Streamline: Progressions in Product Compliance (Part 1 of 4)

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2 Chapter 1: Faster, Better, More Now Faced with adversity, resourceful manufacturers often find or create new ideas for improvement. Savvy manufacturers increasingly look at strategic product testing and certification to improve the new product development function and all processes associated with the entire product lifecycle. Most importantly, manufacturers are leveraging testing and certification capabilities to improve their bottom line. Time to Improve The current economic climate has hit the manufacturing sector hard. At this juncture, even healthy, well-run manufacturing organizations find themselves struggling against economic headwinds, searching for competitive advantage both now and in the recovery to come. Shrewd manufacturers focus on five key levers to improve their competitive positions: Productivity improvements: How can we increase the productivity of our processes front office through engineering and down to shop floor and shipping by removing all forms of waste (time, labor, movement, motion, effort, etc.) while sustaining or improving the safety of those processes? Cost reductions: Where do we lose money through scrap and rework of physical products or, less visibly but even more costly, lose innovation through the scrap and rework of ideas, knowledge and actions? Cash flow improvements: How can we free up cash to invest in the organization for growth instead of treading water to merely stay afloat (e.g., reducing escrows and premiums, better managing inventories to demand)? Customer value: What do our customers value? How do we incorporate those attributes into current and yet-to-be-launched products without harming productivity, costs and cash flow? Market differentiators: How can we make our products stand out in a difficult market? Can we promote, market and sell the unique customer value within 2

3 our current products, and then apply that knowledge to our next generation of products? Big Picture Improvement Most manufacturing organizations have at least some improvement activities underway. Yet too often these efforts focus narrowly on individual functions (e.g. modifying a production cell, applying a new design system to product development) or end-of-pipe metrics (e.g., an across-the-board staff reduction, capital investment freezes). It s not that these efforts won t achieve improvement at least in the short run but that the return on the improvement effort itself is never what it could be. These overly simple improvement approaches are frequently applied to new product development and research and design (R&D) processes. But, here too, these narrow approaches fail to encompass an overall value-stream perspective as recommended by lean manufacturing principles, and therefore don t fully plan for both short- and long-term impact: i.e., cradle-to-grave product development as it extends from an innovative idea through the manufacturing process and, ultimately, to the recycling or disposal of the end product. Few organizations have embraced product development as something more than mere invention but instead, as described by Allen Ward in Lean Product and Process Development, the creation of operational value streams that run from suppliers to plants and then out to customers. In this view, product development has value only if it enables operations to deliver better products to customers. i Indeed, a major reason that traditional approaches to improvement (productivity, cost reductions, cash flow, etc.) so often fail when applied to R&D and new product development processes is an inability to make the connections from process to process in a way that impact a company s entire product development value 3

4 stream. A critical point to make that connection and leverage improvements is strategic product testing and certification (see diagram). Strategic Testing and Certification Yet despite the broad potential of product testing and certification for improvements up and down the value stream (e.g., procurement, manufacturing, branding), it rarely receives executive attention. That s a problem because understanding the options and opportunities that strategic testing and certification offer can dramatically affect a company s bottom line through market positioning and pricing (gained from benchmarking and comparison testing), cost controls (gained from testing sourced components for price/performance levels), new country/market opportunities (gained from knowing how to design for multiple countries in advance), speed to market (gained from choosing a testing laboratory with a large 4

5 network, shorter queue time and greater responsiveness), revenue potential (gained from getting products to market sooner) and, finally, brand enhancement (gained by becoming a quality leader, performance leader and, ultimately, a market leader). Improved testing and certification services product safety testing (electrical/electronic, gas, building products), electromagnetic compatibility (EMC) testing, benchmark and performance testing can significantly improve product development value-stream functions, metrics and performance, including: R&D and product design: Codifying and disseminating design knowledge learned through testing, such as finding critical failure points that can lead to warranty reductions, allows manufacturers to improve product and process innovation, speed revisions, and increase R&D productivity. Sourcing: Testing helps to identify strengths and weaknesses within components and the materials in those products, which provides yet another check-and-balance for brand/reputation management. This information is also vital for evaluating supplier performance on quality and regulatory compliance; negotiating vendor agreements; and improving procurement (e.g., consolidating component SKUs by attribute as well as strongest vendor performance). Manufacturing: Testing and compliance activity is often viewed by manufacturing as an obstacle, damaging lead times as products sit, and making it difficult to efficiently schedule production and manage production assets. Yet a streamlined, predictable testing and compliance function can not only enable smooth production flow, but can also provide real-time information for manufacturing engineers to improve processes, such as 5

6 calibrating stamping presses and injection molding equipment or revising how products are handled in assembly minimizing product defects and potential breakdowns. Testing and certification: Improving the basic performance metrics of the testing function can optimize the overall product value stream. Turnaround time is affected not only by the skills of the laboratory, but by the strategic planning of testing services in general to take advantage of bundling time and cost savings, or syncing quality reporting with quality management systems to reduce cycle-time and costs and improve quality. Distribution: Getting products into distribution channels on schedule (and faster than competitors) is a huge differentiator, one often made possible by improving testing turnaround times. Being first to market dramatically increases the sales window for a product, adding days, weeks or months to a manufacturer s revenue stream vs. that of the competition. Speed to market is even more critical for global distribution, but requires planning and up-to-date knowledge of global testing standards and requirements, as well as the infrastructure to efficiently manage global certification processes. Marketing/branding: Manufacturers today are operating in an era of heightened product liability concerns, and, as such, demand bulletproof testing and certification to ensure product safety. But savvy executives know that state-of-the-art benchmark and performance testing also can improve a product and its brand image by highlighting unique features and attributes important to targeted groups of customers. Product lifecycle: Improved product design, sourcing, manufacturing, packaging, shipping and return/recycle ultimately means higher quality 6

7 products: e.g., safer products, fewer customer returns, lower product liability, and fewer warranty claims (allowing manufacturers to minimize warranty escrows). Then, too, improved product lifecycle performance also cuts costs, improves cash flow, and delivers increased value at a time when customers increasingly demand more value at lower costs. Improved performance of the testing and certification function is the key to optimizing improvements up and down the value stream. Are you getting these improvements out of your testing and compliance activities? Turn product testing and certification into a competitive advantage by: Making it an executive priority: Few value stream improvements yield such broad-based rewards as the testing and certification step, enabling both quick savings and long-term rewards realized through continuous improvement. Does your senior executive team view testing and certification as cost or a strategic opportunity? Assessing current testing and compliance activities: Have you benchmarked your testing capabilities? What s acceptable performance in your company may already lag behind new capabilities available to your industry. Quantifying testing and compliance performance: How would improved testing and certification performance impact your manufacturing processes and the corporate bottom line? Measuring the gap between your current testing functionality (costs, delays, quality) vs. the improved performance of new testing and compliance strategies can be an eye-opener and is a necessary first step to altering your product value streams and to increased profitability. 7

8 Capturing the benefits: Is your company ready to capture improvements that accompany improved testing and certification? Manufacturers need to evaluate, plan and develop the infrastructure to leverage the capabilities of strategic testing and certification (e.g., connecting information flows to quality assurance and distribution planning; building R&D feedback loops and processes; alerting financial planning and legal counsel to reduced risk exposure, etc.) and deliver improvements (productivity, cost reductions, etc.). Implementing with both short-term and long-term goals: Quick gains are possible simply by improving the outsourced testing and certification step (e.g., decreased turnaround times leading to faster market entry for products), but building a relationship with your testing provider and fully understanding its range of expertise state-of-art testing and compliance capabilities, bundled testing, global expertise, and data acceptance programs will enable you to improve in ways not yet imagined. Coming Soon: Chapter 2 - Product Value Streams About Intertek Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world. From auditing and inspection, to testing, quality assurance and certification, Intertek people are dedicated to adding value to customers products and processes, supporting their success in the global marketplace. Intertek has the expertise, resources and global reach to support its customers through its network of more than 1,000 laboratories and offices and 30,000 people in over 100 countries around the world. Intertek Group plc (LSE: ITRK) is listed on the London Stock Exchange and is a constituent of the FTSE 100 index. Visit: 8

9 This publication is copyright Intertek and may not be reproduced or transmitted in any form in whole or in part without the prior written permission of Intertek. While due care has been taken during the preparation of this document, Intertek cannot be held responsible for the accuracy of the information herein or for any consequence arising from it. Clients are encouraged to seek Intertek s current advice on their specific needs before acting upon any of the content. i Allen C. Ward, Lean Product and Process Development, Lean Enterprise Institute, Cambridge, Mass.,