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Posted By on 12/02/2017 in Category 1

The Supply Chain Impact on Product Development

The Supply Chain Impact on Product Development

The Supply Chain Impact on Product Development

 ON NOVEMBER 30, 2017Reading Time: 3 minutes

Developing a hardware product is full of challenges. The process of going from a concept to a finished product is filled with unknowns and takes a lot of time. It’s an iterative process of creating a design, building a prototype, and testing it, repeated a half-dozen times or more before getting it right.

It’s one thing to build a working prototype, but it’s much more difficult to mass produce a product efficiently and reliably so that it meets the customer’s expectations. Maybe that’s why VCs prefer software investments to hardware. But from my experience, there’s nothing more satisfying than creating physical objects that can be sold in the millions around the world.

I recently researched the development times of about 50 consumer electronic products, ranging from smartphones to wearables to printers to audio products, developed by organizations of all sizes. These were standalone products and not simple accessories.

What I found was that the time from the initial industrial design to first customer shipment averaged about 2 1/4 years. Surprisingly, the spread was narrower than I expected, ranging from about 1 1/4 years to about 3, not counting a few outliers at the long end. Smaller companies were sometimes faster than large companies with many more participants, perhaps because a small team of experts can sometimes be more productive than large bureaucratic organizations.

Development time rarely was affected by how complex the product was, because the more complex projects had larger teams. One of the biggest contributions to the development time was the time from completing each design cycle to building and testing how that design functioned. Much of that time was related to fabricating parts, ordering components and just waiting. The second biggest contributor was changing the product requirements after the development process was underway.

What was also evident was that products requiring custom parts took longer than those relying on off-the-shelf components. But the lead time, even for off-the-shelf parts, particularly electronic components and displays, was unpredictable and often meant paying more to buy from the spot market.

But one fact stood out. For those products that were built in very high volumes, the supply chain issues became a major factor. Not only did it effect the schedule to get into production, but it also determined the design approach taken and the materials and the components selected.

A good example are the new iPhones. Early rumors predicted the phones might be made of exotic materials such as ceramic or titanium to make them much more durable. These materials require a considerable infrastructure to fabricate and are not easily scalable to huge volumes.

Instead of Apple, it was Essential, a startup company founded by Andy Rubin, that did just that. They created a phone made of titanium and ceramic. With their sales forecasts being a tiny fraction of Apple’s, they could easily find a supplier and develop a process to meet their needs. Apple was constrained by its own success.

When designers and marketers spec their products, they need to consider the components’ availability, not at the beginning of the project, but when the product will be shipped. But they also need those components during the product’s development, so the life cycle of the component needs to be carefully considered.

While smaller companies may have an easier time of supplying their needs, obsolescence becomes a factor in a product’s development schedule. Many components, including off the shelf electronics and displays, continually are phased out, while new components come online, but often not sequentially.

The larger product companies can more easily get access to their suppliers’ roadmaps that show the details of the phasing in and out of their components. Smaller companies, who may not even be aware the maps exist, are often surprised to find that, as their new product is going into production, one component suddenly goes end of life. The solution is to quickly find a replacement and design it in, often causing unexpected expense and delays to the schedule.

Once you understand the impact of supply chain issues, you’d dismiss those rumors about changes being made to the iPhone design 6 weeks before introduction. Any product being produced in such large volume would need to freeze their design and lock in parts and manufacturing processes many months before production begins. The slightest change would delay production by months.

As difficult as it is to develop hardware products, supply chain issues add to the challenge throughout the design cycle and after the product goes into production. And from my experience, it can be a major element in a product’s development time and in the design, itself.

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