Congratulations! Management has approved the product plan. It’s time for engineering to start designing. First up – arrange the hierarchy of subassemblies on the yet to be born product’s family tree.
Traditionally a capital equipment company’s engineering team will determine a product’s structure based on how they intend to design it. When the design phase is finished, they’ll release it to the company’s MRP system so that systems and spare parts can be quoted, built and shipped to customers.
But should your product structure just be a consequence of design strategy?
If it is, you’re missing an opportunity to maximize this future product’s commercial success. You need to engage Marketing, Manufacturing, and Service. They can help define a structure that aligns with how the product will be sold, built, and serviced. This sets you up for:
- Better pricing
- Lower product costs
- Shorter manufacturing cycle times
- Lower inventory levels
- Lower service costs
Here’s each function’s role in making it happen.
Marketing can help the company achieve value-based pricing by using the product’s family tree to tailor the offering to target market sub-segments.
Software and automobile makers are very visible practitioners of this strategy. Just take a look at all the flavors of Intuit’s Quicken or Toyota’s Camry . These are great examples of core products with a variety of configurations designed to target sub-segments of financial software and family sedan buyers.
These targeted offerings are only possible because the products were structured early in the design process to support them.
Capital equipment makers should take the same approach. Configurations with rifle-like customer targeting can hit the customers’ key value drivers. At the same time, these configurations can be stripped of features not valued by the target customer. That’s a formula for better pricing and lower costs.
Manufacturing needs to ensure that the product structure is designed to support how they intend to buy and build the product’s subsystems and components.
For example, if the intention is to outsource a large subassembly with the exception of a single proprietary part, that single part must be structured separate from the rest of the assembly.
In addition to defining product structure to support how materials will be purchased, it also has to be structured to align with assembly and manufacturing test plans.
When manufacturing defines their requirements for product structure up front, the result is shorter production cycle times and lower product costs.
Last but not least, service must contribute to product structure definition. Fundamentally they need to define a product structure that supports their Field Replaceable Unit (FRU) strategy.
Service needs to determine the circumstances under which the product should be repaired at the component, subassembly and module levels. The product structure must then be defined to support this.
For example, suppose there’s an instance where the FRU is a printed circuit board (PCB). However that PCB is part of a purchased assembly. That PCB must also be structured as a separate, orderable item. Otherwise when the part fails in the field, you’ll have to order the entire assembly when all that you want is the PCB.
Getting service’s FRU strategy baked into the product structure will keep both service costs and spare parts inventory in check.
So if you want to pluck profit from product structure, don’t just leave its definition in engineering hands. Instead have engineering work with marketing, manufacturing, and service to define the product structure that will maximize the product’s commercial success.