Statistical Analysis of New Product Development (NPD) Cycle-time Data
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Alpha Technologies recently concluded a comprehensive study of historical NPD performance data (cost, cycle-time, resource requirements, program type and complexity, plans versus actuals, etc.) and has successfully applied the results of this study to make measureable improvements to their NPD process. Probability-based summary data is used to aide in planning and budgeting, set statistically valid continuous improvement targets for performance scorecards, and develop a visual resource management tool for allocation of human resources to present and future NPD programs.
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Statistical Analysis of New Product Development (NPD) Cycle-time Data
- 1. Quality and Business Excellence Celebration ASQ Vancouver 25th Anniversary Statistical Analysis of New Product Development (NPD) Cycle-time Data Including Applications of Results Steve Pratt, MEng., PE, CSSBB Director of Engineering, Alpha Technologies
- 2. Alpha Technologies Company Background Alpha is a Full Service Power Systems Provider to Multiple Markets Pratt – Slide 1
- 3. Power Modules Indoor Power Systems Outdoor Power Systems Alpha’s Power Solutions Products Pratt – Slide 2
- 4. Phase-Gate New Product Development (NPD) Process Deliverables: • Product Concept • Business Case • Preliminary Plan Deliverables: •High-Level Design •Requirements •Complete Project Plan Deliverables: • Design Outputs • DFx Reviews • Preliminary Test Reports Deliverables: • Pilot Doc Pack • Pilot Build • Sales Forecasts Deliverables: • Compliance Certifications • Training • MarCom docs Deliverables: • Sustaining Eng • Repair/Support • Cost Reduction Phase 2 Planning Phase 1 Concept Phase 3 Development Phase 4 Qualification and Pre- Production Phase 5 LA and Production Ramp-up Phase 6 GA and MOL Pratt – Slide 3
- 5. Concurrent Engineering via Cross- Functional Core Teams Service Supply Chain Product Management Program Manager Quality Engineering Manufacturing Pratt – Slide 4
- 6. Motivation for Study Continuous Improvement: • general perception that NPD takes too long • lack of proper management of resources • desire to establish performance benchmarks Pratt – Slide 5
- 7. NPD Data Collected and Analyzed Schedule Data • Recorded Dates: Start, Gate 1, Gate 2, Gate 3, Gate 4 (LA) & Gate 5 (GA) • Program Plans: estimated time to LA, estimated time to GA • Calculated: total time, time per phase, actual vs. plan Cost Data • Timecard System: actual total effort (man-hours) • Program Plans: estimated total effort • Calculated: effort by function, effort by phase, remaining effort, actual vs. plan Pratt – Slide 6
- 8. Tools Used in the Study JMP – Statistical Discovery Software Analyze-Distribution Platform: • Calculations: Quantiles, Moments • Plots: Histogram, Quantile Box, Normal Quantile • Fit Distribution: Normal, Beta, Goodness of Fit Tests Fit Y by X Platform: Bivariate Analysis • Fit Line, Fit Polynomial, Summary of Fit Fit Y by X Platform: One-way Analysis • Calculations: Means and Standard Deviations • Plots: Mean Diamonds • Analysis of Variance (ANOVA) Fit Model Platform • Calculations: Standard Least Squares, Summary of Fit, Effect Tests • Plots: Actual by Predicted, Effect Leverage, Residual by Predicted • Two-way ANOVA with interactions Microsoft Excel and PowerPoint Pratt – Slide 7
- 9. External Benchmarking Data – PDMA Best Practices Research Provides industry-average NPD Cycle-Time based on complexity of programs: • new-to-the world • new-to-the firm • next-gen improvements • incremental improvements Pratt – Slide 8
- 10. Source: Griffin A., “Product development cycle time for business-to-business products,” Industrial Marketing Management 2002;31: 291-304 Average NPD Cycle-Time Benchmarking Pratt – Slide 9
- 11. Planned vs. Actual NPD Cycle-Time Pratt – Slide 10
- 12. ANOVA to Identify Significant Factors for Schedule Data Pratt – Slide 11
- 13. ANOVA to Identify Significant Factors for Effort Data Pratt – Slide 12
- 14. Categorizing NPD Programs into 9 Buckets Product Types: Modules (power modules, shelves, controllers) Indoor Systems (rack-based systems, racks, distribution) OSP (outside plant power/battery systems) Program Complexities: A– major program requiring advanced development B – completely new, but no advanced development C– new with incremental development Pratt – Slide 13
- 15. NPD Summary Data – Schedule (Gate 2 to LA) Pratt – Slide 14
- 16. NPD Summary Data – Schedule (Gate 2 to GA) Pratt – Slide 15
- 17. NPD Summary Data – Effort (Total Development Hours) Pratt – Slide 16
- 18. NPD Schedule & Effort Continuous Probability Distributions Pratt – Slide 17
- 19. Additional Analyses • plan vs. actual – schedule and effort • schedule and effort variance by phase • time spent per phase • total effort by function and phase • default team size and composition Pratt – Slide 18
- 20. Applications Better Estimating Pratt – Slide 19
- 21. More Accurate Gate 2 Point Estimates of Schedule and Effort Previous estimates were: - subject to negotiation - overly optimistic and aggressive - “rose-colored” recollections of past Pratt – Slide 20
- 22. Alpha’s Historical Schedule Estimation Accuracy Median MRE = 44% Pratt – Slide 21
- 23. NPD Schedule Point-Estimation via Historical Mean Values Median MRE = 19% Pratt – Slide 22
- 24. Basic Schedule Equation Using Historical Mean Effort Values Median MRE = 21% Pratt – Slide 23
- 25. Informal Comparisons Equation Using NPD Mean Values Median MRE = 20% Pratt – Slide 24
- 26. Mean Magnitude of Relative Error – Schedule Estimates Pratt – Slide 25
- 27. Alpha’s Historical Effort Estimation Accuracy Median MRE = 36% Pratt – Slide 26
- 28. NPD Effort Point-Estimation via Historical Mean Values Median MRE = 18% Pratt – Slide 27
- 29. Mean Magnitude of Relative Error – Effort Estimates Pratt – Slide 28
- 30. Determine the “Cone of Uncertainty” Pratt – Slide 29
- 31. Cone of Uncertainty for NPD Project Estimates Pratt – Slide 30
- 32. Cone of Uncertainty for NPD Project Schedule Data Pratt – Slide 31
- 33. Cone of Uncertainty Applied to the 9 NPD Project Buckets Pratt – Slide 32
- 34. Schedule Cone of Uncertainty Quantified by Program Phase Pratt – Slide 33
- 35. Effort Cone of Uncertainty Quantified by Program Phase Pratt – Slide 34
- 36. Effort Estimate Ranges by Program Phase Pratt – Slide 35
- 37. Applications Top-Down Project Planning Pratt – Slide 36
- 38. Creation of Top-Down Program Schedules Pratt – Slide 37
- 39. NPD – Time Spent per Phase Pratt – Slide 38
- 40. How Much Time Should Be Spent on Planning? Pratt – Slide 39
- 41. Applications Performance Goal Setting Pratt – Slide 40
- 42. SMART Performance Improvement Goals • fact-based and statistically valid • objective and quantifiable • deterministic at the start of a program • consistent across all types of programs • an enabler of continuous improvement • unambiguous and easy to calculate An ideal performance improvement measure is: Pratt – Slide 41
- 43. RSD: a Normalized Measure of Dispersion Pratt – Slide 42
- 44. Program Scoring: RSD as Performance Unit-of-Measure Pratt – Slide 43
- 45. 2013 NPD Cycle-Time Performance Pratt – Slide 44
- 46. Earned-Value Milestones to Score WIP NPD Programs Pratt – Slide 45
- 47. Applications Better Project Selection Pratt – Slide 46
- 48. Deterministic Business Case Analysis “Figures of Merit” Pratt – Slide 47
- 49. Probabilistic Business Case Analysis Beta Distribution Pratt – Slide 48
- 50. Monte Carlo Simulation of Cash Flows ($000) Trial #1 Trial #2 Trial #3 Trial #4 Trial #5000 NPV $556 $461 $681 $447 $621 NRE 562 560597530664 GM$year1 348274 241220 274 GM$year2 604 653 407579 635 GM$year3 451651644447558 Pratt – Slide 49
- 51. Probability-Based Figures of Merit Pratt – Slide 50
- 52. Applications Resource Management Pratt – Slide 51
- 53. Default Team Size and Composition Effort divided by Schedule represents number of individuals Pratt – Slide 52
- 54. Roadmap and Budget Planning Pratt – Slide 53
- 55. Program Resource Management Engineering Pokémon board • visual resource management tool • 9 program type/complexity buckets • default team size/composition Pratt – Slide 54
- 56. NPD Programs are Represented by a Series of Magnetic Trays Pratt – Slide 55
- 57. Program Trays Incorporate Default Team Size/Composition Pratt – Slide 56
- 58. NPD Team Members are Represented by a Series of Cards Pratt – Slide 57
- 59. Engineering Pokémon – Additional Pieces Program Status Indicators Bonus Targets Add-on Resource Trays “Ghost” Cards Important Date Indicators Clear Plastic Overlays Pratt – Slide 58
- 60. The Board in Action Pratt – Slide 59
- 61. Resulting Improvements Pratt – Slide 60
- 62. Improved New Product Development Better planning and management of resources… • more stability and focus / less chaos • increased efficiency • enhanced organizational understanding • faster NPD cycle-time Pratt – Slide 61
- 63. In Conclusion: It is never too late to start recording data! - even simple data such as key dates and time spent on activities can facilitate powerful analyses - capture data in real-time; don’t rely on memory or post mortem activities Pratt – Slide 62
- 64. Questions??? Pratt – Slide 63
- 65. Thank You! STEVEN PRATT, MEng., PE Director of Engineering www.alpha.ca Pratt – Slide 64