Purchasing's Role in Product Development: The Case for Time-Based Strategies

INTRODUCTION One of the toughest challenges companies face in the 1990s is the time compression of product development. A review of the literature provides more than ample evidence of the existence of economic, strategic, and operational reasons for reducing the product development cycle.|1~ The development of time-based strategies may provide firms with the ability to deal effectively with time compressed product development, thereby providing a firm with a major competitive weapon to anticipate one of the major challenges of the nineties. Time-based strategies embody the value-added dimension of time (i.e., responsiveness), resulting in a reduction of the time-to-market cycle. Major forces initiating the need for reduced product development time have been created by increasingly aggressive global and domestic competition, improved mass communications, and increasing consumer sophistication. Other reasons include unique demands by consumers; a need to meet corporate growth objectives; shortening of product life cycles (caused by a combination of rapid technology changes, competitive activities, and market requirement changes); pressure from senior management to speed product development; and the emergence of new markets.|2~ The strategic implications of compressing time are significant, and it becomes apparent that speed-to-market creates opportunities in market share, market leadership, and profits.|3~ For example, "by introducing six all-new vehicles within a 14-month period, Toyota captured a 43 percent share of the auto sales in Japan. In the 1990 model year, it sold more than one million cars and trucks in the United States for the first time--strengthening its position as number four to the hard-pressed Big Three."|4~ A speedy product development gives a competitive edge to Toyota because it allows the firm to tailor each model to market conditions closer to the start of production.|5~ Research by a Harvard University team that studied 29 development projects for vehicles that entered the market between 1983 and 1987 found that Japanese companies develop a car in 1.7 million engineering hours over 47 months, as opposed to 3 million engineering hours and 60 months for their Western counterparts.|6~ Honda also used speed in new product introduction to gain a major competitive advantage over Yamaha in the motorcycle market.|7~ A 1987 study indicates that the Japanese can, on the average, complete a new-car development project about 18 months faster than either their U.S. or Western European competitors, at a cost of about half a billion dollars in lost profits to the lagging firms.|8~ According to a McKinsey & Company study, a product that is six months late to market will miss out on one-third of the potential profit over the product's lifetime.|9~ These situations are only several examples of many that highlight specific reasons to reduce the time-to-market cycle. As one researcher has noted, successful companies achieve competitive advantage through acts of innovation, in which innovation is approached in its broadest sense, including new technologies and new ways of doing things.|10~ Owens Corning Corporation's chairman states: "Why does it take ten years to move from R&D to product? We want to get products in four years, instead of eight to ten years."|11~ PROJECT MANAGEMENT APPROACHES TO PRODUCT DEVELOPMENT Product development in the United States has been implemented primarily by using a sequential, step-like, phased process--a linear approach--that basically includes the following steps: (1) define the product, (2) test feasibility, (3) build and test prototypes, and (4) start pilot production. This approach has achieved the development of a final product by following a step-by-step process in which a group of functional specialists from one area of the company completed its assignment, and then passed the work on to the next group of specialists, and so on, until development of the product was finally completed. …