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In this field study, conducted at a leading avionics guidance systems manufacturer, we gathered primary data on time and cost performance of both the design and manufacturing phases of new product development (NPD). We modeled the impact of the management levers relating to oversight, the intensity of design specialization, and the level of interaction with the customer. The study highlights the necessity of leveraging the interdependencies between the design and manufacturing phases in NPD.
Key words: time to market; new product development; project management; cost and time trade-offs; customer involvement; financial metrics; NPD
History: Accepted by Teck H. Ho and Christopher S. Tang, special issue editors; received June 2001. This paper was with the authors 13 months for 2 revisions.
1. Introduction
New product development (NPD) allows firms to evolve with their marketing and technical environments (Brown and Eisenhardt 1995, Clark and Fujimoto 1991). Several articles in the academic literature (Brown and Eisenhardt 1995, Cohen et al. 2000, Eppinger 2001, Krishnan and Ulrich 2001, Lee et al. 2000, Novak and Eppinger 2001), as well as the popular press (e.g., Business Week 1992) have focused on various methods for effective NPD. It is widely accepted in both the marketing literature (e.g., Urban and Hauser 1993) and the operations literature (e.g., Hayes et al. 1988) that NPD can be considered to take place in multiple steps. In this field study, we consider the entire NPD process to comprise two phases: design and manufacturing (Pahl and Beitz 1988).
The design phase potentially impacts downstream manufacturing and has been postulated to affect both the cost and lead time. In the operations literature (Desai et al. 2001, Fisher 1997) it has been pointed out that appropriate investments in design lower unit cost. Several studies have suggested that activities in the design phase often determine approximately 80% of manufacturing cost (Miller 1988, Ullman 1992). Ulrich and Pearson (1998) state "Because the design activity specifies the materials, part production processes and assembly requirements of a product, product design is one of the determining factors of manufacturing cost." Several works have also suggested that design can potentially affect the manufacturing and assembly lead times downstream, with extensive literature on design for assembly (DFA) or design for manufacturing (DFM) (Coleman 1988, Miller 1988,...