Consequences Long Term Investments
Gillette learned that they had to think ahead and be creative to be competitive. They learned that they have to develop their products before their competitors to be the leading company of the market and staying popular to the customers. Russel B. Adams Jr. , says in the Gillette case study text: “This is what happens to you if you’re not up there keeping ahead of the market”, which shows that Gillette is aware of the problem and of course will try to fix it. To keep up with customers demands they had to do as Bic, who made disposable shavers, even though it would mean giving up profitability.
In the long run it would be more profitable than being in the wrong end of the development process of the market. Customers are so important for companies because they always have the right to chose another supplier, as customers did with the disposable shavers development from other companies. Now Gillette has to change their business strategy to be competitive and core competencies have to include development of their products. Why do you think Gillette was so slow in introducing coated stainless steel blades, even though the company was familiar with the technology?
What are the implications for firms faced with making long-term investments in manufacturing and supply chain resources?
Gillette waited to make the coated stainless steel blades because they knew how to make them and they knew they would have to upgrade all their manufacturing equipment to do so. It would be too much of a cost to the company if customers didn’t want to buy it. The implications in making long term investments would be not knowing if the firms will earn revenue or if they will lose money on the process.
Therefore they need to be sure before doing so. They have to ask their customers what they want before deciding because customers are so important as they are the ones who decides to buy/not buy the company’s product and they provide the only income to the companies. If firms are making long term investments, it could mean having to upgrade equipment in the manufacturing process and maybe they need to get more place for stuck or employ more people which demands a big effort and financial costs. Therefore they have make sure they make the right choice.
If the firms make deals with a supplier (upstream) and customers (downstream) don’t want to buy the new product, then they will lose money on the deal with the supplier because they will be stuck with all these new parts they can’t use and it would affect the relationship between the supplier and the companies as they both aren’t making as much money as they hoped for in the first place. But if they started the whole process by finding out what the customers want and what they can charge for this new product, looking at the development costs as well, a new investment could become very valuable to the companies.
Development costs does not only include production costs but also more hidden costs as transportation and warehousing costs. It takes a lot of evaluation and research to figure out what the best thing to do is but by choosing the right decision it can become very valuable to the firms.
Why is it not enough for Gillette to simply design a razor that gives the “best shave possible”?
- How does manufacturing help Gillette maintain its market share and profitability? What are the implications of having operations and supply chain personnel involved early on in the development effort?
Best shave possible is not always the only thing customers want. As explained in the Gillette case study text, a lot of customers want disposable shavers and they want them cheap, so they can just throw them out afterwards, which makes it easier and faster because they don’t have to clean the blade after each use and don’t have the razor laying around on the shelf or in the locker. In this matter we can look at QFD (Quality Function Deployment). Here we have to look at what the customer requirements are which is what Gillette needs to look at.
If we look at the “house of quality”, the customers will have requirements regarding performance, like if the shaver is affordable and if it has a smart design. Then they compare the customers requirements to the products characteristics to see if the product lives up to the requirements. Maybe one of the characteristics of the shaver would be that the new razors are better and really good for your skin but expensive. Because the customers requirement was that it had to be inexpensive, it doesn’t meet customers requirements. We can then look at synergies between some of the features and if they can be combined.
After making this analysis we know what customers requirements are and if our product lives up to them. When we are all done talking about QFD, we will have tried to identify the specific manufacturing and service process steps needed to meet the customers requirements by taking each requirement and product specification and figure out what material is needed to produce this product and what the processes for making the product are and so on. So it is not just about developing and being good at one thing, you have to meet the customers requirements and try to develop a product they really want to buy.
An analysis like explained above can help Gillette understanding its customers. A company like Gillette also has to develop new and exiting products to maintain their profitability and their place in the top of the market. Here manufacturing helps Gillette by experimental development. They have to, all the time, keep up with the market and do it in a way that can create profitability in the end. They have to keep being competitive and the only way to do that, is to develop their products and be the first company releasing a new special product to their customers and to improve at all times, otherwise their competitors will run them over.
If a company implement their operations and supply chain personnel already in the concept development phase of the development process, they can start looking at which suppliers would be good doing business with according to the new product. Maybe they have a new technology that makes this supplier the right one for the given new product. In the planning phase they can figure out which supplier would be the main key partner and start a partnership.
In the design and development phase they might help figuring out what is available on the market of suppliers and which items/parts used in the new product would give the highest gain in the six dimensions which are:
- Repeatability (ability of making the product over and over again in the volumes needed)
- Testability (Is it possible to test the product during production)
- Serviceability (Can parts be replaced or serviced easily)
- Products volumes (Do they company need to expand e. g. the equipment or people needed)
- Product costs (Cost of the product itself but also hidden costs such as transportation costs or engineering change)
- Match between the design and existing capabilities (If the company has/has not existing parts or manufacturing facilities which can used creating the new product)
They also need to start thinking about getting a flow in the supply chain, from supplier to customer or maybe even further. If they need to get new suppliers the cost will be more expensive too which they will start thinking about in the commercial preparation phase, they might need new information systems, new personnel or make an increase in warehousing for being able to produce the new product.
In the last part of the development process which is the launch phase, they have to figure out if the quality of the product is good and if the costs are good and if the suppliers are able to deliver and so on. By implementing the supplier early they will have time to begin their work early as well. If the company chose to implement personnel from the key supplier in the development process as well, they will be able to develop faster and maybe even cut costs.
The supplier might be the expert and know just what to do in the given situation and they can come up with other ideas that the company itself wouldn’t think of because it doesn’t have the same knowledge. Maybe the supplier is willing to take over some of the development process and thereby share the costs and risks related with producing a new product. If the supplier is the expert, we can talk about black box design where the supplier are given some broad specifications which they have to follow but they are at the same time allowed to produce the product in the way they believe is the best.
In grey box design the suppliers are also a part of the development but they work together with the producing company to develop the best product. If operation and supply chain personnel is involved, concurrent engineering, where the phases overlap each other would be to prefer because they are not involved just as much in all the processes and if they get to do their work as soon as possible and won’t have to wait for each process to be done, the development will happen much faster.
This is in contrast to sequential development where all has to be cleared before moving on to next development phase which might take longer time. To sum it all up, companies really have to start thinking about their customers, about their opinions/requirements according to the products each company produces. To be the leader of the market, the companies have to ask their customers what they want and make the development process accordingly so they are able to produce a profitable product which can create value to the company.
In the development process it is important for companies to think about their supply chain as well because if they use it correctly, they are able to reduce costs of the new product. Companies have to be competitive, creative, developing, renewing and always think about tomorrow, which Gillette learned the hard way.
