User Experience Insights
How can SAP applications support the New Product Development & Introduction (NPDI) Process?
In this blog you will get an overview of “How can SAP Applications support the New Product development and Introduction (NPDI) Process for Discrete and Process industry .
Introduction of NPDI Process:
NPDI stands for “New Product Development and Introduction is the complete process of bringing a new product to the customer/Market. New product development is described in the literature as the transformation of a market opportunity into a product available for sale and it can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief).
In other words, it is a process to track/monitor complete life cycle of a product i.e., from idea generation to commercialization and end of the product.
Cost, Time to market and Quality are the main variables that drive the customer needs. Aimed at these three variables, companies develop continuous practices and strategies to better satisfy the customer requirements and increase their market share by a regular development of new products.
There are various factors which influences the product development.
- Changes in consumer preferences
- Increasing competition
- Change in technology
- To capitalise on a new opportunity
- Cost Reduction/Optimization
- Process Change
- Change in existing Design/Product
There are many uncertainties and challenges throughout the process which companies are facing during new Product Development.
To eliminates these barriers and uncertainties and to communicate smoothly between internal teams as well as external world during Product development/after sales, SAP is the only solution which provides best practices, integrated applications, collaboration tools and digital Platform to the companies to achieve their goals on time without compromising quality and cost aspects of the final product.
Let me justify my statement “How SAP is going to help in New product and development”
In new product development, R&D cost is about 70-80% of total cost of the product. Time and Cost is directly proportional to each other. If time increases during R&D phase of a project, it will delay launch of the product as well as it will also increase the final cost of the product.
There are various challenges in project organizations because information distributes across multiple sources.
Efficient Project management requires Platform that “connects” all project participants and is deeply integrated with enterprise business functions
- Single source of truth
- Instant access
- Real-time project analytics
- Role-based user interface
The companies where the research and development activities related to the design of a new product are managed and to supports the product development process by managing the related project costs, milestones, budgets, and approvals. After releasing all or part of the project, the project is executed, and project-related purchasing can be performed. Through the integration with SAP Enterprise Product Development- Collaboration, you can leverage advanced collaboration scenarios for project execution. Period-end closing activities such as overhead/settlement can be executed
To avoid/reduce rework during R&D phase of a product development cycle, SAP provide Innovation management Application which help to filter the best idea from the bucket based on various parameters.
One Idea is promoted to the next stage and converted into a Proposal using SAP PPM.
During Proposal Stage, based on various factors i.e., NPV (Net Present Value), Development Cost, Initial Cost, Probability of commercial success, probability of technical successes, assessed risk, capacity planning etc. Proposal owner can take GO/NO GO decision.
If all factors are in favour, Proposal owner can promote proposal to the next phase i.e., Project Management where he can do the complete planning of a project by defining phases (Stage Gate) and tasks. The advantage of a stage gate process is to approve each phase during product development. If Phase gets rejected, system will not allow project manager to start the successor phase. Example: If Lab trail phase gets rejected, system will not allow user to start the Pilot Trial Phase.
To increase profitability and achieve real-time transparency of customer projects, Commercial project management can be used on top of PPM solution.
Project financial planning
Improve planning, monitoring, and control by creating cost and revenue plans and integrating them with enterprise accounting.
Issue and change management
Establish transparent processes to record project issues and deviations and determine the financial impact of changes.
Document and assess project risks through standardized evaluation methods and plan and track risk mitigation activities.
During this process, project manager can collaborate within teams as well as assign task to team members for the completion of the task. Even during this stage of a project, companies can easily collaborate with outside world (Suppliers/vendors) using EPD i.e., Enterprise Product Development – Collaboration tool.
Based on the information provided by the supplier/ vendor, companies can do the early cost estimation for the new product using SAP PLC i.e., Product lifecycle costing tool. It helps to calculate the cost of a product considering raw material cost, labour cost, activity cost etc. To improve profits by managing costs accurately in the early design phase
SAP PPM has strong integration with Project Systems (PS), Logistics, finance as well as with HR modules.
During Product development companies needs to carry out trails. Based on facility availability, companies can carry out trail in house or send it to third party for trails. To carry out Trail in house, companies need to allocate materials as a project stock or involve 3rd party for trail and testing. Service orders need to be created so that 3rd part can be involved for testing and trails and in addition to this NDA (Non-Disclosure Agreement) should be also signed with the 3rd part for IP (intellectual Property) protection.
In short, all R&D cost whether it is a direct/indirect expense should get allocated to the R&D project i.e., PS Project. Direct cost includes raw material cost, resource cost etc. and indirect expenses refer to services cost etc. The benefit of doing this is that companies get R&D tax credits for the R&D work. R&D tax credits rules and regulations differ from country to country.
EPPM, Logistics, Finance are SAP application which are applicable for both the industry types.(Process as well as Discrete)
In SAP, we can define and manage R&D process for Manufacturing as well as for Process Industry.
For R&D manufacturing, we can use SAP application EPE i.e., Enterprise Product Engineering and for R&D Process, we can use SAP application EPF i.e., Enterprise product formulation.
Hope this blog post gives you an overview and a basic understanding of “How to use SAP Application to define NPDI Process”.
Feel free to post your comments and I encourage you to post questions about the topic in our SAP Community using this link.