Collaboration with manufacturing and customer service

The manufacturing-marketing interaction [19] has been a key success factor for many thriving high-tech firms. One of the main reasons is the extreme importance to optimize the time-to-market for high-tech products.

As seen in Chapter 9, the first company in a market can usually demand a higher price, as its risk premium, and therefore earn a higher profit margin. On the other hand, companies that trail behind competitors and enter a market where prices have started to drop often end up in financial disaster.

One researcher has calculated that introducing a laser printer 6 months late could lower cumulative profits by 30% (based upon a 20% annual market growth, a 12% annual price decrease, and a 5-year product life cycle) [20]. On the other hand, a product development program that runs 30% over budget will only reduce cumulative profits by 2.3%. A vice president at Hewlett-Packard noted: "If we overspend by 50% on our engineering budget, but deliver on time, it impacts 10% on revenue. But, if we are late, it can impact up to 30% on revenues."

The entire company should be ready to make a product launch a success-and this should be double-checked. Manufacturing problems can considerably contribute to a restrained product launch, even more so because new technologies involve more and more complex manufacturing constraints. In the manufacturing of DRAM computer memory chips, the number of process steps has doubled in the last years while it require temperatures above 1,000°C;and manufacturing is getting increasingly more complex with the new generation of embedded DRAM. Similarly, in the beginning of the 1980s, the manufacturing of photocopiers simply consisted of assembling the light source and a toner system with a mechanical system to move a piece of paper. Nowadays, copiers resemble computers and contain control hardware and software, panel displays, and organic photorecep-tors. The same trend is affecting the technology in cell phone handsets, which are no longer simple phones but include flash memories, cameras, an image sensor, LCD display (supporting more than 260,000 colors), navigation wheel, and many other components.

This greater operational sophistication obviously requires a fundamental adaptation of the manufacturing department (including purchasing) and the customer service department. From the beginning, all departments in a company must work together even if their degree of involvement varies along the process. The manufacturing department must be included from the beginning of the prototyping phase in order to pinpoint possible difficulties in mass production and suggest improvements in product design. This cooperation can lead to precious timesavings when compared with competitors who discover manufacturing problems only after a product launch has been carried out. In any case, it is also a guarantee of a better manufacturing quality.

Besides, in many high-technology businesses where product life cycles are short and demand is unpredictable, delivery performance is critical. When the delivery process is slow, it is usually because of a long lead time, which distorts sales forecasts. When the manufacturing department does not respond quickly enough, the sales department overstates the customer's commitment or the size of its orders to build in a safety margin. Consequently, production schedules and inventories do not match real demand and late changes have to be made to orders in the factory, adding more lead-time to the process.

The solutions are not only an improvement of the sales forecast, planning meetings or the use of computer-integrated production planning. Efficient high-tech companies have also included the manufacturing viewpoint in their product development policies and strategic plans [21]. In addition, they have deployed task forces or permanent multifunction teams organized by segment of customers and products to effectively manage the order-to-payment process. The ultimate step is having a just-in-time production system like the one utilized by Dell, which builds most of its products on receipt of a customer order.

This ability of manufacturing to respond quickly to changing customer requirements has been labeled as "Agile manufacturing" [22]. It demands a system that can produce effectively a large variety of products and that can be reconfigured swiftly to cope with any change in the product design. It is not based on technology alone but on the strategic capacity to take into account the market change through vision, strategy, and organization [23]. Consequently, communication between the manufacturing organization and the marketing structure is of primary importance to develop better relationships between the two departments [24] in order constantly to balance the adjustment between market demand and the firm's supply [25]. Communication also helps to reduce the differences between departments' perceptions of goals, which are often creating interdepartmental conflicts [26].

Furthermore, research engineers are usually preoccupied with technical product performance and marketing managers are often unaware of the fact that a product tends to malfunction and the amount of time necessary for repair, but these are the major reasons why users of high-technology product are dissatisfied. Therefore, installation and maintenance departments can also provide useful advice at the original steps of the development of a product. Because these departments have a good knowledge of problems due to their amount of customer contact, they will support simplicity and consistency during prototype development.

For Nintendo, the Japanese manufacturer of the most popular video games, customer service is a true marketing resource. More than 120

teenagers, called "game advisors," are available to give advice on the best way to play "Donkey Kong" or "Ninja Turtles." Weekly telephone calls number 50,000;these calls are analyzed to study the expectations of a very versatile group of young customers. Using this strategy, Nintendo came out with the most varied and most liked product range in an industry with more than 250 different games.

Finally, not only must products be launched very quickly, but also, at the same time, they must have a very high quality. Accordingly, one new driving force to a better cooperation between the marketing department and the other departments (such as R&D, manufacturing, and customer service) is the ISO 9000 certification. This standard provides a framework for telling clients the way a firm tests products, keeps records, fixes defects, and trains employees. According to the International Organization for Standardization—the body that governs ISO—it had issued 510,616 ISO 9000 certificates worldwide by December 2001 [27]. While the ISO is defining the standards, it does not itself issues certificates of conformity. Different certification bodies in each country independently check whether a company conforms to the accepted standards. Those organizations, such as ANSI in the United States, AFNOR in France or JISC in Japan, are using assessors who conduct audits, determine nonconformities to standards, and approve corrective actions, before making the accreditation.

The ISO certification process is an effective way to improve business performance. Among the ISO-certified companies, 62% have increased sales, 54% have increased market share, 57% have decreased the cost of quality, 37% have increased export growth and 20% have increased employee retention.

ISO 9000 is a European standard of quality management that has been adopted by more than 120 countries, including the United States, Canada, Japan, and all the members of the European Union. Philips Electronics, General Electric, British Telecom, to name a few, and all the other large high-tech firms are certified and request suppliers to adopt ISO 9000.

ISO 9000 has become an internationally recognized system, understandable to sellers and customers (much more than the American Malcolm Bald-ridge award). By putting the emphasis on quality and forcing companies to pass the certificate exam, ISO 9000 has driven many firms to reconsider seriously the whole process of communication between the various departments involved in the design, production, and marketing of new products.

An interesting example is the case of Amadeus, a leading global distribution system (GDS) and technology provider for the travel and tourism industry. Amadeus mostly competes with Sabre and Galileo. Amadeus created its Quality Management department in 1997 and in 1998 Amadeus was the first GDS to receive ISO 9002 certification, which covers best practices in product and service quality delivery. The benefits quickly impacted customers, as reflected in a 15% to 20% improvement of customer ratings in customer satisfaction surveys.

In 2001 Amadeus was the first GDS, and one of the first companies in the world, to receive ISO 9001:2000 standard. Because, ISO 9001:2000

deals with the management practice and organizational requirements of managing successfully for quality, Amadeus used ISO 9001:2000 as the foundation of a company-wide quality initiative, encompassing every division and department. The goal of achieving ISO 9001:2000 recognition was to improve further the company's ability to develop and deliver its products (i.e., GDS products, IT services as well as e-commerce and e-business solutions) better, faster, and more efficiently, in accordance with customer requirements.

Today, quality is no longer an element of marketing differentiation because it is now a given for the customers. Currently no customer would accept a major quality problem from a high-tech branded product. However, the quality challenge is still important for the small and medium size high-tech firms.

Was this article helpful?

0 0
Financial End Game

Financial End Game

How to profit from the global crisis and make big bucks big time! The current global financial crisis has its roots embedded in the collapse of the subprime markets in the United States. As at October 2007 there was an estimated loss on the subprime market of approximately 250 billion. If you want to come out on top, you have come to the right place.

Get My Free Ebook


Post a comment