and the competitors side by side.
In the second step, top management and a broad cross section of interested
staff and support members are invited to view the display, as well as the
analysis and ideas for overcoming competitive advantages.
This includes marketing, engineering, production, manufacturing, suppliers

and other focus groups.
Sales strategy, business case justification, best and proven ideas of

refinement and implementation are shared to stimulate additional idea
generation.
92 of 302

Display (Contd):

In addition, photographs, test results, catalogs, customer reactions, and if

needed, videotapes are prepared so that visitors and outside suppliers can
readily and quickly recognize differences from observation and published
information.
Exposing internal product related problems is an essential part of the VA

Tear-Down process, such exposure must be done in a non-judgmental
presentation.
This will cultivate senior management appreciation, keen interest and

necessary support for integrating the VA Tear-Down process as a high-level
business culture, rather than a mid-level special event.
Suggestion sheets are available for those who wish to think about and then
write their thoughts.
The views and opinions by third-party people like visitors, customers and
suppliers along with the valuable sources of information from material experts,
production engineers, designers and others represent outside-the-box
concepts and unique ideas for the display process strategy.
93 of 302

Step 6: Immediate & Future Improvements:

Two conditions require immediate change and improvement.
The first are those value-adding competitive changes that can be

implemented with a minimum of investment.
The second is the necessity of correcting a serious competitive defect quickly

with significant investment.
Timing for getting these changes into the market may be a tactical business
issue.
The best time and place to consider incorporating Future Improvements is

during model change over.
94 of 302

Immediate & Future Improvements (contd):

Improvement targets reflect customer sensitive characteristics such as

functions, features and attributes (e.g. cost, weight, package size, number of
components, performance)
Using actual competitive data & final recommendations of the VA tear-down

team lends the required credibility and creative stimulus in generating ideas
that will meet or exceed the target competition.
One cannot assume that the competition will be idle or inactive during this
period.
Change management is dynamic and must consider the competitors reaction,
anticipating when the next round of improvement is warranted.
Unique Ideas, Judgment and Selections:
As pointed out before, the staff responsible for developing unique ideas for the
product development process and resolving problems of competitiveness is
directly involved in each tear down step of the process.
Both quality and quantity of ideas are preferred to harvest and determine the
best value-added characteristics

95 of 302

Unique Ideas, Judgment and Selection:

To avoid duplicating ideas, a short description of the ideas offered already is

posted on the display board to be reviewed by the casual participants. This list
also stimulates new, or improved ideas by piggy backing on these ideas.
For judgment and selection the essential step is to select acceptable, feasible
best of the ideas and justify rejecting the other ones.
It is human to reject 95% of the goodness of an idea for the 5% that is wrong
with it.
As an example, instead of saying, No, the ideas is no good because
management will not approve the required investment, try saying, Yes, the
idea is good, if we can justify the investment, provide value to the customer
and still be profitable.
Using positive approach to judgment and selection makes the required

investment an issue to be resolved, rather than the rationale for rejecting the
entire idea.
Fig 19 illustrates the typical process flow structure for selecting competing
products for competitive benchmarking study and evaluation
96 of 302

Guide For Selecting Competing Products for Comparison
tt
lleecc cctt
e
e
SS dduu nn
o
PPrr o eedd oo rr
ss iillaa ioonn
tti
BBaa iim
SS m uurraa
g
nnffiig
CCoo
S
BBa Seelleec
assed ctt
SSim ed oon
PPr imiillaar n
roocce r
esss
s
Obj ective Of Comparison
tt
leleccucctt
e
e
SS oddu onn
PPrr oeedd o rr
ss iliala s
BBaa im
ns
SS imctitoio n
c
n
FFuun
Out
Outof
of
The
TheBox
Box
Thinking
Thinking
Accept Ideas
Rev iew
And
Sort
Ideas
SSe
PPr elleecct
BBa roodd t
u
a
SSi sseedd ucctt
i
m
MMa miil oonn
attee laar
rriia r
allss
Combine Ideas
Rej ect Ideas
Justify Rej ection
Ideas
Ideas From
From
Different
Different
Products
Products
Ideas
Ideas from
from
Different
Different
Models
Models
New Idea
Figure 19
97 of 302

Products with similar configurations, processes:

98 of 302
To overtake and maintain the lead over a competitors product requires thinking
out of the box thinking
As an example, if a fog lamp for an automobile were selected for improvement,
the comparable lamps used by competitors would be analyzed, taking it to a
new level, the functions used in fog lamps, as distinguished from other wide
range of lamps.
The state of technology should also be considered in selecting products for
comparison. To-days watches have solar cells and washing machines have
built-in microcomputers. Rapid changes in material, design and process
technology are offering unique methods for meeting affordable and profitable
function improvements.
To stimulate innovative ideas requires looking beyond the limits of examining
only the target competitors product and search different producers as well as
products from different industries, which have similar functions, configurations
and characteristics.
The above approach and rationale should also be used for selecting products
with similar processes. This will analyze their processes, help uncover and
counter competitors process advantages

Products with similar material & functions:

For similar materials, the objective is to find any advantages in the use of
materials.
If our product improvement candidate is plastics material, examining

different plastic products, how they are reinforced (with glass fiber, carbon
fiber etc), how it is colored (hot stamping, two-tone color etc) and how it is
formed for small volume (vacuum forming, blow mold etc) will stimulate
improvement ideas.
Selection of samples will be more effective, if the team knows that different
kinds of products that use same or similar materials contain ideas that are
not present among products with the same kind of use or function.
As regards to functions, if we look at the fog lamp example, comparing and

evaluating the functions to Christmas tree lamps, street lamps, and
household lamps could be useful for exploring new improvement ideas.
99 of 302

Products with similar material & functions (contd):

They all share the same base function of emit light, but they emit light in
different ways. Some color light, amplify light, focus light, modify the light
spectrum or manipulate light in other ways.
Selected lamps could also include flashlights, neon signs, highway lights and
others. Comparison focus could include lens design, color spectrum, reflectors,
bulb design, assembly techniques, wiring schemes, or the use of material,
among others.
That is why isolating selected functions to look outside paradigm limits can
provide valuable insights beyond the competitors product for improving the fog
lamp, or other products.
100 of 302

Managing Ideas:

When gathering ideas, judgment should be suspended. Judging, evaluating and

managing ideas are a separate and distinct step, after a reasonable quantifies
and variety of ideas have been sorted, prioritized and recorded.
Design engineers invest considerable time, R&D before their design is finalized.
Therefore, fresh ideas coming from other sources (that do not originate from their
peers) will look upon in a defensive and skeptical manner.
Ideas from marketing, customer sources, manufacturing specialists and

representatives from different industries are sensitive to faults and design
shortcomings as well as improvement opportunities. Their ideas are not meant as
criticism, but offers of assistance to meet the goals of the tear-down assignment.
The brainstorming meeting format must accept rebuttals and criticism, but
criticism must be constructive. It is okay to question the value and practicality of
ideas, but the objective should be to find and convert ideas into a proposal and a
plan, rather than rejecting them out right.
Successful tear-down and managing of ideas can result only from using ideas
extracted from differences from a wide range of viewpoints and various types of
analysis and evaluation.
101 of 302

The VA Tear-Down Process and Establishment of Cost Targets
Establishing VA Tear-Down Cost Targets Setting Cost Targets
Simple, Reasonable and Stretch (Aggressive):

Setting cost targets is a common and important metric Product cost targets
are selected on business needs, strategy, and objectives, and are
influenced by market conditions.
Price is influenced by cost, the two respond to different business conditions.
Cost is the expenditure of resources required to manufacture a product that

satisfies customers sense of value.
Price is the value manufacturers places on products that anticipate how

much customers are willing to pay for the functions and features offered by
that product.
A successful business is one that can satisfy customer requirements at a

cost that results in planned profits.
102 of 302

Setting Cost Targets-Simple, Reasonable and Stretch (Aggressive)

In to-days global market and competitive economy, driven by accelerating

technology (also contributes to shorter product market life) ever growing
capacity, need for rapid new product development, customers tastes and
demands, companies compete for sales & market share.
New Product Development and improvement is a dynamic, continuing, cyclical

venture. because the advantages of new and improved products erode as new
competing products are introduced. As a result, sale prices must be lowered and
profits shrink forcing renewed product improvement activities.
No more five-year product life, before competition reduced the price and
introduced new and exciting new products. In VA Tear-Down, it is a common
practice to try to first achieve target costs for each part of the product.
Shortfalls or over targets are normal and the negatives and positives are
balanced as long as the overall final product cost is achieved, without losing its
overall value and market / customer acceptance. Three Types or levels of target
costs will be discussed. They are as follows:
Simple, Reasonable and Stretch (aggressive)
103 of 302

Successful Implementation of Target Costs
Case study # 2 Three Toaster Ovens
Figure 20
Three brands of oven toasters
104 of 302

A review of a detailed case study (3 oven toasters) to understand as to how the VA TearDown process is applied effectively to set and achieve product target cost successfully.
These are 3 types of table top oven toasters and the example is chosen because
most of the household uses them and everyone can easily relate to the design
and construction of these appliances Ref to the pictures of ovens Fig 20
It is simple in structure and principle for easy understanding of the concepts.
Each product can be switched from 400W to 800W and each can be used for a
variety of cooking. Let us say the retail price of these products is approximately
around U.S $33 each.
Following explanation to walk you through the VA Tear-Down and target cost
setting process.

105 of 302
Column titled ours is the base product of our oven being addressed
for new product improvement in this example
Weight comparison of the common component parts of the ovens are
given in grams
Product Target Costs for improving our product (oven) are established on
the basis of these data for new product development strategy

A review of a detailed case study (3 oven toasters) to understand as to how the VA Tear-Down
process is applied effectively to set and achieve product target cost successfully Ref to Fig
20 for the pictures of the oven toasters

Setting Simple Cost Targets: Cost Targets are established as a result of Tear-Down
analysis and are based on physical properties rather than projections or market desires.
Refer to the product comparative analysis (Fig 21); We will see that the oven B is the
lightest in total weight of 2133 grams as identified at -(#1).This weight becomes the first
simple target because it can be achieved by copying Bs design-the start of ours challenge
It will be noted that some of our oven parts weigh less than Bs. If we use those, we can
achieve an additional -(274 202 = 72) + (357- 338 = 19) + 12 = 103 g , which would now
result in the new product target of 2133 103 = 2030 g. This is our 2nd target for minimum
weight, a simple target, which can be achieved by making suitable modifications as required
During this time, let us assume that company B is also aggressively pursuing to introduce a
new toaster oven, lighter weight and cheaper than their current product offering. Let us take
this as a valid challenge in this case study
106 of 302

Figure 21: Product comparative analysis of components Toaster Ovens
No
COM PONENTS
OURS
M inimum Wt In Grams
(Difference from OURS)
Cord Assembly
102
112
80
80(32)
Heater
252
287
203
203(84)
Grill Assembly
92
79
76
76(3)
Door Assembly
325
338
357
325(13)
38 = 300
Reflector Assembly
415
454
375
379(79)
84 =370
Switch Panel Assembly
44
110
30
30(0)
Cover Assembly
787
762
716
716(46)
Tray
316
202
274
202(--)
Other Assembly
10
12
0(--)
2,343
2,344
2,133
2,017(337)
[1]
[2]
TOTAL WEIGHT
Note 456.6 grams
107 of 302
Individual
Target
32= 80
87 = 200
9 = 70
70 = 40
62 = 700
22 = 180
-- = 0
[3}
404 = 1940
[4]

process is applied effectively to set and achieve product target cost successfully.

Setting Reasonable Targets: If we benchmarked the products by combining the lightest

parts of the 3 ovens, the resulting weight = 2017g (#2). This will result in a total weight
savings of 2344 2017 = 327 g (ref to Fig 21- # 3)
Assume a relationship between a part weight and its cost, the lightest with least expensive
parts should be our target. The total weight saving to be achieved on our oven is 327g (#3)
or approxly 14.4% - a theoretically minimum and a product at reasonable cost!
Incorporating lowest weight and modifications at this level is rather easily attainable, but
not very challenging from an innovative product development standpoint! Therefore, setting
stretch (aggressive) targets should be our goal. This will combine the above minimum
weight + an aggressive, realistic, yet challenging weight goal for a new product of Oven!
To move ahead of the competition requires information on advances in material, process,

market growth, progress of in-house technology to assess product advantage & limitation
Stretch targets involve factoring in unproven improvements for each component, rather
than using the sum of the parts in todays market. We set component targets because
material, process & technology may differ among product parts and sets our stretch goals
108 of 302

process is applied effectively to set and achieve product target cost successfully.

This is a credible target (established on the basis of actual product & part examples as well
as justifiable potentials & market projections). In the oven example, the total of individual
parts targets, which reflect NPD teams challenge, added up to 1940g (#4), a weight saving
of 2344 1940= 404g (17%). Product target is now 1940g (sum of all the targeted parts).
Individual parts may exceed or come in under their assigned targets. It is important that we
should be aggressive, yet realistic and credible to pursue the product target weight -1940g.
Targets that are well founded provide a worthy challenge to use the VA tear-down process.
The next step is to determine if the aggressive weight target established by this process will
be acceptable in the market and meet customer satisfaction when the product is launched.
If the market evaluation indicates the need for further refinement, each component will be
reviewed in detail to identify which one need further effort & how much additional tweaking
is justified to address market shortfall and quantum leap the nearest best competitor!
Unlike conventional target cost setting, established on a rough estimation, this method
shows the parts to be given priority and special attention and this concept is called cost
planning. Target setting by the VA / VE tear-down team carries credibility and therefore,
earns merit and recognition in the organization.
109 of 302

Figure 22 (Display Board, Idea Control and Follow up):
110 of 302

Figure 23 Example of static tear-down oven toasters
111 of 302

Perforated board disassembled parts display of the ovens

The display boards are used for displaying what has been disassembled. Parts are hung in an
exploded view arrangement, if needed and all the detailed information (part #, material,
weight, specification, tooling concept, tech details of processes, estimated cost) are posted.
A perforated board displaying various disassembled components of our oven case study
example (Static Tear-Down parts) are shown in Fig 22 & 23. Tear-Down workshop exercises,
generate a large number of ideas & concepts during the cross-functional team brainstorming
process and the display board is a convenient and excellent tool to facilitate this process
The ideas that are developed go through a maturing process into specific proposals and
recommendations by filtering, prioritizing, sorting and in-depth discussion and investigation.
The VA/VE tear-down combined with benchmarking process tend to be more practical than
those stand-along brainstorming sessions.
When the team deals with the actual products, examine, touch / feel the hardware and
witness the whole tear-down process, ideas generated have significant credibility and also
confidence in the eyes of the top management.
112 of 302

Competitors product selection:

Ask the question: Why was that competitors product selected?- should be addressed. If
the competitor has good cost advantage, then the basis for the specific advantage should
be discovered and will be the source for generating ideas for cost reduction.
If the competitors product claims advantage in the many functions offered which has
market appeal, and then they will be focus for functions idea generation.
When a competitor offers a new or improved product or unique feature with benefits, then
a product analysis team will dig deep to investigate those products and determine what
innovations have been incorporated. They will be the subject of for idea development.
The specifics of Product Disassembly What we can learn?:

During this process all differences, whether advantages or disadvantages, should be
noted. Everything in which the competitor differs from our product is the source of ideas,
regardless of its nature.
Everything that is not found in our product, such as the way of parts assembly (sequence),
tooling, fixtures, parts mating, quality assurance, or the way parts are fastened, is also the
source of ideas. Opportunities of DFMA, DFS & accessibility are other potential areas for
learning for product development strategy
113 of 302

Beyond Idea Collection:
Product improvements can only result from implementing acceptable
ideas. The ultimate objective of VA Tear-Down is product development
and improvements that will beat competitors offerings. Following are
some valuable ideas.

Make examination of the collected ideas visually friendly. Ideas and the affected
parts should be organized and arranged on display boards and tables.
Sort the ideas by departments from which the ideas and or concepts have been
proposed. Information should be displayed showing expected benefits including
part weight, cost, quality, function, features, and attributes as well as estimated
tooling and potential capital investments (if feasible to estimate).
Schedule target dates for implementing approved & accepted final suggestions.
Implementation time schedules - final dates for completing drawings, testing,
engineering release, & implementation in production be published. Best to have
a designated Project Manager to lead the program from beginning to end.
Effects of implementing idea (cost savings & benefits), investments, payback

(return on investment criteria) and other progress reports should be published.
114 of 302

Static, Dynamic & Cost Tear-Down A quick Look of each:
Static Tear-Down:
This is the first and original Tear-Down process, used for comparison and
competitive analysis by disassembling and displaying parts to stimulate product
development and improvement. There are two major steps.
In the first step, the selected products, parts or materials subjected to Dynamic
Tear Down (ours and the competitors) are displayed as they are disassembled into
their component parts. The team then reviews & decides how to analyze each part.
In the second step, the ideas for improvement that were suggested for competitive
analysis are used to form product development strategies. The toaster ovens in our
case study are done under static & cost tear down strategy.
The basic steps of this process and flow are shown here. Refer to Fig 24 below for
the details.
115 of 302

Figure 24
1. Preparation
1. Plan Event
1. Plan Event
Basic Steps of Cost

Tear-Down
2. Collect Information
2. Collect Information
3. Select Team
3. Select Team
4. Select /Collect Parts or

4. Select /Collect Parts or
Products
Productsto
tobe
be
Compared/Analyzed
Compared/Analyzed
5. Preliminary Investigation
5. Preliminary Investigation
II. Display -I
III. Analysis
IV. Display -II
6. Review Statistic
6. Review Statistic
Tear-Down
Tear-DownProcedure
Procedure
Review Scope
Process affected
7. Conduct Other Tear-Down

7. Conduct Other Tear-Down
8. Develop Displays
8. Develop Displays
9. Collect Ideas
9. Collect Ideas
10. Examination
10. Examination
V. Follow-up
116 of 302
11. Follow-up
11. Follow-up

Static, Dynamic & Cost Tear-Down A quick Look of each:
Dynamic Tear-Down:
The term dynamic refers to all the design features that contribute to the time
(cycle time for total assembly) and cost of assembling the product in production.
In this process, following disassembly, the products are re-assembled (if needed
more than once) as intended by the products manufacturer to document time.
Sequence of assembly process, the time required, perhaps estimating potential
set-up time and other elements are recorded, simulating the manufacturers
assembly methodology of the competitors products.
This information is systematically compared and evaluated and the function of
each part is determined to assess its contribution to the product. The objective of
Dynamic Tear-Down is to reduce the labor and capital expense required to
assemble a product.
The assembly operation is a major labor cost component and a prime target for
product improvement by reducing fixed cost. Refer Fig 25 (dynamic tear-down)
for the details
117 of 302
Static, Dynamic & Cost Tear-Down A quick

Look of each:

Cost Tear-Down:
Because the main issue of concern is cost, all cost-related information must be
included in the analysis
Information includes component cost comparison, assembly time translated into

cost as determined in Dynamic Tear-Down. Objective is to project as best as
possible and assess the total cost to market the product, less over head (which
can only be roughly estimated) with competitors products.
Important thing to note! The purpose of focusing on cost is not to collect and
compare total product cost, but to obtain the best information possible for
improving our products functions, features, attributes, and identifying their
contributions to enhancing customer perceived value versus the competition.
This is achieved by evaluating all the competitive advantages through analysis,

and isolating cost-reduction factors through such detailed analysis. The scope of
this process is focused not only to the cost of the product, but also items like
tooling, package issues, accessories, catalog, distribution logistics and so on.
118 of 302

Static, Dynamic & Cost Tear-Down A quick Look of each
(contd):

Because the details of the competitors manufacturing processes and volume

are generally not known easily, the competitors cost is usually estimated on
the basis of our own, or our suppliers process and volume.
To evaluate competitors purchased standard shelf items, our purchasing team

can search and find catalog related items of the competitor.
Where the competitors total cost is lower than ours, the team uses the various
items of differences as their target for reducing the final product cost.
Conversely, when competitors cost is higher than ours, the team can use the
cost difference to improve or add value-adding features to our own product
119 of 302

1. Plan Event
Preparation-Specific
Action
3. Obtain
Products for
Analysis
Figure 25 - Basic steps of

dynamic tear-down
2. Select Team
4. Prepare
Disassembly
Manuals
5. Select Work
Space
6. Acquire
Tools and
Facilities
7. Pre-disassembly
Inspection
8. Prepare Project
9. Record Time
Next Model
10. Compare/Analyze
12. Future
Themes
11. Complete
Suggestions
Follow-up
120 of 302
13. Assign
Targets
14. FOLLOW UP

Figure 26
Basic Steps of Cost Tear-Down

A. Plan Event
A. Plan Event
Cost Tear- Down Continue the

3 Ovens case study
Plan Event 5W1H (why (purpose), who, what, where, when & how
Market Share
Market trend
Customer Preference
B. Collect Information
B. Collect Information
C. Select Team
C. Select Team
Select Team
Obtain Products to be Analyzed
D. Obtain Products for Analysis

D. Obtain Products for Analysis
Product Features
Sales Information
Customer Surveys
E Preliminary Investigation
E Preliminary Investigation
Conduct Dynamic Tear Down or DFA
F. Measure Assembly
F. Measure Assembly
Compare/Analyze Cost Difference
G. Compare Past Cost

G. Compare Past Cost
H. Wrap-up Analyze, Suggest Improvement

H. Wrap-up Analyze, Suggest Improvement
I.
Determine Competitive Edge

Suggest Value-Adding Improvement
Follow
FollowUp
Up
I.
Figure 4-5
121 of 302

Apply the cost tear-down strategy to our toaster oven example.
Brief explanation is :Figure 27A Specifications of oven toasters
122 of 302

Figure 27B -Features of oven toasters (contd)
123 of 302

Figure 31: Display layout where tags are larger than the parts displayed, color-coded circular
seals can be used for identification
124 of 302

Figure 33 - Stress what is important
125 of 302

Figure 34A - Graph comparing total assembly labor hours for oven toasters
Review the product specification (Ref: Fig 27) for comparison & cost tear-down
report for the 3 oven toasters.

126 of 302
Also Ref: Fig 34Afor the graph comparing total assembly labor hours for the
ovens using our in-house current manufacturing assembly cycle time and other
standard data to arrive at the data

Cost Tear-Down Analysis:

Tables 4-2A, 4-2B and 4-2C (Please refer to your handout copies of these) are
the detailed breakdown of the cost tear-down analysis sheets.
As an example, look at item 8 of the table 4-2C, which lists cost information for
the tray component of the toaster.
The tray consists of 2 parts: the bread tray and the crumb tray (where the bread
crumb fall and are collected).
Our toaster trays are purchased for $0.45 (see Row 8, column price/set).
Competitor As tray is slightly larger than ours and extrapolation by weight

percentage produces an additional $ 0.0214, making the estimated price
$ 0.4714 per set.
Competitor Bs cost is estimated in the same manner. Manufacturing methods

looks similar, so the team decided that the only difference is in the cost of the
material.
127 of 302

Cost Tear-Down Analysis (contd):

Examining our crumb tray, note that the tray is smaller than the competitors as
shown in table 4-2, part (Row 8).
Competitor A has a separate piece, which is pressed and paint coated, then
attached to the handle of the tray.
Competitor B has an integrated tray and handle, but with a decorative tape of
the same color as the cover affixed to the handle.
Competitor As unit cost is estimated to be $ 0.47 higher than ours, which

consists of $ 0.37 due to the larger size with better stamping layout, $ 0.05 for
the paint coated separate handle piece estimated on the basis of our cost
table, and $ 0.05 for assembling the separate piece.
Competitor Bs cost increment over ours is estimated to be $ 0.26, which

consists of $ 0.21 for the crumb tray, $ 0.03 for the tape, and $ 0.02 for
applying it.
128 of 302
Figure 34B
129 of 302

Cost Tear-Down Report

Figure 34B shows a cost tear-down report that covers the overall cost comparison,
those factors causing cost differences and suggested future actions. This report
example covers the entire oven toaster.
130 of 302
Products having a large number of systems, assemblies, and parts, such as a car,
are divided into smaller cost tear-down assignments. A cost tear-down report is
created for smaller elements and purchased parts such as headlamps and door
mirrors.
The individual reports are then collected, organized and summarized as the total
cost for the entire car. Looking at the Figure 34B, the following describes the major
topics to be addressed in creating the Cost Tear-Down report.
Conclusion- 1: This section in the report contains the overall summary of the report.
The % shown are those of our competitors (A & B) cost as compared with our cost.
The assembly costs analyzed and determined in the Dynamic Tear-Down are
included in this column.
In the oven example, weight is not a significant value-adding characteristic.

However, weight in heavy products like cars impact a number of value indicators
such as performance, fuel economy, and handling, and therefore, requires special
attention

Cost Tear-Down Report (contd)
Conclusion 2: Factors Causing Cost Differences: Listed in the Factors for low sections are the
items for which competitors costs are lower than ours. These items are considered possible
sources for product improvement through cost reduction.
The next section lists those competitors cost items that are higher than ours. This report may
indicate that our design is better than the competition, or the competitors products have better
performance.
Conclusion 3: Actions and Requests for Future: This section indicates what actions to take now,
as well as recommendations for future actions. The section is the consensus of the full Tear-Down
teams suggestions summarized on the basis of all the analyses performed up to this point in time.
Dont worry exact cost differences of + or s. Focus on the reasons for differences (less cost could
be due to cheapening & more due to over eng
Conclusion 4: It is not necessary to determine the absolute cost of the competitors product.
Determine the differences in cost, focusing on the reason for those differences. There is nothing
gained in evaluating items that are cost equal.
Record any use of automation or special tooling used by the competitor to achieve a cost
advantage. Determine the cost effect by analyzing the cost to produce the item in our
manufacturing facility. Assume the same production volume & cost level as our own product.
Closing Points: (guidelines when conducting static tear-down and cost analysis):
Create a relaxing environment; Encourage visitors to invite their associates & send invitations
to all people concerned. Let them see the graphs and charts to stimulate their visual senses
and contribute ideas
131 of 302

Evaluating VA Tear-Down Results to determine customers value
Section V
Evaluating VA Tear-Down Results
The customer determines the
True / Total value Willing to pay for them
Two Measurement Methods:

132 of 302
Forced Decision (FD system)

Decision Alternative Ratio Evaluation (DARE system)

Evaluation: Results/ Competitive Analysis-Continue 3 ovens study
Evaluating VA Tear-Down Results:

The VA Tear-Down method compares our products with our competitors products, focusing
on differences relating to cost and functions both for product components and for the entire
product.
The purpose of VA Tear-Down is to uncover competitor advantages, develop ideas to

eliminate such advantages, and surge ahead of the competition.
Even if the VA tear down team isolates the reasons for higher cost than the competition and
takes actions to correct the problem, the steps do not assure that the competitive
disadvantage has been resolved. The competition likely will be doing the same thing!! It is a
race against time & who can do better & faster!
The customer ultimately determines the product value, functions and cost that he or she is
willing to pay. There are two methods to capture this specific voice of the customers (VOC)
1.Forced Decision (FD) Method
2. Decision Alternative Ratio Evaluation (DARE) System Method
Let us examine closely how these two factors reflect the voice of customers
133 of 302

The Customer Determines Value:

The customer determines value of our products and the cost Tear-Down
help determine whether or not we are competitive in the marketplace.
Also, customers are not interested in products, if they are less expensive,
but functionally inferior to competitors offerings, or if they lack features.
The same is true if the cost is more and doesnt achieve the proper
balance of function and cost in the eyes of the customer, not the
manufacturer. Customers evaluate a product by its final value as:
Value =
134 of 302
Function
--------------------Cost


In addition to the above, there are many other aspects and

characteristics that determine the value of product competitiveness.
We need to incorporate them in our NPD, if we have to succeed

creatively against tough competition.
To do this, a priority ranking of those specific characteristics must be

established, one that will offer the customer those high-value functions
as a trade-off for those of lesser value.
If the priority for each item can be assessed and quantified for
comparison, functions can be objectively measured.
Let us now review a proven method for rating the priority for each
function, and then expressing that priority numerically, to come up with
balanced strategy
135 of 302


Weighting Each Evaluation Element

(Select items competitiveness can be compared)

In addition to cost & functions, ask the question-What do the customers want?
What about the product that attracts customers? How much are customers
willing to pay for the functions and features of a product?
What superior product characteristics will motivate them to purchase a product?
Therefore, a priority ranking of those characteristics must be established, one

that will offer the customer those high-value functions as a trade-off for those of
lesser value.
A method for rating the priority for each function, and then expressing that
priority numerically, is now introduced below.
136 of 302

Measurement Methods:
Forced Decision (FD) Method: (Ref to Fig 35 for the details)

In this evaluation, items are compared in pairs as in a league tournament. See

Fig 35 Of the pair, the one item felt to have the greater value to the customer is
given the score of 1 and the other given 0.
Refer to the oven example, when appearance and projected area (the overall
foot print of the base) are compared as to which is the greater customer value,
appearance is judged by the evaluators to be the more important value of the two
and is scored 1 and the projected area, therefore, receives a score of 0.
Next, appearance and switch operations are compared. Here, the switch
operations are judged to have greater value (scored 1) than the appearance
(scored 0).
When all the pairs have been compared, the total scores given to each of the
items are summed in the total column. Priority is given to each item according to
its total points, as shown in the column titled Ranking.
137 of 302

Measurement Methods (continued):

Whether switch operations has a greater customer value than

appearance could be debated. When assessing the switch on an oven,
switch operations was judged to be more valuable to the customer.
However, a paired comparison of a wall switch would find that
appearance has more value to the customer that switch operations.
Reason for this is that a wall switch is simple to operate, a stand-alone

item and part of the room decoration. Oven switch is more complex,
setting the heat range etc and the switch appearance is actually a small
part of the overall appearance of the oven itself.
Although appearance is valued higher than switch operations in making

a buy decision the customer will return the toaster oven if the operation
of the switch is too complex.
Judging customer value must consider the specific environment of the

functions being evaluated, rather than generalize the customer value
preferences.
138 of 302

Measurement Methods (continued):
Decision Alternative Ratio Evaluation (DARE) System: (Ref Fig 36 for details):

Using the FD (Forced Decision) method, the priority of each function to be

compared is done and determined by anticipating which of the two in a pair
functions the customer would select. However, the importance of each function
also needs to be determined.
Simply because two items are close to each other in priority ranking does not
indicate that they are almost equal in importance. DARE is the method to
quantify the degree of importance.
It is difficult to evaluate how important a function is in relation to all other

functions. But, once the priorities have been determined by the FD method, it is
relatively easy to compare the importance of two items that are next to each
other in priority.
Beginning with the item highest in priority ranking, determine how much more
important that item is than the item that is directly below in priority ranking. The
item lower in priority is given the factor 1, & the higher priority item, a number
higher than 1.
139 of 302

FD Analysis of Toaster Oven Functions
Date_________
TEAM____________
Figure 35
RANK
FUNCTION DESCRIPTION
TOTAL
COMPARATIVE EVALUATION
10
Appearance
Project Area
Switch Operations
Food Placement/ Retrieve

Ease
Control Panel Visibility
Caution Labels
Cleaning Ease
Crumb Removal
Cooking Area
Cord Length
140 of 302

DARE Analysis of Toaster Oven Functions
TEAM___________
DATE_________
Figure 36
Functional
Description
1
2
Switch
Operations
Food Placement
/Retrieve Ease
Cooking Area
Appearance
Projected Area
Cleaning Ease
Control Panel
Visibility
Crumb Removal
Cord Length
10
Caution Labels
1.2
8.2
20.7
1.2
6.8
17.2
1.1
5.7
14.4
1.1
5.2
13.1
1.3
4.7
11.9
2.0
3.6
9.1
1.2
1.8
4.5
1.4
1.5
3.8
1.1
1.1
1.1
2.8
1.0
1.0
2.5
39.6
100
1.2
1
1.2
1
1.1
1
1.1
1
1.3
1
2.0
1
1.2
1
1.4
1
Total
141 of 302

Decision Alternative Ratio Evaluation (DARE) System
(continued):

Returning to the oven example (Fig 36), we see that switch operations is
1.2 times more important than food placement / retrieve. This value is
entered in column J.
The process is repeated for all the prioritized functions as shown in the
figure. The value of J is subjective. They are the result of team discussing
the comparative value of the functions compared to the lowered value
function.
As an example, the FD determined that cord length was more important

than caution labels, but by how much? Starting with the lowest value, the
team decided that cord length was 1.1 times more important than caution
labels.
Next, the team discussed the relative importance or degree of separation

between crumb removals over cord length.
The team decided crumb removal was 1.4 times more important than cord
length. The team continued with their assessment for all.
142 of 302

Decision Alternative Ratio Evaluation (DARE) System
(continued):

Once all pairs have been compared, the degree of importance for all the function items
are converted into values calculated on the basis of 1.0, the lowest valued attribute.
The ratio of importance is calculated & entered in column K. For example (Fig 36),
(caution labels / cord length) X (crumb removals / caution Labels)
will be: = 1.1 X 1.4 = 1.5 (1.54 rounded off).
Multiplying (1.1 X 1.4) X 1.2 = 1.8, is the K value of control panel visibility over the two
preceding functions. Continuing with the calculations in column K, the degree of
importance for Ease of cleaning is 3.6 and Appearance is 5.2 when compared with all the
other items.
Let us convert the absolute values of degree of importance from column K to percent. In
this case 100% is given to column W to the absolute value total of 39.6 from column K.
By converting the data to %, the values are normalized and will relate to any product
example using the DARE method. The values calculated this way the Degree of
Importance Factors: these can be applied to many areas including cost distribution.
143 of 302

Paired Comparison: (Refer to Fig 37 for the details)
144 of 302
The Paired Comparison combines the FD and DARE processes in one continuous
step. Paired comparison is a simpler alternate method to the FD and DARE
processes. Either FD or DARE together or Paired Comparison can be used at this
point in the evaluation, depending on the evaluating teams preference.
Referring to the Fig 37, the ten function descriptions are alphabetically listed. As in
the FD method, the functions are evaluated in pairs to determine the valued
preference of the pair
For example, comparing appearance to projected area, the team selected A

(appearance) The team was asked: By what degree of importance is function A
better than function B? The team has 3 choices (see Choice Factors).
If the team found it difficult to choose between A & B in determining which function
was better, the team would select choice factor 1. If, after some debate, the team
agreed that Appearance was better, the choice factor would be 2.
If the team selected Appearance after a short discussion, if any, the choice factor
would be 3. In this example, the team selected choice factor 3, which appears in the
first square as A3.

Figure 37
B
A3
B
Paired Comparison
C
C2
C2
D
A1
D3
E
A2
B3
F
A2
B3
G
A1
B1
J
A3
B2
A
B
C2
C1
C3
C2 C2 C2 C3
D3
D3
D2 D2 D1 D3
E3
F
G2 E3
G3 H3
G G3
H
E
F
G
H
I
J
Choice Factor
1. Low - Hard Choice
2. Medium - Fair Choice
3. High - Clear Choice
145 of 302
H
A2
B1
I
I2
I3
I1
I3
I3
I1
I
E2
J2
G3
H2
I3
J
Description
Appearance
Projected
Switch
Operations
Food Placement
/Retrieve Ease
Control Panel
Viability
Caution Labels
Cleaning Ease
Crumb Removal
Cooking Area
Cord length
Total
Score Rank Percent

14 4
13.9
11 5
10.9
19
18.8
17
16.8
8
0
10
5
15
2
101
7
10
6
8
3
9
7.9
0
9.9
5
14.9
2
~100

Paired Comparison: (Refer to Fig 37 for the details) - Continued

Comparing function A to function C (switch operations) C was chosen with a choice

factor of 2 (see Cell C2). After appearance has been evaluated against other functions,
projected area (B) is compared in a like manner.
The paired comparison scores are totaled and normalized in the % column. The rank
column places the functions in descending order of importance, based on the
functions score.
The % column in Fig 37 corresponds to column W in the DARE analysis - Fig 36.
Differences in the values are the result of differences in approaches. You will note that
the important relationships are the same between FD, DARE and Paired Comparison
methods
VA Tear-Down team members are encouraged to select and modify the FD, DARE,
and Paired Comparison processes to suit the purpose and products selected for
evaluation.
A modification for the Paired Comparison method is to expand the choice of factors
from 3 degrees of importance to 5. This will result in a greater degree of separation in
the relative importance of the functions. It would not, however, change the function
ranking.
146 of 302

Competitiveness Analysis:

We have so far stressed the importance of each function offered by a product. It is

equally important to determine how well these functions perform when compared to
competitions products. To make this comparison, team members evaluate each
function on a scale from 0 (worst) to 10 (best), with 5 representing the standard, and
then calculating the average values.
The evaluation must be made as objectively as possible from the standpoint of the
products consumers. Exclude people who were involved in the creation of the product
for obvious reasons. Representatives of actual purchasers and users can judge the
value of the functions offered, their relative goodness, and their willingness to buy the
product
Although the values for individual function items are known, they are not, equal in
importance and cannot be simply summed up. The rating by each evaluator is multiplied
by the degree of importance (see column W) in Fig 36 to obtain the function point for
that item.
Then the ratings by all the evaluators are summed up as an average score for that
function. The numerical score does not indicate an absolute value. When compared to
the competitors score for the same function, however, the score indicates the relative
ranking of the products being compared.
(Refer to Fig 38 for the details)
147 of 302

Fig 38 Toaster oven competitiveness comparison chart
148 of 302

Competitiveness Comparison Chart: - (Refer to Fig 38 for the details)
Refer to the Fig 38 here of the oven example, the rating given to appearance for
competitor A toaster is 8 (the average of the evaluators score) and the degree of
importance factor is 13.1 (see Fig 36, column W). Therefore, its function point is 105
(8X13.1). Similarly, the function points are calculated for all function items. The total of
the function points is 676 for oven A, 709 for our oven and 688 for B.
In addition to the total function points, it is also important to compare the points for each
function. Comparison by function makes it possible to determine the function for which
our product lags the competitors, that functions importance, and the priority of the effort
to catch up with or exceed the competitors.
All people concerned can easily share the analysis and the status as well as what has to
be done. The chart shown in Fig 38, also helps develop sales strategies. For example,
our product does not necessarily have to prevail over all others in every one of the
function categories. This is not necessary. The challenge is to intelligently optimize it!
By developing superiority in functions highly valued by customers, we can advertise and

promote these functions to gain market share. Information displayed in Fig 37 & Fig 38
and similar charts added to the parts display in Static Tear-Down, helps assure
beneficial results of the tear-down process.
149 of 302
Value Evaluation:

Even if our product scored superior to its competitors, the issue remains: Is the
customer willing to pay for those functions?
The value equation (value = function / cost) is used in Value Analysis to measure
value. The cost part of the equation has been determined previously in the cost
tear-down (ref to fig 34B). Competitor As cost index is 98.4 and Bs index is
85.6, with our cost set at 100.
The value (function relative to cost) can be calculated with the total of the
function points divided by each of these indices.
The resultant values are used to assess the value of our product in relation to
competitors products.
Function
We know the relationship that Value = -------------Cost
The values of 3 ovens calculated by means of this equation are shown in Fig 39:

150 of 302

TOASTER OVEN PRICE COMPARISON - Figure 39
Calculated on theoretical Cost
151 of 302
Cost %
Function
Point
Product A
98.4
676
Ours
100
709
709 divided by 100 = 7.1
Product B
95.6
688
688 div by 95.6 = 8.0
Values
676 divided by 98.4 = 6.9
Value Evaluation:

The same figure is shown at the bottom of Fig 38. The value of competitor
Bs oven is calculated by dividing the total of function points (688) by its cost
index (85.6) to get a value of 8.0.
This indicates that it is 12.7% better in value than ours, which has a value of
7.1. The value of competitor As oven, determined in the same way is 6.9,
which indicates it is slightly lower in cost but its low function point detracts
from the advantage of the lower cost.
Our oven is in the middle in terms of value.
The same relationship can be applied by substituting Price for Cost. This is
a more valid Value approach because the customer doesnt care about the
cost but the price he or she must pay for the product.
152 of 302
Calculated basis on Market price - Figure 40

Market
Price
(a)
Function
Point (b)
$36.80
676
Ours
$40.80
709
Product B
$38.40
688
Product A
153 of 302
Value (b/a X 100)s
18.4
17.4
17.9

Value Evaluation:

In fig 40, the function points for our product, 709, are divided by $ 40.80, which
is the actual retail price rather than our suggested retail price of $ 56.00. The
result is its market value index 17.4. Likewise, competitor As oven is sold at $
36.80 (suggested retail price is $ 44.00) Therefore, its market value index is
18.4 (676 divided by 36.8).
Competitor Bs oven, retailed at $ 38.40, suggested price of $ 52.00, the

market value index of 17.9 (688 divided by 38.4), or 103% of ours.
In todays market, most consumer goods and hard products are sold at a
discount against the manufacturers suggested retail prices, designed to
increase the customers sense of value because with identical functions, a
discount usually increases the customers value perception.
Of the 3 ovens, customers are most likely to find competitor A the best value
on the market in overall evaluation. Sometimes, people sense that the discount
is being offered as a prelude to announcing a newer, better product, then the
discount strategy may fail and backfire!
154 of 302
Section VI
WCNPD Target Costing
The Next Frontier in Strategic Cost Management
Foundations of Target Costing:
The Target Costing Process:
From Allowable to Achievable Target Cost:
Incorporating Customer Input in Target Costing:
Target Costing A detailed illustration of case study # 3
Coffee Maker Example (Brew Master)
155 of 302

Foundations of Target Costing:
Since profits are our primary goal, it seems reasonable that we should start
by determining a desired profit margin. Remember this:
If you dont know where the Target is, you cant hit a Bulls eye!
In other words, what is our planned target margin, which should be decided
with care. A good rule of thumb (approximate projection) to use is that the
target margin should be slightly (perhaps 5%) higher than your firms current
average gross margin.
This provides you with some protection against some cost growth during
development, and ensures that you will at least maintain your current level
of profitability.
Obviously, if we have somehow found a pot of gold product, that can far
exceed our average gross margins, we should go it.
156 of 302
Foundations of Target Costing (Continued):

The purpose and foundation of a target margin (for the purpose of Target
Costing) is to establish a minimum threshold, below which a new product
can never go without risk of cancellation.
Target Cost = Projected Price Target (Desired) Margin
Note! You should never do the above calculation the other way:
Price = Cost + Desired Margin. Why? Because you dont control the price!
The marketplace is the final arbiter of product price, although your should
try to maximize your profitability.
If the target cost cannot be met, and if there can be no recovery, the project
should be cancelled. This decision process is shown below.
157 of 302

Target Cost
Achievable?
Yes
Accept Target
Cost
No
Yes
Change
Market
Price?
Set New Target

Cost
No
Launch Product
Yes
Change
Functionality
?
Accept Target Cost
No
Yes
Strategic
Product?
Waiver or Set New

Target Cost
No
Cancel Project and
Reassign Resources
158 of 302
Target Cost Decision Process Flow Figure 41

The Target Costing Process (ref to Fig 41 details)

Target costing, by nature, is a strategic process.
It has two major phases and requires the support of many other key
organizational processes.
We will review a step by step description of the sub processes, inputs,

outputs, tools, and participants involved in development of the target
costing process.
Let us review five key messages that are critical to this process strategy.
159 of 302

The Target Costing Process - KEY MESSAGES:
Target costing takes place within the strategic planning and product
development cycles of a firm. Product design goes through this
development cycle in a recursive, rather than linear, fashion.
The first phase of target costing is the establishment phase. The focus
here is on defining a product concept and setting allowable cost targets
for products or a family of products.
The second phase of target costing is the attainment phase. This phase
transforms the allowable target costs into achievable target costs.
The establishment and attainment phases of target costing occur at

different points in the product development cycle. Different organizational
processes play primary and secondary roles in these two phases.
Target costing is supported by many other business processes.
The success of target costing depends on these other processes being

performed effectively within an organization.
160 of 302

THE CONTEXT OF TARGET COSTING

Target costing is intimately linked to an organizations competitive strategy

and its product development cycle.
Competitive strategy defines the goals that an organization must attain to

satisfy market demands and remain profitable.
Target costing provides the means by which the organization achieves

these goals. It does so by integrating the strategic variable of market trends,
customer needs, technology advances, and quality requirements into a
product definition that meets a customers price, quality, and time
expectations.
Target costing is the simultaneous planning of how to satisfy customers,

capture market share, generate profits, and plan and manage costs.
161 of 302

The Context of Target Costing (Continued)

Without a target costing system, meeting competitive prices and generating

acceptable returns on a consistent basis is difficult, if not impossible, in
todays environment.
The product development cycle provides the other context for target costing.
Target costing manages costs at the design stage when costs are being
committed.
The opportunity to use design as a vehicle for cost management typically

applies only to new products. This is why target costing and new product
development are intimately linked.
While target costing can be used for existing products, this is possible only if
these products or their manufacturing processes are being radically
redesigned.
162 of 302
The typical product development cycle has four stages:

1. Product Strategy and Profit Planning
2.Product Concept and Feasibility
3. Product Design and Development
4. Production and Logistics
163 of 302

1 Product Strategy and Profit Planning:

The product development cycle starts with enterprise level strategic

planning. The result is a business, product, and profit plan that spells out
the particular market segments a firm intends to sell in and the products it
intends to produce for this chosen niche.
The plans typically spell out the planned market shares and required
profit margins from the various products.
2 Product Concept and Feasibility.

The next step in the product development cycle is to translate product and
profit plans into specific product concepts. Product concepts are
developed using customer input and competitive intelligence.
Product feasibility is determined by making preliminary life cycle cost

estimates, evaluating the technology needed, computing the required
investment, and estimating the available capacity.
164 of 302

Product Design and Development and Production and

Logistics
3 Product Design and Development

Once a product concept is accepted and its feasibility tested, it goes into full-fledged
design and development.
Detailed specifications for manufacture and assembly are developed at this step.
Manufacturing processes are concurrently designed and suppliers are called in to
provide design & process improvement ideas
4 Production and Logistics

The start of full-fledged production and distribution marks the

culmination of the product development cycle.
Service and support plans are activated. Market results and customer responses are
monitored to provide information for continuous improvement or redesign of the
existing or next generation products.
165 of 302

The Organizational Context of Target Costing Figure 42
The Organizational Context of Target Costing
Target Costing
Market
Research
Competitive
strategy
Exhibit 3-1
Product
strategy
and plans
Product
concept
and
feasibilit
y
Product
design and
development
Product Development Cycle
Competitive
intelligence
166 of 302
Producti
on and
logistics

The Organizational Context of Target Costing:

The Figure 42 locates the target costing process within the twin contexts of
competitive strategy and the new product development cycle is shown in the
above figure.
It shows that competitive strategy is the product of research on customers

and competition. This research also is used for product planning, which
gives a concrete shape to a firms competitive strategy.
Product planning is the first step in the product development cycle.
Target costing plays a key role during the product planning, concept, and
design stages of this cycle.
Once production begins, target costing assumes a backseat and continuous

improvement (also referred to as kaizen costing) takes over the cost
management role.
167 of 302
The Organizational Context of Target Costing (contd):
The Figure 42 also depicts competitive strategy and product development

cycles as sequential processes.
A product, however, does not necessarily go through these steps

sequentially. Products with longer development periods may go through
iterations of this cycle numerous times.
A strategy based on a particular market and technology may start the

product development cycle.
Markets and technologies, however, are dynamic and may change before a
design is final.
With new market conditions and technologies, a product may have to be

recycled through the concept and feasibility steps.
168 of 302

Phases in the Target Costing Process

Target costing occurs in two phases that correspond, roughly, to the first
and second halves of the product development cycle.
We call them the establishment phase and the attainment phase of target
costing.
The establishment phase occurs during product planning and concept

development stages of the product development cycle and involves setting
a target cost.
The attainment phase occurs during the design development and

production stages of target costing and involves achieving that target cost.
The two phases of the target costing process in relation to the

product development cycle are shown in Figure 43 below:
169 of 302

Figure 43
Target costing and product Development Cycle
Figure 43
Establishing Target Cost
Attaining Target Cost
Product
strategy
and point
plans
170 of 302
Product
concept
and
feasibility
Product
design and
developmen
t
Productio
n and
Logistics

Establishing Target Costs

Target costs are established within the parameters defined by a firms

product strategy and long-term profit plans. These plans specify the
markets, customers, and products that a firm intends to develop.
New products can be developed by applying new technology or

combining existing technologies.
The original fax machine is an example of a product created from the

application of new technology. Products that combine a fax machine,
printer, copier, and a scanner in one box are examples of new products
created by combining existing technologies.
Products aimed at specific markets or customers are tested for

feasibility and then allowable target costs are set for feasible
products.
Figure 44 provides an overview of how this allowable target cost is

established.
171 of 302

Seven Major Activities Occur Target Costing

As shown in Fig 44, seven major activities occur in establishing target costs.
They are:

Provide Market Research
Perform Competitive Analysis
Determination of Customer or Market Niche
Understanding & Developing Customer Requirements
Defining Specific Product Features
Establishing An Acceptable (to customers) Market Price
Required Profit Target (a product must yield)
We will examine these activities more in details and reference

Fig 44 for this purpose
172 of 302

The Establishment Phase of Target Costing
Figure 44
Market
research
Define
product/
Customer
niche
Market
price
Understand
customer
requirement
s
Define
product
features
Target
cost
Required
profit
Competitive
analysis
173 of 302

Seven major activities that occur in establishing Target

Costs
Market research
Competitive analysis
Customer or market niche
Customer requirements
Product features
Market price
Required profit
174 of 302

Market research, Competitive analysis and Customer or
market niche

Market research provides information about the unrecognized needs and wants
or customers. The research is used to define the market or product niche a
company plans to exploit.
Typically, a market niche is a broad definition of a class of customers such as

health conscious eaters or computer power users.
Competitive analysis determines what competitors products are currently

available to the target customers, how the customers evaluate these other
products, and how competitors might react to our companys new product
introductions.
Customer or market niche determination involves analyzing market and

competitor information to decide what particular customer segment to target.
A customer or market niche is a more specific definition of customers, such as

young, upwardly mobile professional, two-income families between the ages 30
and 45.
175 of 302

Customer requirements, Product features,
Market price And Required profit
Customer requirements involve specific product-related information

from customers. The initial product concept is used for determining
preliminary requirements.
Continuous input from customers is solicited,

and the product design is refined until it meets their requirements.
Product features involves setting specific requirements about the

features a product will have and the levels of performance of each
feature. The latter captures traditional quality variables such as
reliability, dependability, and frequency and ease of repair.
Market price establishes a price that is acceptable to customers and

capable of withstanding competition. Market prices can be established
in many different ways, which will be discussed in the next chapter.
Required profit target is the profit a product must yield. It is typically

expressed as return on sales (ROS) ratio. This ROS must take into
account the long-term profit plans and the financial return on assets
(ROA) a company must earn in its industry.
176 of 302

From Allowable to Achievable Target Cost:
ATTAINING TARGET COSTS

While the establishment phase focuses on macro planning processes, the

attainment phase deals with technical cost planning and engineering
needed to attain target costs.
This phase focuses on how to make the allowable target cost achievable.
Activities designed to attain target costs occur primarily during a products

concept development, feasibility testing, and design development stages.
All three stages precede the release of a product design for manufacturing.
Once a design has been released, the focus of cost reduction shifts to
continuous improvement efforts.
177 of 302

Attaining target costs is a Four step process:
1. Compute cost gap.
2. Design costs out of a product.
3. Make sure that the Target Cost achieved prior to releasing the design for
production using the Value Engineering Strategies to bridge the cost gap.
4. Release the final design for manufacturing and perform continuous

improvement.
These Four steps are shown in Figure 45:
178 of 302

Design Cost Out
Compute Cost Gap
Produce
Perform
value
Engineering
Initial
Cost
Estimate
Compare
to Target
cost
Figure 45
179 of 302
Design
Products
process
Estimate
achievable
cost
Perform
Cost
Analysis
Release
design to
Productio
n
Actual
Cost
Undertake
continuous
improvement

Computing the gap

Computing between the allowable cost and the current cost is the first
step in attaining target costs.
Note that this is total product costs and not just manufacturing cost.
The current cost is the initial as-is estimate of the cost of producing a
product based on current cost factors or models. The overall gap between
allowable and current cost must be decomposed by life cycle and value
chain.
A life cycle decomposition assigns total product cost into birth to death
categories of research, manufacturing, distribution, service, general
support, and disposal.
Value chain analysis breaks down the cost by whether it is incurred by the
firm or one of its value chain members such as suppliers, dealers, or
recyclers.
180 of 302

Designing costs out

Designing costs out is the most critical step in attaining target costs.
The key to cost reduction is to ask one simple question: How does the design
of this product affect all costs associated with the product from its inception to
its final disposal? To include all costs, and not just manufacturing costs, may
appear farfetched at first.
However, many downstream costs such as distribution, selling, service,

warehousing, support, maintenance, and recycling can be greatly affected by
product design.
Consider a product such as a convection oven. The weight of the oven and the
complexity of its control panel are two elements affected by design.
The design of these elements, in turn, affects both manufacturing and other
downstream costs. A heavy machine will increase loading, transportation and
installation costs -2 men instead of 1 be needed to handle the machine
A complex electronic control panel will increase the time salespeople may
have to devote explaining to customers how the oven works.
181 of 302

Designing costs out (continued):

It may also increase product support and repair costs as electronic

components may fail more rapidly than mechanical components.
Finally, the material used to manufacture and give it the extra weight may
result in a significant disposal cost. All these factors add to a products life
cycle cost. Many of these costs can be reduced if they are anticipated and
explicitly considered by product and process designers.
Cost reduction through design requires recursive problem solving using four
key activities: product design, cost (and value) analysis, value engineering,
and cost estimation. The activities recur until the product design goes from an
initial concept to a design ready for manufacturing. A design is released for
manufacturing only when a products projected actual cost is equal to its
allowable target cost.
This recursive problem solving is a characteristic of target costing. Its
purpose is to generate cost effective designs. Unlike traditional cost
management, recursion avoids later manufacturing problems by eliminating
the need to correct design errors after manufacturing starts.
182 of 302

Production

Production and continuous improvement represent the last stage in

attaining target costs. These activities focus on product and process
improvements that reduce costs beyond that possible through design alone.
This stage includes steps such as eliminating waste, improving production

yields (such as getting more production from raw materials), and other
efficiency enhancing measures.
Japanese refer to this as kaizen costing. In the U.S. it is value analysis,

others call it as continuous improvement.
It is after production starts that actual costs can be compared against

targets and lessons learned are used for the next generation of products
developed
183 of 302

SUMMARY Allowable & Attainment Phase of Target
Costing

Target costing occurs in two phases
An establishment phase that sets an allowable cost target
An attainment phase that makes the allowable cost achievable.
These phases occur within the four-stage new product development cycle.
New products offer the best opportunity for target costing, because 70-90%
of all costs are typically committed at the development stage of a product.
This does not mean that existing products cannot benefit from target costing
they can. The benefits, however, are limited to the extent that design
options have been locked in.
184 of 302

Incorporating Customer Input in Target Costing

This is a quick overview of how to incorporate the voice of the customers in

the target costing process. There are 5 key messages that we will examine:
Target cost systems are market driven. They must incorporate customers
wants, desires and needs
Customer input is used in all four stages of the product development cycle
All customer levels, intermediate and ultimate, must have a voice in the
target costing process.
Customer focused firms have several common traits. These firms use stat
of the market technology. Conduct open-minded inquiry in customer needs,
wants complaints.
185 of 302

Incorporating Customer Input in Target Costing (continued)

Systematically distribute customer & market information throughout the

organization. Whenever appropriate, share information through teams
Make underlying assumptions about data collection methods explicit
Challenge all assertions or assumptions about customer needs
Many other data collection and analysis techniques are available.
The technique used should be tailored to fit a firms needs and used only
after considering benefits and shortcomings
186 of 302

Value to the customer:

If a company truly understands what is valued by customers, designers

may add features that add cost without significantly adding value in the
customers eye. So what does value to the customer really mean?.
Value is the difference between the benefits received and the cost
incurred by the customers in getting those benefits. Benefits received
include each customers selective perception and opinion of the utility
derived from physical and aesthetic attributes of a product and the way
the product fits his or her needs and demands.
For example, the attributes of a car include both the physical features of
the product (weight, size, power) and its aesthetic properties (sexy,
youthful, fun to drive). The costs include the price paid and related
immediate outlays for transportation, installation or training as well as life
cycle costs such as maintenance, repairs, and disposition.
Another element of the cost is the risk associated with life cycle cost. In
general, products with longer lives have greater risk and therefore higher
perceived costs. Figure 46 shows the two dimensions of customer value
187 of 302

Dimensions of Customer Value Figure 46
Costs
(Price + Life
Cycle+ Risk)
Benefits
received
(Physical/
Aesthetic)
Customer
Value
188 of 302

What does Really Customer Focus Mean?

Every organization claims to be customer focused. How does an

organization that is truly listening to its customers behave? Learning what
the customers want is difficult. It involves more than just taking information.
The process of monitoring the VOC includes asking the right type of
questions, absorbing the answers into a proper mental model of the market,
communicating that information to the other members of the organization
and management team, and then acting on it.
As this process becomes refined, management broadly shares market

information as well as perceptions of what the customer thinks of its
products against those offered by the competition.
A market focused company exhibits the following strategic traits to be a

market leader in truly understanding and staying Customer Focus in new
product development.
189 of 302

What does Really Customer Focus Mean?
Uses state of the market technology in products, because customers want it
Conduct open-minded inquiries (complaints / requests from all feasible

sources)
Make customer & market information available throughout the organization
Shares all the information through teams (both cross-functional and global)
Challenges all assumptions; Lively, open & frequent debates and interactions
Makes underlying data assumption explicit so it can be scrutinized and

challenged
A market driven and focused organization that acquires the above traits is well
geared to learning what it needs to know for target costing. Fig 47 below
explains this in some details.
These traits help to build an organizations base of experience. This base, in

turn, creates the foundation for faster and more rapid organizational learning
about customer needs and for becoming market focused.
Both are essential for making intelligent trade-offs in the target costing process.
190 of 302

Traits for Organizational Learning from Customers
Figure 47
Use state of
the market
technology
Challenge all
assumptions
Inquire
about
customer
needs
Firms base of experience

Organization Learning
for Target Costing
Make data
collection
assumptions
explicit
191 of 302
Share
Information
through teams
Make
Information
accessible

Major Components of Brew Masters Coffee Maker - Figure 54
192 of 302

Beginning Steps in Establishment Target Cost
Figure 48
Market
research
Define
product/
Customer
niche
Market
Price
Understand
customer
requirement
s
Define
product
features
Target
cost
Required
profit
Competitive
analysis
193 of 302

Target Costing A Detailed Illustration

Coffeemaker
We have reviewed target costings structure, tools and processes and will now move on to study
an illustration of a case study in detail.
Our purpose here is to provide an integrating framework to understand as to how this process
works to systematically arrive at the Target Cost that we need for the New Product Development
strategy.
Establishing
194 of 302
Brew Master
Target
Costs:
To establish a target cost (which is the first phase of the strategy) requires
conducting market research, performing a competitive analysis, and defining a
market niche. This overview is shown graphically in Fig 48.
Background of the case study: Brew Master is a manufacturer of small kitchen

appliances such as toaster, coffeemakers, grinders, blenders, juicers and so on.
Competition is tough with major brands like- Mr. Coffee, Braun, Krupps, Sharp
and Toshiba.
The company is looking for market opportunities to exploit in their various

products, One such product is their coffeemaker line. Brew Master makes
conventional drip coffee maker and an espresso / cappuccino maker. How can
the company apply the target costing process to its coffeemaker line?

Beginning Steps in Establishing Target Costs:
195 of 302
Fig 48 -shows the first phase for establishing Target Costs The company is looking
for developing a New Product of an upscale (top of the line) coffeemaker line.
Assume their market research and analysis discovers an upwardly mobile college
educated consumer group who is interest in more gourmet type of food at home.
The companys further research results in the discovery of a home gourmet

market niche of a coffeemaker line that provides espresso quality coffee, but is not
as complex and time consuming to operate. There is little competition in this market
segment
Brew Master must form a cross-functional team to come up with an initial product
concept and test its feasibility. Team proposal is for an initial product concept that
combines a coffee grinder and a drip system into a single coffeemaker.
The new design will grind fresh coffee beans and push extremely hot water through
the grinder basket to make a coffee that smells and tastes more like espresso.
Assume the design is technically and financially feasible and the companys product
team want to proceed to the next steps to understand customer requirements &
define product functions and features, as shown in Fig 49

The 8 Steps Process Achieving Target Costs
Step 1 Establishing Target Costs
Step 2 Define Product / Customer niche
Step 3 Competitive Analysis
Step 4 Understand Customer Requirements
Step 5 Define Product Features
Step 6 Required Profit Margins
Step 7 Set Market Selling Price
Step 8 Achieve the Target Costs
196 of 302

Next Steps in Establishment Target Cost
Figure 49
Market
research
Define
product/
Customer
niche
Market
Price
Understand
customer
requirement
s
Define
product
features
Target
cost
Required
profit
Competitive
analysis
197 of 302

Next Steps in Establishing Target Costs:
Based on market research of coffee drinking consumers focus groups, Brew Master has identified 8
features & functions: -classified as- Must haves, Should haves and Could haves.
You may recall that we have discussed the importance of the above 3 customer attributes earlier in our
discussion to help prioritize and optimize product functions. We are applying this concept now in our
strategy for establishing the Target Cost for the coffee maker
1. Coffee taste and smells like espresso

2. The unit is easy to take apart and clean
3. It has a six + cup capacity
4. Coffeemaker looks real sharp, upscale and nice in appearance
5. It has a clock timer to start automatically at a designated time
6. It performs well with different grinds of coffee beans
7. It keeps the coffee warm after making it at a best serving temperature
8. It automatically shuts off the unit after a designated time period.
198 of 302

Final Steps in Establishing Target Costs
These customer requirements (converting customer needs /wants into functions

and into design requirements) become the basis for the engineering design and
specification of the coffeemaker. (Recall example of cell phone reviewed before)
The product team now must convert this customer input into more precise and
focused product definitions, specifications for meeting customer satisfaction
Example of this product definition will include specific items like: eight cup
coffee carafe, grinder size, blade rotation speeds, size and shape of the
coffeemaker, the heating unit, size, the water heater specifications, & so on.
We will have a hands-on workshop exercise to practice all the above concepts
A product definition is typically in the form of a blueprint, a computer designed

drawing or model or an actual scale model.
The last two steps in establishing the target cost for the proposed coffee maker
are to set price and profit margin, as shown in Fig 50.
199 of 302

Final Steps in Establishing Target Costs (contd)
Market research shows that the market price for an 8 cup drip coffeemaker
with a clock timer is currently $ 69. A stand-alone coffee grinder sells for $ 15.
Since the two features are combined, and the coffee taste is being enhanced,
Brew Master can charge a price slightly higher than $ 84. Given its desire to
capture 20% market share, assume that Brew Master can set the target price
at $ 100
Please Note! To keep the example simple, multiyear cost planning is not
introduced Clearly the price projection will normally have to be over the life of
this product and it will be a declining price, since competitors are likely to
introduce their own new products. Cost reduction therefore will be more
important over time for this product than at its introduction
The final step in the target costing process is to establish a target profit margin
by determining the desired return (typically 7 10% in the small appliance
industries) for the coffeemaker. The company wants 10% target margin.
The target cost for this new coffeemaker, therefore is $ 90 (100 10), also is
called the allowable cost for the product. We will now focus our efforts to
move from the allowable to the Achievable Cost of the coffee maker product
200 of 302

Final Steps in Establishment Target Cost
Figure 50
Market
research
Define
product/
Customer
niche
Market
Price
Understand
customer
requirement
s
Define
product
features
Target
cost
Required
profit
Competitive
analysis
201 of 302

Attaining Target Cost (4 Steps are shown in the Fig 51)

The second phase of the target costing addresses the challenge as to how to attain the final $ 90 target
cost?-How do we turn this allowable cost into an achievable cost?Four systematic
steps are involved:- in attaining this final target cost goal.
1. Compute exactly the cost gap as accurately as possible

2. Design cost out of the product before releasing the design for
manufacture
3. Perform continuous improvement using the Value Engineering
Process.
4. Release the final design to product; Continue cost take-out efforts
(Kaizen)

1.
Allowable (target) cost $ 90, is the total cost and not just the manufacturing cost. Let us pay close attention to the next
statement here. The current cost is the initial as-is estimate of the cost of producing the coffeemaker based on current
cost
factors
or
models.
The gap between the allowable & current costs must be decomposed (refined & updated correctly) by life cycle and
value chain, which assigns total product cost into birth to death categories of R/D, manufacturing, distribution, service,
general
support
and
disposal
etc.
A value chain decomposition breaks down the costs if incurred by Brew Master or by one of its value chain members
such as suppliers, dealers, or disposers provides an assumed breakdown of the allowable and current costs by life-cycle
and value chain for Brew Master coffeemaker.
202 of 302
Computing
exactly
the
Cost
Gap:

Computing the Cost Gap ..continued
203 of 302
How did the company arrive at these cost breakdowns? The breakdown of allowable
costs by life cycle typically requires estimating the costs to be incurred on R&D,
manufacturing, marketing, distribution, repairs, warranty and other support, and
disposition costs at the end of the products life.
The value chain requires estimating the costs incurred within a firm and those by its
suppliers, dealers and recyclers. Past historical average can be used as an initial
estimate for these costs. For Brew Master, past experience shows, manufacturing
costs typically are 41% of the total product cost for small appliances.
In this 17% is inside costs and 24% are for components purchased from suppliers.
This historical data can be used as a starting point to set the allowable cost for each
category in the life cycle and value chain costs. Fig 52 shows the life cycle
breakdowns as a % of the allowable cost of $ 90.
R& D -4%, Mfg -41%, Selling & Distribution 20%, Service & Support 10%,
General Business Overhead (G&A)20% and Recycling- 5%. It also shows that
62% of the allowable cost of $ 90, or $ 55.80, is within Brew Master and 38% or
$34.20 is in the value chain.
Brew Masters initial estimate also shows that the total product cost of the new
coffeemaker will be $ 114 or a gap of $24 (114 90).The total $114 consists of $ 67
inside (gap - $ 11.20) and $47 outside (gap = 12.80).

Compute Cost Gap
Design Cost Out
Produce
Perform
value
Engineering
Initial
Cost
Estimate
Compare
to Target
cost
Figure 51
204 of 302
Design
Products
process
Estimate
achievable
cost
Perform
Cost
Analysis
Release
design to
Productio
n
Actual
Cost
Undertake
continuous
improvement

Figure 52
Value Chain
---------------------------------------------------------------------------------------------------------Inside
outside
Total
--------------------------------------------------------------------------------------------------------------------Life Cycle
Research and
development
Allowable
Current
Gap
Allowable
Current
Gap
Allowable
Current
Gap
$3.60
$5.00
$1.40
$3.60 (4%)
$5
$1.40
Manufacturing 15.30 (17%)
20
4.70
$21.60(24%)
$30
$8.40
36.90
50.00
13.10
12.60(14%)
17
4.40
18.00
23.00
5.00
Selling and
Distribution
5.40 (6%)
0.60
Service and
Support
9.00 (10%)
10
1.00
9.00
10.00
1.00
General
Business
overhead
18.00 (20%)
19
1.00
18.00
19.00
1.00
Recycle Cost
4.50 (20%)
2.50
4.50
7.00
2.50
Total
$55.80(62%)
$67
$11.20
$90.00
$114
$24
205 of 302
$34.20(38%)
$47
$12.80

Computing the Cost Gap ..contd

The information in Fig 52 shows us that the largest cost gaps exists in external
manufacturing costs ($8.40), internal manufacturing costs ($4.70), and external
selling and distribution ($4.40).
It is clear that Brew Masters cost reduction efforts must be focused both
externally and internally. It needs to work closely with its suppliers and dealers
and involve them actively in cost planning and cost reduction efforts. This means
partnership and mutual trust and sharing of information with these various
entities. Ideas for reducing costs in the value chain are:

206 of 302
Reduce suppliers cycle time

Reduce the distance parts and products have to travel
Give incentives for cost reduction ideas and solutions for a win-win situation
Involve value chain members in lean production exercises
Reduce the uncertainty value chain members face; share production estimates and
scheduling with them
Involve value chain members in total quality management programs.

2. Designing cost out of product- (before releasing product to production):

The key to cost reduction is to ask one simple question: How does the design of this
product affect all costs associated with the product from its inception to its final
disposal?
To include all costs, and not just manufacturing costs, may appear farfetched at first.
However, many down stream costs such as distribution, selling, warehousing,

service, support and recycling can be greatly affected by product design.
Cost reduction relies on four major activities: Product design, cost analysis, value
engineering, and cost estimation.
Cost reduction is recursive, since the activities cycle back several times as the
product goes from an initial concept to a final design.
The recursion is a characteristic of target costing. Purpose of the recursion is to

generate a cost effective design and not to correct design errors.
207 of 302

How Cost Reduction Occurs:
Cost reduction will be a trivial task if no constraints were place on the features
and functions offered in a product and the time to develop it.
For example, Brew Master can simply delete the coffee grinder and reach its
target cost of $90. However, this defeats the basic product concept.
The challenge, therefore, is to reduce cost without sacrificing any of the features
or functions important to a customer.
We demonstrate how to reduce costs using the four steps recursive (repeatable)
activity cycle as shown in Fig 53.
This cycle, which is design to cost analysis to value engineering to cost

estimation, is combined with the data from Fig 52 to show how to attain the target
manufacturing cost of 36.90 from the currently estimated level of $ 50.
Note that the target includes both inside and outside manufacturing costs,
because suppliers are part of the product team during this cost reduction phase.
208 of 302

Compute Cost Gap
Design Cost Out
Produce
Perform
value
Engineering
Initial
Cost
Estimate
Compare
to Target
cost
Figure 53
209 of 302
Design
Products
process
Estimate
achievable
cost
Perform
Cost
Analysis
Release
design to
Productio
n
Actual
Cost
Undertake
continuous
improvement

How Cost Reduction Occurs (continued)
Design Product and Processes:
In the case of Brew Master, the coffeemaker and the manufacturing process are considered at the
same time. This avoids the costly changes later because machines may not be available or capable
of executing a product as designed.
Cost Reduction / Continuous Improvement:
Perform Cost Analysis:
For Brew Master, cost analysis means deciding what components of the coffeemaker (heating
element, control panel, grinder etc) to target for cost reduction and then assigning a cost target to
each of these components.
Cost analysis also focuses on the interaction between components and parts. Often, a reduction in
the cost of one component more than offsets the cost increase elsewhere.
For example, decreasing the cost of the outer shell of the coffeemaker by making it small may
increase the costs of the control panel, electronic circuitry and heating element. If these cost
increases are large, no net savings accrues from decreasing the outer shell.
Cost analysis requires 5 major sub activities. Let us review each of them.
210 of 302

Major components of Brew Masters proposed Coffee Maker
211 of 302
Figure 54

3. Perform continuous design & functional Improvements to

help achieve the final target cost - 6 steps are involved
A. Develop a List of Product Components and Functions.

Cost reduction efforts starts by listing the various product components, identifying the functions that
they perform and their current estimated cost.
The initial product design and cost estimates provide this information. The list shows what
components and functions are needed to satisfy customer requirements and what the cost to provide
these functions might be. Fig 54 shows a diagram of the various components of the proposed coffee
maker.
B. Do a functional cost breakdown.

Each part and component performs a specific function. The next step is to identify that function and
estimate its cost. This is shown Fig 55. For example, the function of the brew basket assembly is to
grind and filter coffee. Its current estimated cost is $ 9, which represents 18% of the total
manufacturing cost for this product.
To keep the example simple, we have combined several functions and components for the
coffeemaker. At a detailed level, the brew basket or the electronic control will be broken into several
subcomponents. The total for all components is $ 50, which is the same as the manufacturing cost
estimated shown in Fig 55
212 of 302

Functional Cost Breakdown for Brew Master's Coffee Maker
Figure 55
Cost
Component
Brew Basket
Carafe
Coffee warmer
Body shape and
water well
Heating element
Electronic
display panel
Total
213 of 302
Function
Grinds and filters coffee
Holds and keeps coffee warm
Keeps coffee warm
Amount
$9
2
3
Percent
18%
4
6
Holds water and encasement

Warms water and pushes it
Controls brew and clock
settings
9
4
18
8
23
$50
46
100%

Customer Feature Ranking for BrewMasters Coffeemaker
Figure 56
Customer Ranking
___________________________________ Relative
1 (not
5 (very
Ranking
Customer Requirements
important)
important)
(%)
___________________________________________________________________________________
Coffee tastes and smells like espresso
5
20%
Easy to clean
4
16
Looks nice
2
8
Has 6+ cup capacity
3
12
Starts automatically at designated time
4
16
Works well with different coffee beans
1
4
Keeps the coffee warm
3
12
Automatically shuts off
3
12
Total
100%
214 of 302

C. Determine Relative Ranking of Customer Requirements
The functions of the coffeemaker form the engineers view of the product. This is not the
customers view. You will recall that Brew Master had identified 8 features important to its
customers.
The engineers view of a product as functions must be reconciled with the customers view of a
product as a set of features. We must relate product functions to the features customers want.
First assess the relative importance that customer place on the various features. Have a formal
survey of prospective customers rank the importance of these eight features, to be used to rank
customer requirements. An assumed ranking for each feature, based on survey results are
shown in -Fig 56.
The importance ranking is done on a five point scale. A score of 5 means the feature is very
important; a score of 1 indicates that it is not important. For instance, the taste and smell of
coffee is the most important feature and multiple grinder settings is the least.
The last column of Fig 56 converts the raw scores for the importance of features into a relative
ranking of features. This is done by first adding together the raw scores of the eight functions
(5+4+2+3+4+1+3+3) = 25.
Each functions score is then expressed as a % of 25. For example, the coffee taste has a
score -5 out of 25 The relative ranking, therefore is 5/25 = 20%. It says that, of the total value a
customer derives from this coffeemaker, 20% comes from the way coffee tastes.
215 of 302

D. Relate Features to Functions
The relative ranks of features must be converted into an important rank for
each function. Since components carryout the functions of a product and are
the key design parameters, this step relates customer ranks to the
components that best meet that particular requirement.
Quality Function Deployment (QFD) is a useful tool for target costing,

because it highlights the relationships among competitive offerings, customer
requirements and design parameters. The QFD matrix summarizes the
information about product functions from Fig 55 with customer ranks from Fig
56.. It adds two other pieces of information collected during the market
research phase.
First, it adds the correlation between a component or design parameter and

customer requirements.
Second, it adds information about how customers evaluate competitors

offerings of these same features.
A QFD Matrix is shown in Figure 57. Let us analyze this matrix.
216 of 302

Relate Features to Functions (continued)
That the requirement that coffee taste like espresso has a high correlation
with the design of the brew basket and the heating element.
How many cups the coffeemaker can hold is correlated to the water well and
the carafe size.
Taste is also the most important feature to a customer, and it is currently

rated at 3 for Brew Master and 2 for its competitor.
This tells Brew Master that, although it is ahead of the competition, it is still
far from what the customer would like to see as far as taste goes.
On appearance, the competition obviously has a better looking product with a

rating of 5;
However, the customer ranking for this feature is 2, which suggests that it is
not worth spending too much in improving the appearance of the
coffeemaker.
217 of 302

Figure 57
Components
or Functions
Brew
Basket
Carafe
Coffee
Warmer
Body/Water
Well
Heating
Element
Display
panel
Customer
Low
Requirements
Tastes/smells
like espresso
Easy to clean
Looks nice
Has 6+ cup
capacity
Starts
automatically
on time
Works with
different
beans
Keeps the
coffee warm
Automatic
shutoff
218 of 302
Competitor
Ranking
4 5
5
4
2
3
High
Customer
Ranking

Correlation of Design Parameters and Customer

Requirements
= Strong correlation
= Moderate correlation
= Weak correlation
Comparative Competitor rankings
= Competitor ranking
= Our ranking
219 of 302

BrewMasters Coffeemaker: Functional Cost Analysis of Components
Figure 58
COMPONENTS
Customer
Requirements
Brew
Basket
Tastes/smells
like espresso
.5 X 20%
= 10%
Easy to Clean
.3 X 16%
= 4.8%
Carafe
Coffee
Warmer
Body/Water
Well
Heating
Element
.5 X 20%
= 10%
.1 X 16%
= 1.6%
16%
.6 X 8%
= 4.8%
.5 X 12%
= 6%
.4 X 8%
= 3.2%
.5 X 12%
= 6%
.05 X4%
= 0.2%
Keeps the coffee

warm
.2 X 12%
= 2.4%
220 of 302
15.0%
10.0%
1 X 16%
= 16%
16%
.95 X 4%
= 3.8%
4%
.8 X 12%
= 9.6%
12%
Automatically
shuts off
Converted
component
9.6%
8%
12%
Starts
automatically on
time
Has multiple
grinder settings
Relative
Feature
Ranking
20%
.6 X 16%
= 9.6%
Looks nice
Has 6+ cup
capacity
Display
Panel
20.4%
10%
1 X 12%
= 12%
12%
35.0%
100%

E. Develop Relative Functional Ranking

The QFD matrix allows converting feature ranks into functional or component ranks. This is
critical, because customers think in terms of features but products are designed in terms of
functions & components For the conversion, we need one other piece of information, the %
contribution of each component to a customer feature. Information is shown as a general
correlation shown in Fig 57
Engineers have to convert this correlation data into specific contribution%. Such a breakdown
for the coffeemaker is shown in Fig 58 and the information is interpreted as follows. The
feature tastes like espresso is a function of the brew basket and heating element design.
(You can verify this from Fig 57.
Engineers feel that both these components contribute equally to this taste feature. We,
therefore, assign equal (50%) weight to each functions contribution to taste. Relative value
ranking of the taste feature is 20%.Therefore, since both components contribute equally, we
assign each component a value rank of 10.
The last row of Fig 58 adds the value contributions of a component to all features to arrive at
that components approximate value to a customer. The brew basket is assigned a value,
based on a customer importance rank. Of 15% the carafe has a value of 10%; and so on. Note
that the last row & last column both add up to 100%.They are simply different views of
customer values. The column represents value of features, and the row represents the value of
components.
221 of 302

F. Perform Value Engineering (Most critical/ best opportunities for cost reduction)
To achieve the cost targets, Brew Master must analyze the various components to
determine how to provide their functions at the lowest overall cost with no reduction in
required performance, reliability, maintainability, quality, safety, recylability, and usability of
the coffeemaker.
For example, the function of the heating element is to bring water temperature to a specific
level.
Value Engineering asks how the water temperature can be raised to 110 degree F in three
minutes, at a lower cost. It generates ideas for simplifying both the design of the
coffeemaker and the processes used to manufacture it. Value Engineering consists of three
steps.
The first step is to identify the components for cost reduction. Choosing which components
to select requires computing a value index. This is a ratio of the value (degree of
importance) to customer and % of total cost devoted to each component.
For the coffeemaker, the value information is in the last row of Fig 58 and the relative cost
information is in the last column of Exhibit 11-8. Both quantities are expressed as %. Fig 59
computes the value index and shows its implications for cost reduction.
222 of 302

Value Index for Brew Masters Coffeemaker - Figure 59
[1]
Component or
Function
Brew Basket
Carafe
Coffee Warmer
Body Shape and
water well
Heating Element
Electronic
display panel
223 of 302
[2]
Component
Cost
(EX. 11-8)
(% of total)
18.00
4.00
6.00
[3]
Relative
importance
(EX 11-11)
(%)
15.00
10.00
9.60
[4]
[5]
Value
Index
(Col. 3/2)
0.83
2.50
1.60
Action
Implied
Reduce cost
Enhance
Enhance
18.00
8.00
20.40
10.00
1.13
1.25
O.K.
Enhance
46.00
100.00%
35.00
100.00%
0.76
Reduce Cost

Perform Value Engineering (continued)
As Fig 59 shows, components with a value index of less than 1 typically are prime
candidates for value engineering. Components with high values are candidates for
enhancement since far too little is being spent for a feature important to customers.
These components present an opportunity to enhance the product. The two variables in
the value index, cost and relative importance, are plotted on the graph shown
in Fig 60.
An optimal value zone in Fig 60 indicates the value band in which no action is
necessary. The optimal value zone is based on the experience and the opinion of the
target costing team members.
The zone is usually wider at the bottom of the value index chart, where low importance
and low cost occur, and narrower at the top, where features are important and cost
variations are larger.
The area of the graph above the optimal value zone indicates components that are
candidates for cost reduction. Items below the zone are candidates for enhancement.
224 of 302

The second VE activity is generating cost reduction ideas, which requires creative thinking and
brainstorming. The purpose is to ask what can be reduced, eliminated, combined, substituted,
rearranged, or enhanced to provide the same level of functionality from a component at less
cost.
Fig 61 lists some cost reduction ideas that Brew Master might consider reducing the cost of
the electronic display panel, the prime target for cost reduction identified by the value index.
Note that the cost reduction ideas in Fig 61 contain some general principles that can be
applied to many different situations. These ideas focus on reducing the number of parts,
simplifying the assembly, using common or standard parts, keeping the design simple, not
using soon to be obsolete parts, and not over engineering the product beyond what will meet
customers needs.
A cross-functional team is essential because these type of engineering design choices must
be guided by customer and financial input.
Engineers need to know reliably if the cost reductions are worthwhile or not.
For example, considering whether to eliminate the flexible circuit requires a good idea of its
purchase cost as well as good cost tables that can estimate what a flexible circuit adds to the
other manufacturing costs of the coffee maker.
225 of 302

Brew Master Coffeemaker Electronic Display Panel : Value Engineering Ideas to Reduce Cost Figure 60
226 of 302
Panel Subcomponent
Cost Reduction
Power Supply
Reduce wattage; more than needed in current

design
Flexible circuit
Eliminate flexible circuit; use wiring harness
Printed wire board
Standardize board specification; Use mass

produced unit
Clock Timer
Combine with printed wire board
Central Processor chip
Substitute standard 8088 chip Instead of custom

design
Heater connector
Rearrange layout of board To heater connection

Component Interaction Matrix Figure 61
Available
Components
Basket
Coffee
Carafe
Warmer
Body
Heater
Basket Coffee
Display
Unit
2004
Carafe
2010
Warmer
2010
2008
2010
23
2005
Body
Heater
Display Panel
227 of 302
The last VE activity is testing and implementing promising ideas, which require determining if cost
reduction ideas, are technically feasible and acceptable to customers. Those ideas that meet this test
are further developed and incorporated into the product or process design and cataloged in a VE ideas
data base so they are available for future design efforts.
One tool often used for testing the feasibility of ideas is the component interaction matrix. This matrix,
which helps to identify the impact of changing one component on other components, requires cost data.
It ensures that no current or soon out of production components are used. The use of such components
can increase product cost significantly. Fig 62 shows a sample of component interaction matrix for
Brew Masters coffeemaker.
The cost column of Fig 62 shows the cost of a component. The availability column shows the date on
which the component is expected to be obsolete. An OK entry indicates a relationship between the
components. Brew Master must determine whether the relationship between the components is
positive or negative.
For example, decreasing the size of the brew basket may decrease the cost of the heater, which does
not have to use as much water heating power. Similarly, we may find that the display panel cost goes
up as the body cost goes down.
In this case, the savings in body may be wiped out by the increase in panel cost. In determining these
costs, we must keep the life cycle for all components consistent. For example, we may have
engineered a body to last for 15 years, when the display panel
will last only 7 years.
228 of 302

Please note! Many appliance companies have made this mistake in recent years. For instance one
maker of dishwasher uses a 25 year steel wash tub with a 7 year electronic control panel.
The replacement cost of the panel is almost 65 75% of the cost of a new dishwasher. Clearly, the
company could have reduced the cost of the tub by using materials other than steel that do not last as
long or increase the life of the control panel to match that of the tub.
Note! We have noted that a lot of time and efforts have been spent in, brainstorming,
4. Release Final Design for Production:
Ideally, Brew Master will release the design of the new coffeemaker for manufacturing when it is
satisfied that the estimated achievable cost is equal to the allowable cost. If this is not the case, it has
three options: remove some of the features, increase the market price, or get cost savings from
continuous improvement.
The first two actions are feasible only if they will not adversely affect the sales of the coffeemaker. The
last action requires serious evaluation of the manufacturing processes, defect rates produced, yield
experienced, cycle time for manufacturing, storage, transportation, and other areas to determine
whether any waste can be eliminated.
These continuous improvements may be used to fill any shortfall between allowable and achievable
target cost
thinking and evaluating the Value Engineering strategy to achieve the final Target Cost
of the product. This is the foundation & philosophy of Lean Product Development process
229 of 302
Section VII
WCNPD VA Tear-Down Benchmarking
Hands-On Team Workshop

230 of 302
Complete explanation of the strategy, tools & process are taught

At the end of this section, 5 to 6 teams will be formed
As much as possible, teams will be cross-functionally mixed
Guide lines and rules will be explained for a hands-on workshop
2.5 hours given for benchmarking & Best-In-Class ideas
Teams to document and complete their recommendations
Team Presentations, analysis, discussion and Q &A
Review briefly what has been learned

Benchmarking- Definition, Innovation & Bold Thinking
Benchmarking Attributes to focus on
Checklist: Brainstorming Questions Function Redesign
Checklist: Brainstorming Questions Product / Process Redesign
The Pugh Methodology Case Study Truck Battery Box
Ground Rules for Competitive Benchmarking Strategy
Workshop, Documentation, Analysis, Conclusions & Final Design
Team Presentation of Final Design / Recommendation / Rationale
Lean Design Challenge, Stretch Ideas & Supplier Partnership
231 of 302

Benchmarking Definition
Benchmarking is the process of identifying, understanding and adapting

outstanding practices from organizations anywhere in the world to help your
organization improve its performance
Example: Supply Management

Supplier Lead Times

Order Input Time
Late deliveries
Shortages per Year
Suppliers / Buyers
232 of 302
Company A
150 days
6 minutes
33%
400
34
World Class
8 days
0 min
2%
4
5.3

Benchmarking Definition Another Definition:
Benchmarking is the continuous process of measuring products, services,

and practices against the toughest competitors or those companies
recognized as industry leaders. It is not a tool, but a structured process.
Not an end, but a means, Not a one-time event, but a continuous practice.
Benchmarking Innovation and Bold Thinking:
Stop copying, imitating or duplicating the competitors design and concepts

Stretch your imagination to the outer boundary- outside the box thinking!
Keep pushing the envelope, piggy back & build on others idea & creativity
Think about the unthinkable Be daring!
No idea is too small or too big: Every possible ideas need to be documented
Ignore the detractors; Stay focused; Stay Enthusiastic & believe in the Team
No paradigm, pre-conceived notion or not invented here (NIH) philosophy
Develop the concept of Best of all the Worlds Innovative design approach
It is better to be directionally correct than numerically not precise!-Just do it!

233 of 302

Benchmarking Attributes to focus on
1. Design: Engineering, Performance, Functionality, Construction & Appeal
Lean Manufacturing & Assembly: DFMA, Poka-Yoke and World-Class
Material, Tooling and Technology: New & Proven technologies
Quality, Reliability, Durability (QRD): Life-Cycle Cost and product value
Marketing, Sales & QFD (Voice of Customers, customer applications & value)
Stretch & Future ideas / Concepts: Outside the box thinking to quantum leap
the nearest and best competition on a global basis Never ending strategy
Lowest Cost and Total Value: For both customers and the company-Long term
234 of 302

Benchmarking Attributes Checklist
1.
Design:
Functionality, Performance, Simplicity of Design And Robust in Construction

Meets customers minimum Musts & Wants (QFD) Will the Customer pay for these?
Mistake Proof ness (Poka-Yoke), Standardization, Built-in Quality And Ergonomics
DFMA, Lean Manufacturing & Modularization System Approach (family of parts)
Designed for current equipment, capability, facilitate optimum set-up/ changeover
Ease of trouble shooting, Service Diagnostics, Legal, Safety & Regulatory issues
Maximize use of shelf items, Adaptable to Stretch / Futuristic Ideas / Technology
Accessibility, Serviceability and meet safety and legal requirements, if applicable
Standard shelf or commercial items; Parts standardization & use existing designs
Reduce the number of parts with multifunctional goal to suit production volume
Least number of fasteners, size, type, style and length to speed up assembly time
Lowest possible cost to provide the maximum value, product quality and total life
cycle benefits better than the nearest competition

235 of 302

2.
Lean Manufacturing:
Is it Designed for Lean Manufacturing (Ease of assembly and Disassembly)?
Is it Designed for Serviceability, Diagnostic and Mistake-Proof in Manufacturing ?
Family of parts Mfg to lower set-up, tooling standardization and Built-in Quality
Fasteners: Least number of size, type & variety using emerging fastener technology
Optimum, Proven and Cost-Effective Technology for automation to lower mfg cost
Wherever feasible to design for flexible Manufacturing cell layout to lower mfg cost
Suppliers pre assembled modular assembly, where it will be cost effective
Facilitate Lean Manufacturing, Operational Excellence & elimination of all NVA items
236 of 302

3.
Material, Technology & Tooling:
Optimize material Spec, Thickness, Standardization, Surface Finish and Weight issues
Alternate Material / Substitution, Utilize New Emerging Technology to lower cost
As much as possible use standard or commercially available material.
Near Net Shape, Optimize part orientation to lower scrap in stamping process
Tool and Die Design: Manufacturability, Cost and Quality to suit Manufacturing Volume
Fit, Finish and Overall Quality consideration to meet product spec & applications
Vendor Rationalization & Opportunities to lower cost Process Optimization
237 of 302

4.
Q,R & D:
Built-in Quality, Reliability & Durability to meet / exceed customer expectation
Does it meet total Performance goals to meet customer satisfaction
Is the Product Design Robust to meet life cycle cost, maintenance and Repair?
Failure Mode Effect Analysis (FMEA)-History, Field Problems & Complaints
Life Cycle Value, Low Operating Cost & Designed for Customer Application
Lower Warranty Cost, Field Repairs / Defects, Customer Dissatisfaction
Will the design facilitates ease of testing, eliminate adjustments and fine tuning?
Stretch and Futuristic Ideas to improve Q,R,D through Emerging Technologies
238 of 302

Benchmarking Attributes Checklist:
5.
Marketing / Sales / VOC (Voice of the Customer):
Fit, Finish & Appearance will it delight and appeal in the eyes of the customers
Voice Of the Customer (VOC) What they like, dont like, options and Features they will
pay for them or not? Do not over or undershoot design to meet VOC
Is it designed for specific customer applications to enhance value, business or profits?
Any features of excitement, options or unique value to consider-better than competition
If feasible, include products core customers during the B.M. sessions for their input
Performance, Best Value & Price, Quality, Delivery & After-Sales Service /Support
Continuous Improvement, Features /Applications and listening to suppliers feedback
Remember!-Customer is the King. Need to ask will they will pay for the features?
239 of 302

6. Stretch Ideas & Concepts:
Keep a closer watch on the product development based on Global Perspective
Always search for New and Emerging Technologies and Systems
Dynamics of Customers tastes, preferences and buying habits of the future
Stretch or breakthrough idea / concept - that could offer / open a new market
Customer is always the King! Quantum leap customers expectation through

R & D and technology to help launch new and better products to continuously
meet or exceed customers expectation and satisfaction to provide better total
value, than your nearest competition on a global basis
240 of 302

Product Development Competitive Benchmarking

Hit List of Attributes to focus on for the Team Exercise.
Design:
Functionality and Performance to Meet all QFD item
Design Concept, Layout, Location and Size Issues
Number of Parts Standardization
Construction and Robustness to meet QFD criteria
Fasteners Type and Numbers used to lower Cost
Accessibility and Serviceability
Safety and Legal Requirements if Applicable
Standard Shelf or commercial items used in the Design
Mistake Proof ness And ease of Trouble Shooting
Standardization for lowering Cost
241 of 302


Hit list of Attributes to focus on for the Team Exercise.
Lean Manufacturing:

242 of 302
Designed for Lean Manufacturing Strategy?

Ease of Assembly DFMA Advantage
Is it designed for Mistake Proof?
Manufacturing Set up and Schedule to lower cost?
Fasteners impact on Manufacturing assembly/ quality
Ease for Disassembly Repair & Service
Accessibility for use of Power tools for productivity?
Is it designed for Ergonomics?
Suppliers pre assembled parts to lower cost?
Any other Unique Manufacturing Opportunities?


Material and Tooling:

243 of 302
Material Spec and thickness / Gauge

Alternate or better or unique material to lower cost?
Commercial Available or Special Material?
Material Cost Factor-Estimated
Material Weight Factor - Estimated
Fit, Finish and Overall Quality
Material spec and Tooling Cost Factors?
New Process or Technology Issues
Stretch or Any Future New Material ideas
Other Material Considerations?


Quality, Reliability and Durability (Q,R,D)

244 of 302
Does it Meet Minimum Quality Standards?

Built-In Quality Design for Mfg?
Is it Robust/ Heavy Duty / Durable?
Built for a Reliable part or system?
Life Cycle Cost? Maintenance/Repair
Warranty & Failure Past History
Legal and Safety considerations
Facilitates ease of Testing and Adjustment to spec
Will the Customer pay for the Value?
Any Unique feature of QRD Factors?


Marketing, Sales and Voice of the Customer (V.O.C):

245 of 302
Is the VOC appears to have been executed in Design

Will it Meet or Exceed Customers Expectations?
Is it designed for Customer Applications?
Fit, Finish and Overall Quality?
Any Customer Excitement Features/ Options?
Supplier Feedback Opportunities?
Will Customer pay for these features?
Are there features that are excess?
Any creative or break thru ideas?
Other Marketing and Sales Ideas?


Stretch and Future Ideas:

246 of 302
Unique Design Attributes that are worth it?

Breakthrough
Technology issues-lower cost
Any Stretch ideas- combine functions and Systems
Material Stretch Opportunities?
Tooling Stretch Opportunities?
Manufacturing Stretch Ideas?
Stretch Ideas for Modularization?
Supplier Stretch ideas, if any?
R & D projects for the future
Any other issues not covered above

Checklist Questions
VE Brainstorming for Function Redesign
For Identifying Potential Functions as Redesign Candidates:- Yes or No
(If the answer is Yes, then that particular function is a candidate for redesign)
247 of 302
Can we do without this function?
If this were not done, would anything of consequence happen?
Is it doing more than the customer requires?
Do others produce it at less cost or in less time?
Is there a simpler way of meeting this need?


Checklist Questions
VE Brainstorming for Function Redesign
248 of 302
Can another firms standard part or process be used?
Does it cost more or take more time than is reasonable?
Are we trying for too much reliability, is it over-engineered?
If you were a customer, would you omit this?
Is this the only way to do this? Is this the best way to do

this?
What critical function does it perform for a customer?


Checklist Questions
For Generating Ideas-Potential Product or Process Redesign: Yes or No

(If the answer is Yes, then that particular function is a potential candidate
for redesign)
249 of 302
Adapt:
What else is like this? What could we copy?

What is out there that we can adapt?
Combine:
Can we combine steps / purposes / functions?
Magnify:
What can we add? Can we do it more frequently?

Should we enlarge the scope?

Checklist Question
VE Brainstorming Product / Process Redesign
250 of 302
Minimize:
What can we reduce / omit / streamline?
Rearrange:
Can we interchange steps? Do it in a different sequence?

Can we change the timing?
Can we rearrange steps in a different pattern?
Can we schedule steps differently?
Reverse:
What is the opposite / Turn it around/upside down/

backward?
Can we reverse roles or functions or steps?
Substitute:
What can we use instead / take another approach/ new

twist?

The Pugh Methodology Examples of Illustration
Concept Selection According to Pugh:
251 of 302
In 1981, Stuart Pugh, a professor of engineering at a university in

Glasgow, Scotland, suggested a simple and relatively effective way
of sorting out multiple design concepts.
Fundamentally the Pugh Method is very simple, basic and easy to

apply focusing primarily on optimizing the best engineering design
concepts, ideas and options rather than cost reduction, which is of
secondary in terms of importance.
An overview of the methodology is provided below - Figs 62 & 63

Pugh method evaluation - Some alternative conceptual designs for a canister
vacuum product - Figure 62
252 of 302

Concept Selection According to Pugh Methodology
At the heart of the Pugh Method for Concept Selection is a simple evaluation
matrix that lists all of the major design criteria for a given product function.
Each design alternative is given a score based on its potential performance

relative to a default design choice.
A plus indicates that a concept performs better than the default, a minus
implies worse performance than the default, and an S (for same-as) means
that the concept would perform equally well.
The Pugh Method is the basic analyzing process step used in the VA TearDown and Competitive Benchmarking strategy. Looking at Fig 62 we have an
example of some design alternatives for a canister vacuums allow movement
function
Not all alternatives will make a lot of sense, but there may be some aspect of
one option that can be combined with another to form a radically new and
unexpected breakthrough idea
253 of 302
254 of 302
How to systematically Identify- Product functions & attributes for Benchmarking
System: Car Body (cab-in-white) Interior:
Material Spec (Steel, Aluminum, Reinforced Plastic, Carbon-Fiber etc)

Front Door opening
Front Panel and Grill
Head, Leg, Belly and Shoulder Room Dimensions
Ergonomics of comfort, safety issues
Entry / Egress
Repair, Rebuild, time cycle for repairs better than competition
Extend the cab for special applications and modifications etc

255 of 302
System: Car Door and Glass assembly:
Door Constructions (Heavy duty or light duty)

Strong and robust or flimsy and cheap to meet QFD & Cost issues
Door Hinge and construction
Door Handles, design, construction & location
Glass design-raising and lowering mechanism, tinted or not
Maintenance and Repairs issues
Safety and Legal Concerns and Legislative issues
(Glass breaking on impact during accident)
Styling, Appearance and Quality of Glass

256 of 302
System: Car Instrument Panel (Dash Board)
Instrument Gage design, Appearance and Styling

Appearance, look, location, size, glaring effects etc
Markings on the Switches How good they are for operators to see easily
How long the switch marking will stay against wear and tear
How well the switches and the various controls are ergonomically sized
and properly located for ease of sighting and operation
Warning Lights Location, Operation and Easy identification
Maintenance Type gages
Unique features of Customer Excitement (extra plug point for cell phone,
TV, CD player and other personal electrical appliances)
Extra electrical outlets for other custom modifications and changes to
enhance utility including convenient remote emergency Jump Start
feature f

257 of 302
System: Car Brake and Brake System
Air or Hydraulic System?

Manual or Power-Assist Braking System
Any back-up safety system to come on automatically in case of brake failure
Brake Stopping distance (How quick & effective is the actual braking effect)
Life of the Brake pads, Master Cylinder and Brake Operating Calipers
How good are the brake pedals need be designed better than competition?
Construction, Design, Location, Ergonomics & Operation
Is the pedal operation is flexible for customizing setting?
(for short, tall & handicap drivers)-car pedals today are offered as options
with adjustment, similar to seats and tilt & telescopic steering adjustments

258 of 302
System: Medium or Heavy duty Truck Chassis Frame Rails
Design, Layout and Construction

Material spec, thickness and rust preventive coating
Soft or Heat-Treated rails for strength and durability
Quality of rails (Straightness, Channel section uniformity, Bow, Camber, Twist
etc)
Ride Quality, Drivability, Noise, Vibration and Harshness (NVH characteristics)
Reinforcements, Cross Members, Brackets Are they riveted, welded or
bolted?
QRD issues and concerns.
Flexibility to build different body styles, cab configurations and operational .
applications

259 of 302

A simple template guidance for all the students strictly as an initial start only to
learn about product attribute identification for a Kitchen Blender-Design focus only
Please note! As part of an internal class exercise, all the students are expected
to develop the attributes (covering all the 6 major areas-learned in to-day class)
for the kitchen blender before coming to the next class. This is a learning curve

Part Features-(chosen product system / function)

Product Design, Functionality, Performance
Meet all the QFD issues & opportunities
Attributes-(Design Spec, where, how, & why focus)

Blender capacity, size, functions, features
Other performance and value characteristics
Design concept, location and layout of control

Blender styling, Operating buttons, locations,
Buttons. Any shelf items can be used to lower cost? Shape, size, color, style-for ease of operations?
Robustness, built to last & withstand all abuses for

Long term criteria of cooling environment- (Q,F, D)
Safety, Legal & Parts standardization considerations Meet or exceed legal, safety, environmental and
for the family of blenders. Need to investigate / test recycling issues-elect cord, all the blender parts
Accessibility of service, repair & maintenance cost
Unique customer excitement, application, option etc Color selection, convenience, cleaning, gasket
Opportunities if any to quantum leap competition?? Life, blade life for longevity, easy of operations
260 of 302
Examine every part of blender carefully as reqd

to be sure before making a balanced judgment
Product designed for DFS? Lowest repair cost?

Figure 63 -
261 of 302
Pugh method for concept selection matrix

The Pugh Method
In any case, once options have been gathered and briefly described, a
matrix such as the one shown in Fig 63 is used to select promising
candidates.
Along the left-hand column, all major design criteria for the given
functions are listed. Pugh recommends a fairly comprehensive list, with
no weighting factors.
The design alternatives are listed along the top of the matrix, often
accompanied by simple sketches that are provided for clarity.
At the junction between each criteria and design alternative, a score is

determined, based on how well the alternative design concept supports
that criteria. A default design (usually the existing / current design) is
chosen as the baseline against which other options are compared.
Rather than a numerical score, Pugh suggests a + for better than the
default, and a - for worse than the default and an S representing
same as the default. The team objectively perform this scoring process
262 of 302

The Pugh Method
Once the scoring process is complete, we simply add up the +s and the -s (ignoring
the S-for same scores). Circle (for easy identification) all the +s regardless of where
they are located in the chart.
Design alternatives with more pluses than minuses deserve further consideration. If
there is a dramatic winner, it may be sufficient to just select that choice and move
forward. As with all concept selection, more detailed analysis by the core design team
is essential to validate the qualitative results of a selection tool.
Another interesting outcome of this process is that, you can cross ref all the design
function criteria (on the left-side column) against each of the concept alternatives (top
of the matrix) and pick the +s, wherever it may be. The best concept may still lack in
1 or 2 specific areas of attributes that others may clearly excel & should be noted
This strategy will give another opportunity to combine and make the best of all the
worlds concepts in order to develop a hybrid or new breakthrough design idea, if
feasible. The challenge for the team: Balance performance, features, QFD, lean mfg,
cost, quality & finally feasibility / practicality to arrive at the optimum selection
We will now focus on how to transfer this conclusions to final team recommendation
263 of 302

Transform Team Pugh Analysis to Final Recommendations
There is a Team recommendation sheet to document final conclusions, reasons

for idea selection, trade-offs & other potential BIC for evaluation
Team needs to constantly refer to the Benchmarking summary hit list detailed
under the 6 major areas of Product Development to evaluate the best and
balanced approach for arriving at the final teams conclusions.
It is NOT always an easy straight forward process. Continuous convergent,

divergent thinking, long term stretch & R&D ideas / concepts all enter into the
equation before decisions are made. Everything should be documented
Benefits of savings (mfg, material, COQ, warranty, sales / market share etc)
implementation cost in tooling, equipment, R&D-all need to be investigated. Any
design sketches, concept proposals, photographs, supplier quotes can be
attached to the recommendations to support and validate final team conclusions
A sample of the Teams summary recommendation sheet is shown here.
264 of 302

Teams Final Summary recommendation A sample form
System:
Team:.
1. Teams BIC for this system or part: Trade-Offs, if any ..
2. Other BIC ideas or opportunities that still deserve analysis or R& D ?....................
3. List all the potential BIC ideas & opportunities to slash cost covering all the 6 major
areas of team VE / VA tear-down Benchmarking exercise. Benefits can be broken
down under each or groups of the above 6 areas for better clarification & future ref.
4. Future (next 2 3 yrs short term & 3-5 yrs long-term) potential opportunities including
stretch ideas, technology breakthrough and R&D projects also be identified. Potential
future suppliers involvement / outsourcing of project development can also be done
5. Quantify all the BIC recommendations broken down into the following, if need be:
-Labor savings
-Material savings
-Overhead savings
-Cost of Quality issues
-Tooling & Equipment $
-Other issues & Impact
6. Design proposals, concept sketches, photographs, supplier quotes or documentation

of useful would help support and provide backup data for team creditability
265 of 302
Sub-System:
Team Champion.
Date:.
Team Scribe:

Ground Rules for Competitive Benchmarking

Strategy:
1.
No criticism allowing during session
2.
A peer group is usually best. Never have high-level management and their
employees participate and are part of the team. The objective here is to
avoid intimidation
3.
No idea is too small or too big. Every possible ideas need to be flushed out
4.
Quantity is desired, The more ideas the more likelihood at least one
outstanding item
5.
Teams of 6 to 9 best. Ideally, if it is cross-functional in make up it is even

better
6.
Combine ideas, Hitch-hike on others idea to explore even a better one, if

possible
7.
Need to stretch your imagination and creativity for outside-the-box

thinking for ideas
8.
Learn to listen first before being heard of your input. Respect others
opinions and ideas
266 of 302

Ground Rules for Competitive Benchmarking Strategy:
9.
Develop a can do attitude; Be open-mindedness to analyze ideas without

prejudice
10.
Record suggestions, ideas & input with proper documentation & reasons
used for each
11.
Do not start the final Pugh evaluation during benchmarking. Conduct this
separately.
12.
Follow the guidelines, tips and creativity disciplines to come up with B.I.C.
design ideas
13.
Fill in the information of the Benchmarking worksheets one attribute sheet

at a time.
14.
One best breakthrough idea may not always be feasible; it could be a

combination, Piggy back of an existing one, best of all the worlds concept
or an incremental type Idea!
15.
Goal here is to synergize, combine integrate and maximize the

benefits. Make sure that all the required information, data and background
is ready for team analysis.
267 of 302

Workshop, Documentation, Analysis, Conclusions and

Final Design:
1.
Use the forms provided for documenting of all the information from the teams
2.
The information should be legibly written with appropriate comments,

background supporting facts / ideas / technical or financial data, identified for
future reference
3.
In the comment columns provided, state the rationale used for teams
conclusions
4.
Factual supporting information: Cost estimates, Total projected investment in

new equipment / upgrades to existing one, tooling $ and other capital $ etc
should be documented with payback ROI (return on Investment) justification
with creditability be provided for each idea for top management approval
268 of 302

Team Presentation of Final Design and Recommendation /

Rationale :
Use the forms provided for this purpose and fill-in all the required information
Select a leader among your team members to lead, synergize the discussion
and to help facilitate a good team work and participative cultural environment
(very important for the process) to facilitate the best unbiased and objective
presentation. Suppliers & selected customer can participate in this meeting
1. Systematically follow the steps: Complete the ratings (+, - & s), circle all the
+s, pick the best 2 or 3 products (scored the highest +s).
2. Look for other +s elsewhere. Team brainstorm for a consensus on developing
the ideal strategy to integrate the best of all the worlds-B.I.C. product strategy
3. Complete the Final Design Recommendation, document the team rationale
and justification background used for recommending the B.I.C. idea / concept
269 of 302

Team Presentation: Final Design & Recommendation
Enjoy the workshop exercises, team interaction experience in the next class and have
some good fun presenting your teams presentations!
Lean Design Challenge, Stretch Ideas & Supplier Partnership:
1. In the real world, there will be similar type of VA / VE benchmarking workshop sessions
at the tier 1 & 2 supplier locations, who will come to the OEMs workshops to make
their individual presentations (usually one supplier at a time because of competitive
environment between the supplier community)
2. OEM Teams should try to evaluate and attempt to integrate those suppliers input and
ideas in developing futuristic and total system concepts including exploring the cost
effectiveness of suppliers delivering the systems or sub systems at the OEM plant
location -JIT, line set to sequence with no inventory
3. Remember!- One of the goal of product development is Lean design and Mfg concepts,
providing the optimum functionality, performance, total value and customer satisfaction
at the lowest cost possible, better than the competitors.
4. The strategy of this balancing act, explained above starts right from day one of new
product development. The workshop exercise that we have started to-day is just a
beginning of a long, exciting and interesting road map for new product and process
development that we will all look forward to be covering in the next 3 classes.
270 of 302

Team Presentation of Final Design and

Recommendation / Rationale :
1.
Use the forms provided for this purpose and fill-in all the required information
Select a leader among your team members to lead the discussion & for
presentation
Complete the Final Design Recommendation, Rationale and justification used
for the idea
Enjoy the workshop exercise and have fun!
2.
3.
4.

1.
2.
271 of 302
Lean Design Challenge, Stretch Ideas & Supplier Partnership:

Team should try to attempt for developing futuristic and stretch ideas, if
possible
Learn to apply all the knowledge and techniques learned to arrive at team
conclusions
Section VIII
WCNPD The Human Element
A Climate for Performance
272 of 302

Creativity, Innovation, Drive and Brainstorming
Creativity, Innovation, Drive and Brainstorming: Background

Creativity is a gift everyone has, but few use. Why is it not used? Some people
fail to realize they can be creative. Others do not see the need for it and do not
feel it is worth the effort to work on improving their creative ability. Unfortunately
these people do not realize the meaning and significance of creativity.
Most of our personal accomplishments in life depend on our creative skills. It is

an ability we cannot do without, if we wish to improve those things that surround
us and make up the world.
Creativity can be ours, we need only to reach out and grab it.
273 of 302

Creativity, Innovation, Drive and Brainstorming
Creativity techniques 3 As.
There are many techniques to help to improve your ability.

You must motivate yourself to make the effort to improve your
creativity.
Successful creativity requires three ingredients, which I call the 3 As:
274 of 302
Awareness Input and Available knowledge gathered and acquired

over a lifetime
Attitude Desire Inner need to do something, motivation
Action Out put Result

Blast, Create and Refine 3 Phases of the process for Creativity:
Phase 1: Blast- This requires defining the basic function of the product or segment of
the product under study. Next blast that portion of the product out of the problem so it
can be clearly identified. This means identify the basic function, the one that most clearly
defines the requirement and offers an opportunity for many creative ideas.
Phase 2: Create- The second phase is to develop ideas to satisfy the basic function and
select one that appear to best satisfy the basic requirement, ask a series of constructive
questions. The questions are as follows:
What is the lowest-cost way to satisfy the basic function?

Will this idea satisfy the requirement?

If the answer is no, ask,-What has to be done to make the idea work or sell?
Alternatives are developed and the same question asked of each alternative
until a satisfactory solution is achieved. Make no attempt to evaluate
solutions at this time.
Phase 3: Refine- The refine phase of the technique is to take what appear to be the best
alternatives and refine them to a final recommendation. This will involve preliminary cost
estimates and a review of implementation requirements to meet product cost, delivery,
and manufacturing requirements.
275 of 302

Respect for People:

Build relationship
Value differences
Balance life
Keep always an open mind
Use teamwork
Customer Focus:

Listen to the customer

Exceed the customers expectation better than the competition
Understand the customers problem to develop the best solution
Relentless Pursuit of Quality in All we Do:

276 of 302
Demand quality in all products, services and processes

Promote continuous improvement


Speed, Simplicity, Agility:

Act with urgency

Work effectively and efficiently
Demonstrate adaptability and sound judgment
Innovation:
Change the status quo
Be creative
Have a passion for learning
Accountability:
Take ownership
Act with integrity
Drive for results
Communication:
Listen
Walk the talk
Communicate openly
277 of 302
Section IX
LPD Management Systems
A Tool Box For Enhancement for
New Product Development Strategy
Design for Assembly & Manufacturability DFMA Principles
Poka -Yoke Improving Quality by Prevention An Overview
Process Capability- How it Impacts Product Cost
FMEA Failure Modes and Effects Analysis - A brief look
278 of 302

Design for Assembly & Manufacturability Principles &

Examples
279 of 302
To successfully design a product which can be manufactured cost

effectively and brought to the market in a timely fashion demands that
industry establish a closer link between product engineering,
manufacturing and quality functions.
More specifically, the people who design the new products and
processes must collaborate with those who make the design a reality.
The first step towards this goal is implementing a design for

manufacturability and automation (DFM / A) methodology. Use of basic
DFM / A guidelines and assessment tool can result in improved product
quality, reduction of parts inventory, fewer engineering changes, and a
shorter, less costly, production cycle.
Use of the DFA guidelines helps minimize cost of assembly within

constraints imposed by other design requirements. The primary
objectives of DFA are to minimize assembly cost by:

Design for Assembly & Manufacturability Principles &

Examples
Reducing the number of parts to be assembled.
Ensuring that the remaining parts are easy to assemble.
1.
2.
Companies with widespread use of the DFA universally report the

following important results:

280 of 302
A reduction in the number of component parts & in costs, both direct

and indirect
Shortening of assembly time and reduction in errors (mistake-proof
ness)
Broadening of technical options for mechanization and automation
A dramatic reduction in assembly process complexity
Increased cooperation between design, manufacturing & quality
organizations.

DFM Guidelines

Design for a Minimum number of Parts

Develop a Modular Design (Family of parts and assemblies)
Minimize Part Variations (Standardization wherever feasible)
Design Parts to be Multi-Functional; Multi-Use; Combination of parts &
functions
Design Parts for Handling and Presentation / Orientation for ease of
assembly
Evaluate Assembly Methods & optimize design to Suit Assembly
Methodology
Avoid fasteners, if possible. Select fastener for ease of Assembly /
disassembly
Design for vertical (top down) assembly orientation & ergonomics
consideration
Eliminate or Simplify Adjustments
Design for ease of diagnostics, Accessibility (for tools) and Serviceability
Examples of DFA Refer to the handout for details

281 of 302

Poka-Yoke-Improving Quality by Prevention A Review
Poka-Yoke is a commonsense approach or technique for avoiding simple human error

at work.
Many things can go wrong in the complex manufacturing environment of the workplace.
Every day there are opportunities to make mistakes that will result in defective
products. Defects are wasteful, and if they are not discovered, they disappoint the
customers expectation of quality, not to mention about the cost (loss to the company).
To become a world-class competitor, a company must adopt not only a philosophy of

Poka-Yoke, but a practice of producing zero-defects. The principles used under PokaYoke are generally simple concepts for achieving this goal.
From a product design / development point of view, the designers must collaborate with
the manufacturing and quality personnel to include features and built-in designs to
make the product 100% mistake-proof, under all manufacturing conditions. We all know
prevention is better than cure and that philosophy is what Poka-Yoke is all about.
282 of 302

There are Different Kinds of Errors

Almost all defects are caused by human errors. However, there are at least ten kinds
of human errors for a quick understanding and reference.

Forgetfulness
Errors due to misunderstanding, Errors in identification
Errors made by amateurs, Willful errors, Inadvertent errors
(absentmindedness)
Errors due to slowness (reacting to an emergency situation)
Errors due to lack of standards (no instruction or work standards)
Surprise errors (equipment or tool runs or behaves differently than
expected)
Intentional errors (People make mistakes deliberately)
Mistakes happen for many reasons, but almost all can be prevented if we take the time
to identify when and why they happen and then take steps to prevent them by using
poka-yoke methods and the safeguards necessary for implementing it.
283 of 302

Process Capability How it Impacts Product Cost
284 of 302
Let us begin to put words to our effort for defining variability.

Manufacturing variability must be controlled to a level that ensures both
customer satisfaction and cost-optimized production.
If we have done a good job in our lean design process, the customer
satisfaction portion of this mandate is neatly built-into our product
specifications, test, and inspection guidelines, and quality assurance
procedures. But do we have the same assurance that our product can
be produced to those standards and quality at optimal cost?
Any product can be produced to essentially to any standards, provided

that money is no object. How can quality be guaranteed while still
aggressively pursuing profits? In other words, can we control quality on
a sensible budget?

Process Capability How it Impact Product Cost
285 of 302
The new product development team must specify a design tolerance for
each critical-to quality attribute. Let us assume that the product design has
been made robust (tolerances are made as accommodating as possible of
manufacturing variations) as possible.
How do the manufacturing folks respond to these specified design

tolerances? They consider various process alternatives and select the best
option, but how do they make that selection? If they go with the very best
and most accurate process, it will cost them a fortune to make the part and
a cheap-and-dirty process cant make the part to print and meet tolerances.
There must be a happy medium, in which the yield of acceptable product is

balanced with the cost of equipment, training and so on. A tradeoff of defect
cost versus process cost.
We must address this tradeoff during the New Product Development stage,
during the detail part design.

Figure 67
286 of 302

Figure 68
287 of 302
Figure 64

Design
Production
Design for Testability
Use-Life
Design for Reliability
Design for Manufacturing
Design for Maintenance/ Service
Design for Ergonomics
Design for Ergonomics
Design for Environment
Product Lifecycle
288 of 302
Figure
65A
WCNPD
289 of 302
- Value Analysis Tear Down A New process
Figure 65B
290 of 302

Figure 66A
291 of 302
Figure
66B
WCNPD
292 of 302
- Value Analysis Tear Down A New process

Executive Summary Product Leadership, Creation & Winning:
New Product Development is a War and Winning is Everything, where victory
ultimately decides the fate of your business and competitiveness

Following are the cornerstones for successful product innovation for

The Lean Product Development Implementation Strategy
A clearly articulated new product strategy for your business and systematic
new product process to successfully drive the project to market place.

Commitment and strategy to Implement a high-quality product development process discipline,

Commit the required resources and Foster innovation
in your organization.
SWOT - (Strength, Weakness, Opportunity & Threats)
Commitment of SWOT (Strength, Weakness, Opportunity & Threats)
strategy, Implement a high-quality new product process discipline,
Commit the resources and Foster innovation in your organization
Understanding What separates Winners from Losers; Just do it!!
Thank You !!- Each & every one of you for your excellent participation, enthusiasm and team
work and good learning. I do hope you will be able to implement the techniques and strategies
learned in the class at your workplace.
293 of 302
Figure 69
294 of 302

We could tighten the variability distribution of the process (i.e. the ability of
the process to hold tolerances), or we could loosen the tolerances of the
design. Either action would tend to reduce the number of units that fall into
the scrap regions of the distribution.
Manufacturing engineers recognize that extreme precision is not what is

critical to cost-effective, high-quality production. What is essential is that each
process be capable, meaning that the ability of the process to hold tolerances
has been properly matched to the specified tolerance range of the product
design.
This process capability can be represented by a statistical metric called the

Process Capability Ratio (Cp), as shown in Figure 69. Cp is the ratio of the
total tolerance band of a given specification (i.e. the upper spec limit minus
the lower spec limit), to six times the standard deviation of the process
variability distribution. The standard deviation is a measure of the width of a
statistical distribution.
295 of 302

So Cp, is really just a measure of the width of the variability distribution as

compared to the acceptance band of the product. Cp = 1 means, only
0.3% (one in three hundred parts would be defective) of units produced
will be out of tolerance.
If a moderately complex part assembly has, say 50 process steps, the

yield-loss will be multiplicative (the % of finished products that would pass
through your factory without a defect would be roughly 86%) in nature.
296 of 302
Today, many industry sectors (mostly automotive industry) are

demanding Zero defects!
To survive, firms have two choices: either significantly improve the

process capabilities (optimum product tolerances to match equipment) or
do a whole lot of expensive testing, sorting and inspection.
For New Product Development Strategy, the message is: Maximize the
allowable tolerance, work with manufacturing and quality personnel to
balance the strategy of part tolerance for the best consistent quality at
the least cost feasible to meet customer requirements.

FMEA Failure Modes & Effects Analysis:
FMEA is essentially a design review process that focuses on proactive

identifications and mitigation of product risks. Its most frequent application is as a
method of ensuring product safety where concerns of liability and lawsuits are
factors to be aware of.
Typically this is how a FMEA review is executed. The core design team and other
smart special product background people gather for a product FMEA meeting. The
product is reviewed in some logical and systematic way with each design element
being the subject of a brief discussion.
The goal of these brainstorming sessions is to list as many potential failure modes
as possible for each element. A failure mode is simply a way in which the product
(or process, as the case may be) could fail to perform its function properly, reliably
and safely.
For example, a possible failure mode for a table fan would be wires short. Nor all
failure modes need to be the fault of the product; incorrect use of the product can
also result in a failure, and may jeopardize customers satisfaction and safety if no
corrective action is taken during the product design and or development stage.
297 of 302
Figure 70
298 of 302

Figure 71
299 of 302

Figure 72
300 of 302
Section X
LPD - Design For Excellency Strategy
A Checklist for Lean Strategy For New Product Development

Final Thoughts, Questions and Answers on the workshop material
Discuss Participants individual company situations & solutions
Real-World Applications, Culture, Communications & Team Work
Summary Review of the Class and Wrap-Up
301 of 302

Checklist for Lean Product Design / Development Excellence:
Design for Meeting or Exceeding Customers value
Design for Achieving the Target Cost & Profitability
Design for Manufacturability and Assembly
Design for built-in Quality
Design for the Best Value at the Lowest Cost
Design for Testability
Design for Reliability
Design for Maintenance / Service / Diagnostics
Design for Ergonomics & Tools
Design for Safety
Design for Environment
302 of 302

The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

The Lean Prod Dev Implment Stra-FINAL-Part I-A 6-12-06

Hochgeladen von

Copyright:

Verfügbare Formate

The Lean Product Development

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Ground Rules and Basic Tools

Recognize the 3 distinct dimensions of Product Development

The Magic of Toyota Motor Co

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Ground Rules and Basic tools:

A good first step toward getting a handle on the complex and

The three distinct dimensions of new product development, focusing on

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Ground Rules and Basic tools:

Market Selling Price Must be maximized, requiring creativity,

Cost of Manufacturing - Cost must be driven ever downward; achieve

Time to Product Launching Must be minimized, both to stay ahead

Achieving optimal profitability demands that all three aspects be

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Ground Rules and Basic tools:

Rule 2- Product Development must be executed by a cross-functional team, at

In my experience, a large % of the cost of most products is not intrinsically

The Methods of Five Whys

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Some Tools to go with the Rules :

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Some Tools to go with the Rules :

Questions like, Have we missed any opportunities to reuse previous

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

Some Tools to go with the Rules :

Six Sigma Blind Deployment:

This is an excellent methodology for the manufacturing, quality and

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

The Magic of Toyota Why it is 4 Times more

Compared to most of the global automotive manufacturers, Toyota

It is a totally different, dedicated and in a way, culturally driven performance

- A fundamental paradigm shift in how your company approaches product

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - Design Excellency Strategy An Introduction

The Magic of Toyota-Why it is 4 Times more Productive?

What is product development? A useful definition is that it is the collective activities

In 25 years product development has changed significantly and added a lot of

But complexity introduces numerous problems, like communication breakdowns,

World Class New Product Development- A presentation by Total Engineering Solutions

Product Development for the Lean Enterprise

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - The Business of Lean Design

Product Development for the Lean Enterprise

In principle, Lean Design is similar to the concept of Lean Manufacturing. Systematic

World Class New Product Development- A presentation by Total Engineering Solutions

WCNPD - The Business of Lean Design

What s Lean Mean ?

The goal of Lean is to employ commonsense methods and tools

Another element that is associated with Lean is the concept of total

Every product is the solution to a problem. The more important the

Value does not always demand complexity, nor does it implies

WCNPD - The Business of Lean Design

The Five Principles of Lean Design

Principle # 1- Precisely defines the customers problem and identifies the