There are massive economic and political pressures for manufacturing companies (such as in the G8 countries) to which they are forced to respond. The combined pressures and responses are radically transforming the industry. The pressures include high-cost labor pools, and costly raw materials (e.g. steel and petroleum). The responses include internal consolidation, outsourcing to global product development, and assembly flexibility. The companies must change their operations to suit these.
Studies on manufacturing product development have been done that give a picture of the present situation in the industry along with a 5-year forecast. The studies include key areas such as business philosophy, product design tools, communication types and engineering efficiency. A definitive response flagged in the study is a climb in Global Product Development (GPD), or outsourcing to global suppliers.
GPD can be defined as the maximization of financial and operational productivity of the product development process by distributing product development tasks across different regions of the globe to efficiently match value-addition and cost. Part of product development includes marketing activities to recognize and record the needs of the customer.
Within product development, a critical part covers activities in engineering for the conceptualization, design, analysis and refinement of new product concepts and ideas; activities for the planning and documentation of manufacturing, operations and maintenance processes; to sustenance activities for the making of ongoing product updates, changes and refinements.
The studies done show that companies which implement GPD strategies gain substantial financial and operational benefits. Savings around 0.5% of company revenue and 10% of the product development budget can accrue. Other operational enhancements including 24x7 engineering and the generation of specialized skill capacity by reinvesting cost savings are feasible.
Leading OEM's have embraced this model, and have restructured their global design and engineering operations to better leverage worldwide resources, accelerate product development and, ultimately, reduce expenses. In order to proceed with the implementation of a GPD Strategy, it is necessary to analyze product development activities. To do this, a company must first segregate higher value-add activities from lower value-add activities and identify the degree to which these activities are portable.
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