After this phase, executive project and manufacturing engineering activities follow. Thedevelopment cycle of a new productends with the start of production and commercial launch in the market.
The industrial life cycle of a productbegins with start of production and ends with completed sales in the market, even if the company has to provide technical assistance and physical maintenance to customers subsequent to the sales. Another parameter is thetechnical life cycle, which depends on the product’s functional duration (the actual use) and on technical and economic considerations.
In the following chapters, we will take a wide approach to matters related to new product industrialization and the management of their production systems, referring from a general point of view to theirindustrial development and life cycle.
which must be bought from external suppliers, in accordance with the company’s top management policies (Fig.1.4).
For big companies, the ‘‘make or buy’’ decision-making process involves the following departments:
• Product Development Planning
• Product and Process Engineering
• Manufacturing
• Purchasing and Supply Chain Management
• Finance
• Human Resources
Decisions are made by the appropriate executives responding to a Steering Committee, which defines strategic policies for the assurance of ‘‘governance’’ in investments and purchases.
‘‘Make-or-buy’’ criteria for whole types of systems and components require a very complex process of evaluation. The most important items in this process are the following:
1.3.1 Items (m) for the Decision to ‘‘Make’’
m1 – Availability of development capacities inside the company, at least equivalent to those offered by external suppliers
m2 – Better protection of company’s know-how, in relation to products/
processes considered part of the ‘‘core business’’
m3 – Need for the integration of internal processes by logistic flows and the improvement of the quality level of the final product
MAKE BUY
PRODUCING IN OUR OWN PLANTS
LET PRODUCING TO EXTERNAL SUPPLIERS Make or buy choice determines company’s manufacturing process level of verticalization.
PRODUCING IN PLANTS ON PARTNERSHIP
CO - MAKERSHIP
Fig. 1.4 Make or buy policies
m4 – Established invalidity of alternatives for the purchasing of components or services
m5 – Necessity of utilizing existing productive capacities inside the company
1.3.2 Items (b) for the Decision to ‘‘Buy’’
b1 – No availability of specific ‘‘know’’ for developing the specific component or service in a competitive way
b2 – Availability of reliable suppliers for the components or services required, in relation to the company’s targets
b3 – Availability of alternative supply sources in the geographical areas of strategic interest for the company
b4 – Opportunity to simplify internal production processes and focus production resources (manpower and financial resources) on ‘‘core-business’’
b5 – Opportunity to reduce company-owned investment by using or increment- ing supplier’s available productive capacities, allowing them to assume the risk of volume dependent on market trends
1.3.3 Items (c) for the Decision for ‘‘Co-Makership’’
c1 – New necessities for the development of production capacities but not enough economic scale to proceed autonomously
c2 – Partners have common or complementary interest in developing the new solutions required to guarantee the industrial mission in a synergic and competitive way
c3 – Partners have complementary or synergic technological capacities at their disposal so that product/process innovation can be sped up without incurring economic investment
The above decision-making criteria establish the guide line for‘‘make or buy’’
choices and/or industrial cooperation and, as a consequence, operative instructions are assumed.
At any rate, specific analysis may be required for new industrial initiatives, comparing economic data of alternative solutions by considering:
• Variable production costs (for direct material and for transformation process);
• Fixed costs consequent to company’s R&D department;
• Investments for internal manufacturing or external purchasing (suppliers’
contribution);
• Other eventual costs derived from fixed costs.
‘‘In-sourcing’’ or ‘‘out-sourcing’’ policies involve not only product components but research and development services, equipment construction, maintenance, logistics, information technologies and other accessory services. The criteria fol- lowed are almost the same as above and must take into consideration economic advantages obtainable over long periods (from 2 to 4 years), involving specialized companies operating on a large market scale (system and service providers).
‘‘Make-or-buy’’ choices influence a company’s structure and assets, capital invested and economic profitability. For these reasons, an accurate cost/benefit analysis for a medium/long term period is needed, making clear that incoherent decisions could highly compromise the level of quality and competitiveness of the final product.
The ‘‘verticalization degree’’ of a company’s production activities is rep- resented by this ratio: total cost of internal manufacturing processes/total cost of sale products plant free.
Beginning in the second half of the 1980s, carmaker strategies have been oriented towards progressively reducing the verticalization degree. Conversely, companies have widened the range of products offered, increasing their presence on international markets.
Production activities verticalization in plants manufacturing cars and light commercial vehicles has a range of a 25 % minimum up to a 30 % maximum, including the manufacturing of powertrain systems (autonomous or inco maker- ship) and excluding components produced by companies that are part of the same industrial group but operate independently on the market. Industrial vehicle plants normally have a minor verticalization degree.
Actually, in Europe, the more vertical carmaker plants are those of Volkswa- gen, Mercedes, P.S.A. and Auto Vaz, while the less vertical plants belong to BMW, Volvo, Saab, Jaguar and Porsche. North American and Japanese plants generally have a minor verticalization degree in spite of the example of those in Europe.