After reading this article you will learn about:- 1. Definition and Concept of Product Planning 2. Need For Product Planning 3. Constituents.
Definition and Concept of Product Planning:
Product planning may be defined as ― Evaluation of the range, mix, specification and pricing of existing and new products in relation to present and future market requirements and competition; planning of product range, mix, specification and pricing to satisfy company objectives; and specifying the research, design and development support required.
From the above definition it is clear that both existing and potential products must be included in the product planning activity, and it follows that the activity itself should deal with the proper balance between old and new products in the product-mix in so far as the future course of the business is concerned.
The evaluation and planning activities referred to, and particularly the emphasis on satisfying the company’s objectives, implies the existence of an over-all corporate plan which provides a framework within which these activities may take place.
Within the overall corporate plan as set down by senior management, the product plan usually represents the activity which links the company with its market, and so is most directly concerned with the forward development of the company as a whole.
This is not to say that product planning is the prerogative of top management, indeed it is a function which is most usually discharged by line management, but rather to argue that successful product planning can only occur within a clear frame work of goals and objectives laid down by the board of directors. Further, senior management must ensure direct lines of communication between itself and the product planning function. Product planning serves as an input to process design.
Need For Product Planning:
The product planning stems from the identification of a need for a product.
Need may evolve from several sources:
(a) Needs Determined from Current Deficiencies:
This area primarily relates to those needs which are stimulated as a result of some problem or deficiency occurring in a product today. The resolution is often achievable through the development, production and use of a new product or process.
(b) Needs Determined from Anticipated Deficiencies:
Through the prediction of societal, political, ecological, technological, and/or economic trends, anticipated needs can often be determined. For example, we suspect that economic constraints in the future will likely prohibit the use of certain systems currently in use. As a result, a replacement system that exhibits a lower overall life-cycle cost is needed to accomplish the designated function(s).
Constituents of Product Planning:
The product planning function often includes:
1. Marketing and Marketing analysis.
2. The performance of feasibility studies, and
3. Advanced planning.
1. Marketing and Marketing Analysis:
The aspect of marketing can assume different proportions, depending upon the nature of product. If the product is relatively simple, the marketing function may not require direct engineering involvement except in the preparation of technical material or specifications which support the product in its promotion.
On the other’ hand, for more complex products the marketing effort involves a team approach, constituting the nontechnical sales and promotional orientation, with the engineer in a role of technical support to answer questions concerning product performance features, reliability and effectiveness characteristics, maintenance requirements and so on. Once the need for product planning is established, it is necessary to determine whether the technology currently exists to satisfy the need, and if not, when it will become available.
In this instance, technology refers to the technical methodology and/or techniques required for achieving a practical purpose. This is basically accomplished through technology review (knowledge of what is currently available) and technological forecasting (knowledge of what is likely to be available in future e.g., future characteristics of useful machines, procedures or techniques).
Given the availability of the proper technology, the producer of the prospective system will complete a preliminary analysis of the market potential and the market share. The objective is to view the system over its projected life cycle on the basis of economic considerations. Gross estimates of revenues from sales and costs are made with the intent of assessing whether or not the venture is worthwhile (i.e., should one pursue the project further).
2. Feasibility Study:
The purpose of the feasibility study is to extend the preliminary market analysis with the intent of arriving at a preferred system configuration that the producer is willing to propose in response to an identified need.
The feasibility study includes:
(i) A detailed need analysis (i.e., definition of system operation and maintenance support requirements
(ii) Identification of alternative configurations,
(iii) Screening and evaluation of the available alternatives and
(iv) Selection of a preferred approach.
The output of the feasibility study constitutes a proposal covering the technical characteristics of the preferred system configuration. This information, combined with advanced planning data is reviewed to determine whether the producer should proceed further with the system development. The feasibility study constitutes another significant step in the decision-making process, thus influencing future product activities, particularly in case of large-scale systems.
System operational concept includes the following information:
(a) Identification of prime mission of the system.
(b) Definition of the opera ting characteristics of the system (e.g., size, weight, accuracy, output rate, capacity etc.).
(c) Identification of the quantity of equipment, personnel facilities etc.
(d) Anticipated time that the system will be in operational use.
(e) Anticipated usage of the system and its elements (e.g., hours of operation per day, on -off sequences, operational cycles per month).
(f) Given that the system will perform, how effective or efficient it is. Effectiveness factors considered may be dependability, logistic support effectiveness, mean time between maintenance (MTBM), failure rate (A), maintenance down time (MDT), facility utilization, personnel efficiency and so on.
(g) Definition of environment in which the system is expected to operate (e.g., temperature, humidity, arctic, tropics, mountainous or flat terrain, airborne, ground, ship board).
System maintenance concept:
(a) The maintenance concept responds to the question: How does the producer envision that the system will be supported through its life cycle? It delineates levels of maintenance support, repair policies, effectiveness measures (e.g., maintenance manpower, time and cost restraints) and serves several purposes.
(b) It provides a baseline for the establishment of supportability requirements (e.g., reliability, maintainability and human factors characteristics) in system/equipment design.
(c) It provides the basis for the establishment of requirements for total logistic support. Given an assumed design configuration of the prime mission equipment, it is then necessary to consider how it should be supported. The maintenance concept supplemented by logistic support analysis, leads to the identification of maintenance tasks, task frequencies and times, maintenance personnel quantities and skill levels, training needs, test and support equipment, supply support (e.g., spare/repair parts), facilities and data. These support requirements are evaluated and integrated with the prime mission equipment and associated software to form the total system.
(d) The maintenance concept evolves from the deployment profile. Levels of maintenance include organizational maintenance, intermediate maintenance and depot maintenance.
Organizational maintenance is performed at the operational site by the company personnel using the equipment (i.e., at consumer location). Maintenance at this level is normally limited to periodic checks of equipment performance, visual inspections, cleaning of equipment, some servicing, external adjustments and the removal and replacement of some components.
Intermediate maintenance is performed by mobile, semi-mobile, or fixed specialized organizations and installations, again at consumer location.
At this level, end items may be repaired by the removal and replacement of major modules, assemblies or piece parts.
Scheduled maintenance requiring equipment disassembly may also be accomplished.
Intermediate maintenance person are usually more skilled and better equipped than those at the organizational level and are responsible for performing more detailed maintenance.
Depot maintenance may be at producer’s factory. It is the highest type of maintenance and supports the accomplishment of tasks above and beyond the capabilities available at the intermediate level.
The depot is a specialized repair facility supporting a number of systems / equipment, may be in producer’s plant. Complex and bulky equipment, large quantities of spares, environmental control provisions, and so on, can be provided if required.
The depot level of maintenance includes the complete overhauling, rebuilding, and calibration of equipment as well as the performance of highly complex maintenance actions. The results of feasibility study are generally presented in the form of a technical proposal to management.
The information prepared should include the following:
(a) A definition of the functional configuration (e.g., functional block diagram) and physical characteristics of the system.
(b) A description of the system operational and maintenance support requirements.
This proposal serves as the engineering technical baseline to support management decisions made throughout the product planning process.
3. Advanced Product Planning:
(A) Product system evaluation, selection and justification:
The combined results of the preliminary market analysis and the feasibility study aid in justifying the product in terms of need and technical approach. However, the results of these efforts must be reviewed further from the business standpoint. The selected product must be evaluated in terms of life-cycle cost. Life-cycle cost includes all future costs associated with planning, R&D, investment (production and/or construction), operation and support and system phase-out.
These costs are estimated and projected by year. Subsequently, a product pricing scheme must be established, with the objective of maximizing the return on investment. With the establishment of pricing data, an estimate of the market share, and a knowledge of the time of need, revenues can be projected by year and compared with the anticipated costs. When evaluating a project representing a particular product configuration, one should select evaluation criterion factors that cover all major considerations necessary to justify the selection decision.
A typical listing of such factors is given below:
(B) Product specifications and plans:
With the initial product configuration fairly well established, advanced planning continues through the development of formal specifications and planning documentation. Specifications basically cover the technical design requirements for the product and planning documentation includes all management-related activity. The combination of specifications and plans along with the associated cost data constitute the proposal for all subsequent research, design, production, evaluation and test, product use and logistic support activity.
Once these specifications and plans have been reviewed and accepted, they will be considered as the basis for all future program engineering and management decisions.
1. Specifications may be classified as:
(i) System specification:
States the technical, operational, and support requirements for a product. Further it allocates these requirements to functional areas and defines the various functional-area interfaces.
(ii) Development specification:
States the technical requirements for any item below the top system level where R & D (to include design) is required. Each development specification must include the performance, effectiveness and support characteristics that are required in evolving from preliminary design to detail design and production.
(iii) Procurement specification:
States the technical requirements below the system level for any item that is currently in the inventory and procured off-the-shelf.
(iv) Process specification:
Covers a service (e.g., heat-treating, plating, welding, packing etc.,) that is performed on any product or material.
(v) Material specification:
Covers the raw material, mixtures (e.g., paints, chemicals etc.,) and/ or semi fabricated material (e.g., electrical cable, piping) that are used in the fabrication of a product.
The preparation of product specifications is an engineering function.
2. Planning documentation:
i. The top-level program management plan forms the basis for all lower-level plans.
ii. Individual supporting plans will be prepared to cover the various phases of product life-cycle activity and will include organizational structure and responsibilities, program functions and tasks, schedules, processes and procedures, and cost projections.
iii. All plans should (if at all possible) be prepared by those responsible to execute the work involved, and must be consistent with available resources and based on a realistic schedule. In addition, there should be provisions for contingency plans for coping with the unexpected.
(C) Product acquisition Plan:
Acquisition refers to the process of acquiring a product or system commencing with the identification of a need and extending through the delivery of the product for consumer use. It may involve research, design, production, and some test and evaluation activities. The material presented under product acquisition plan must cover.
(i) Definition of tasks:
Detailed tasks are identified to cover all acquisition functions.
(ii) Scheduling of tasks:
Using a bar chart, PERT, Gantt chart, line of balance etc.
Line of balance (LOB) is a technique that complements Gantt chart in determining production status. While the Gantt chart technique primarily relates information on the effective and efficient utilization of resources (e.g., machine loading, man loading), LOB is more product oriented. LOB is not directly concerned with the resources expended but is utilized in determining production progress in terms of per cent of task completion. Major bottlenecks in the production process are emphasized.
(iii) Organisation of tasks:
The events and activities discussed above constitute tasks that are organised into work packages. The identified work packages are evaluated from the stand point of task type, complexity, and required completion schedule. In addition, estimated costs are established for each activity (as when using PERT) and are then related to work packages.
(iv) Cost/schedule/performance/effectiveness measurement and control:
Initial target objectives are established for schedule, cost performance (e.g., range, accuracy, capacity, size), and effectiveness factors (e.g., availability, reliability, supportability). Such objectives may take the form of single discrete values, a range of values with both upper and lower limits, or a set of maximum and minimum criteria.
With these requirements initially established, it is now essential that a MIS (Management Information System) be developed to report data that enables the measurement and control of certain selected factors as the program progresses. This is necessary to provide the assurance that the ongoing system development process is producing the desired results.
(v) Corrective action:
The data from the management information system should readily point out existing problem areas as well as potential areas where problems are likely to occur if program operations continue as originally planned. In order to deal with such contingencies, planning should be initiated to establish a corrective action procedure.
(D) Product evaluation plan:
Requirements for the product in terms of performance and effectiveness (e.g., range, accuracy, capacity, power, availability, reliability, maintainability, support-ability) must be evaluated to ensure that these have been adequately accomplished. Requirements must reflect the need, and when established one must intuitively consider the methods by which these requirements will be verified.
The preliminary product evaluation plan should include:
1. Test and evaluation requirements.
2. Categories of test and evaluation.
3. Test preparation phase.
4. Test and evaluation procedure.
5. Data collection, analysis and corrective action methods.
6. System re-work, modifications and retest procedures.
7. Test and evaluation reporting.
(E) Product use and logistic support plan:
Product use and distribution planning:
The product marketing and sales strategy for those items in the producer’s inventory not yet sold. The deployment and distribution of the product to designated consumer locations after production. The recommended procedures for product operation.
Logistic support planning:
A detailed maintenance plan which describes proposed echelons or levels of maintenance and recommended functions to be performed at each echelon. A plan for the acquisition of test and support equipment and/or handling equipment. A supply support plan to cover the acquisition of spares and repair parts. A transportation and handling plan to cover the packing, the use of containers and the shipment of material.
A technical data plan to include system maintenance procedures (i.e., servicing, inspection, calibration and overhaul instructions). A personnel and training plan to cover system operator training, maintenance training and training equipment (i.e., aids, devices, simulators etc.).
(F) Product (or system) proposal:
Product proposal will represent a recommended course of action based on the results of the technical feasibility study and the advanced product planning.
Proposals may be classified as follows:
1. Internal proposal:
A proposal generated within an industrial firm (in response to an identified need) and directed to the management of the firm for approval to accomplish a defined scope of work.
2. External proposal:
A proposal generated within a firm (approved by its management) and directed to an outside agency e.g., another firm or government organization.
Although both types of proposals have a great deal in common, the external proposal is usually broader in scope and is more significant in industry since the immediate objective is to win contracts, bring in funding, and make a profit.
i. Proposal strategy:
Strategy in this instance refers to the type and amount of effort that should be applied in generating the proposal and in establishing a bidding approach. Proposal preparation often requires the expenditure of a great deal of time and money.
Thus it is important to thoroughly evaluate the probability of success along with associated risks. This is accompanied and supported by the results of the market analysis, the feasibility study, and the planning accomplished up to this point. The prime question is whether to bid or not to bid.
ii. Proposal preparation:
Proposals are generally prepared by a team of specially selected individuals who represent marketing, engineering, research, production (e.g., manufacturing, quality control), purchasing, finance, accounting, contracts and ancillary services (e.g., technical editing, printing). The team will analyze the invitation for bid, assess the requirements, and the results will determine the depth of manpower coverage in each area.
During the proposal effort, each team member is responsible for defining the tasks in his area of responsibility, scheduling these tasks, and establishing the organizational approach proposed for task accomplishment. In addition, cost projections are prepared for each task and identified in terms of work packages and the work breakdown structure (WBS), which links objectives and tasks with resources and is an excellent management tool for program planning and budgeting.
iii. Proposal content:
The ultimate content of a solicited proposal will, of course, depend on the requirements included in the invitation for bid.
The proposal in its final form should generally contain the following information:
(a) Proposal title and outline.
(b) Introduction – Bidder to define the problem at hand and summarize the proposed approach to problem resolution.
(c) Summary of proposed effort – What is being offered and what are the costs involved.
(d) Technical requirements – Covers a definition of the proposed system in terms of all technical requirements.
(e) Management plan – The bidder’s management approach, relative to accomplishing the proposed effort, should be defined herein.
(f) Contractual and legal provisions – Contingencies that pertain to contract type, payment dates, warranties, liabilities, penalty etc.
(g) Supplemental information – any supporting data to help the bidder in winning a contract e.g., a statement of bidder’s financial status, a description of successful work accomplishment, a description of available facilities and resources, etc.
iv. Proposal review, evaluation and contract negotiation:
Upon receipt of a proposal from a bidding firm, the customer proceeds with the review and evaluation process.
If a single bidder is involved, the customer may review the proposal and negotiate directly with the bidder resulting in a mutually agreeable statement of work and price.
When competitive bidding occurs, the customer generally establishes an evaluation procedure directed toward selecting the best approach proposed.
Evaluation criteria may include technical characteristics (e.g., system effectiveness), management plan (e.g., resources available), total cost and supporting factors such as prior experience or past performance.
Once that a preferred bidder is selected on a technical and management basis, the customer and bidding firm will proceed toward negotiating a contract. Negotiation may not only become an extensive undertaking relative to the contract type established, but may also involve some haggling in the areas of scope and work and the proposed price/cost figures.