If only a great concept were the sole driver of new product success. Of course, it is critical to success, but so are time to market, cost and launch readiness—all areas in which your supply chain plays a pivotal role. Innovation is one of the highest priorities of executives across industries, but it is challenging for companies to consistently improve. Driving more new product innovation that produces market successes and increased profitability relies on several important levers, including involvement of the supply chain.
The stage-gate model, introduced in the late 1980s, is the most common approach for pipeline management of new product development (NPD) projects (see Figure 1). It is designed to ensure that new products (regardless if it’s innovation, a line extension, renovation or other product type) meet targets for business case, risk and resource availability at each gate before proceeding to the following phase.
Leading companies are shifting their focus from adoption of a stage-gate process for NPD to optimization of the process. Poor execution and evolving IT capabilities are leading to opportunities for improvement in all major elements of the stage-gate process model.
A key to optimizing the NPD process is a well-aligned and mobilized cross-functional team. As an example, companies that involve supply chain specialists as early as possible in the NPD process gain competitive advantage in driving new product success by ensuring the product can be supported functionally and profitably by the supply chain. Top-performing supply chains, in turn, engage partners and suppliers early in the NPD process. Suppliers, co-manufacturers, distributors and other members of the extended supply chain can be mined for potential ideas, which removes constraints imposed by relying solely on internal resources. The goal is to catch and rectify any potential negative or suboptimal supply chain consequences for efficiency, cost, service and quality across the end-to-end supply, before there is a downstream impact on launch or post-launch activity.
Across the stage-gates, there are important supply chain considerations and questions that can affect the success of NPD. For example:
- Plan—how accurate is the new item forecast? What is the supply chain impact of the inaccuracies?
- Procure—do our suppliers have the flexibility to react to changes in demand?
- Make—should we produce the new product within our current internal network? Or should we outsource, either in the short or longer term as product volume ramps up?
- Deliver—what service requirements are expected by our customers and is our current distribution network set up to meet them?
- Overall—what supply chain metrics should be used to measure cost, service, quality and efficiency tied to NPD?
Supply chain performance plays a critical role in the NPD process because it not only drives the investment of capital into production and distribution capabilities, but also, in many cases, determines the critical path for launch dates. Along with supply chain, many functions play a critical role in making NPD a success, including sales, marketing, research and development (R&D), legal and regulatory, quality, program management and executive management. Using a systematic and methodological approach to close NPD performance gaps and execute targeted opportunities for supply chain and other involved functions, companies should be better positioned to improve the business success of launched products.
Hanna Hamburger is a director in the strategy and business transformation practice at The Hackett Group and is based in Chicago. She has over 25 years of consumer products industry and consulting experience. She has worked extensively with consumer products and retail companies in the areas of sales, marketing and supply chain process, technology and tools, and organization performance improvement.
Joe W. Shipley is a manager in the strategy and business transformation practice at The Hackett Group. He has over 10 years of consulting and industry experience, helping clients solve complex strategic, operational, organizational, financial and technical challenges in a wide range of industries, including life sciences, industrial products and consumer packaged goods.