www.iac.fr
Inter ActionConsultants SAS
40, rue de Courcelles 75008 Paris FRANCE
+33 (0)1 56 62 32 [email protected]
Inter ActionConsultants GmbH
Rather Strasse 110a40476 Dusseldorf GERMANY
+49 (0) 211 469 [email protected]
Achieve GreaterCompetitiveness
White Paper, December 2017
Achieve GreaterCompetitiveness
White Paper, December 2017
Inter Action ConsultantsInnovate. Accelerate. Challenge.
CEO’s Statementby Benoit PETIT
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8
Emerging MarketsHow to Succeed?
Domestic RelocationThe Case of France
Connected devicesPlace the Device First!
Additive ManufacturingWhat Actual Benefits ? How to Harness Them?
Accelerating Your Time to Market:What Challenges? What Solutions?
Platform ManufacturingBuild Your Competitiveness
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26
36
48
62
70
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CEO’s Statement
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Dear readers,
2017 was a year of strong growth for IAC.
The loyalty that our clients continue to show us has given us the opportunity
to double the number of our staff as new talents joined the firm: Consultants
from respected engineering schools and experienced Managers bringing
innovative skills. IAC was also joined by four high-profile Senior Advisors, who
have led distinguished careers in the world of industry.
Though the core of our business remains the industrial sector, which we have
served exclusively — more than 2,100 successful projects — since 1982, the
company has nonetheless experienced some major transformations in recent
years, for instance the integration of new areas of expertise as a result of
continual shifts in industrial practices and technologies. Among our most
recent collaborations, we have led countless projects to develop new modular
product ranges, accelerate time to market for new commercial developments,
as well as plan the relocation of an industrial site, introduce additive
manufacturing and explore the potential of a connected device.
In addition to that, we have also invested tremendous efforts into a project
that is especially important to us: our online procurement platform, The
Price Hub (www.thepricehub.com), which provides industrial buyers with an
easy-access optimized tool to compare prices for custom-made parts, to
conduct analytical cost assessments, to find new high-value suppliers and to
get quotations from them. With a team of 15, The Price Hub has been selected
to join the Founders Program at Station F, a campus for innovative start-up
companies, sponsored by self-made French telecom mogul Xavier Niel.
But more to the point, we truly wanted to engage with our audience on a
regular basis by providing quality content to share our insight into current
strategic matters or issues.
Providing a more in-depth perspective than some newspaper or magazine
articles, these short, easy-to-read publications are written by our most
experienced Managers specifically to give you practical and usable
information on the major challenges that industrial companies are currently
facing.
The entire IAC staff and myself truly hope you will find this document helpful
and learn useful tips to help you conduct your business.
Benoit PetitCEO
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Our ExpertiseFour Operational Factors
Innovation & Markets
• Conducting market surveys and assessing
competing products
• Elaborating new business models
• Developing connected devices
• Optimizing your product portfolio and
reducing the complexity of your offering
• Shifting toward Industry 4.0
Procurement
• Accelerating and boosting your cross-
department procurement productivity
• Optimizing your procurement strategy
• Introducing open innovation practices and
monitoring the progress of co-design projects
• Implementing ThePriceHub, a benchmarking,
costing, sourcing and tendering tool
Research & Development
• Conducting (re)design to value & cost
• Ensuring the success of modular design /
platform manufacturing projects
• Helping you win contracts
• Optimizing and securing your development
processes
• Accelerating your time to market
Manufacturing
• Improving the productivity of your
manufacturing process
• Reducing non-quality
• Assessing make-or-buy scenarios
• Monitoring industrial relocation projects
• Optimizing your CAPEX / OPEX
Countries where we operate IAC offices
Paris
Dusseldorf
Inter Action Consultants (IAC)
Innovate. Accelerate. Challenge.
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Aeronautics & Aerospace Automobile
Capital GoodsConstruction &Agricultural Machinery
DefenceHousehold Appliances & Consumer Goods
Energy & Electrical Engineering Rail Transport
Industrial Machinery &Equipement
Healthcare
Nuclear PowerProcess Industry
Our Sectors Key Figures
Founding of IAC
1982
of clients satisfied
95 %
successful projects
2,100
associate businessclusters
3
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by Olivier Saint-Esprit, Partner
Additive ManufacturingWhat Actual Benefits? How to Harness Them?
11
Additive Manufacturing / Introduction
Introduced as early as the 1990s to rapidly
manufacture industrial equipment, additive
manufacturing with industrial applications has
reached a maturity level sufficient for small- to
medium-batch productions. The basic principles
of this technology are now widely understood
and large industrial groups are frequently
publishing articles in professional journals
about experimental models and the occasional
operational success stories. But looking past
these publicity stunts, the heart of the matter is
that very few companies have actually introduced additive manufacturing in their production, because the benefits of the technique have not yet been clearly identified.
Nevertheless, industrial companies all need to
start exploring the potential of this innovative
new technology, which certainly qualifies as a
‘strategic’ opportunity, as defined by Geroski
and Marksides(1), because it represents a major
technological breakthrough, which could
dramatically impact both corporate processes
and talent strategies.
1. Markides, C.C. and Geroski, P.A., 2005, Fast Second: How Smart Companies Bypass Radical Innovation to Enter
and Dominate New Markets, London, Jossey-Bass Inc Pub.
12
Olivier is IAC’s expert on additive manufacturing.
He oversees projects to introduce this technology
in a variety of industrial sectors: aerospace and
defence, healthcare, rail transport, etc.
Olivier Saint-Esprit
[email protected]+33 (0)6 28 72 07 67
Clients:
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Three Precautionary Measuresfor Exploring the Potential of Additive Manufacturing
Assessing Expected Benefits
The failure of mass-market 3D printing solutions
and the ensuing wave of companies going out of
business has provided a much-needed reminder
that investigating usages and added value of additive manufacturing is absolutely essential prior to making any investments.
In some companies, recreational plastic
printing machines are installed for employees
in so-called “creativity rooms”. Their productions
(mugs, figurines, etc.) are usually the reflect
of what little thought was given to the design
beforehand.
Getting Advice from SourcesOther than MachineAnd Powder Manufacturers
Because the actual benefits of additive
manufacturing are still unclear, most arguments
essentially rely on a technology-push effect: “Try
additive manufacturing because it’s innovative”.
This sales pitch is delivered by both machine
and powder suppliers, who go on about their
product’s performance without taking the time to explain how this innovative technology will create value for their clients.
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Protecting Your Product Portfolio
As opposed to so-called conventional
manufacturing technologies, additive
manufacturing processes on the market
today are not open-source, meaning that
the process and the material cannot be
dissociated. Machine manufacturers sell
their own, in-house technology, which uses
a specific powder no one else markets.
For unexperienced professionals, the risk
is to develop products that are entirely
dependent on a single supplier.
A threat that certainly has not gone
unnoticed by large corporations, who are
investing to develop their own processes,
and ideally researching compatible open-
source materials.
To avoid these pitfalls and take advantage
of all the benefits additive manufacturing
has to offer, one must question the value
this process creates for industrial activities.
For this purpose, companies need to
stop obsessing about the technology’s
performance and to focus instead on
methodically evaluating potential added
value for their own product portfolio.
After bringing to light the fact that the
benefits of additive manufacturing are
mainly indirect, we will present the three
main aspects on which this technology may
have a notable impact.
This paper will then focus on the different
approaches that can be used to identify
and harness those benefits for your
operations.
Lastly, we will outline the methodology
used by IAC to support our clients in
establishing their own roadmap to additive
manufacturing.
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With the current craze this new technology
is generating, publications on additive
manufacturing usually fall into one of two
categories:
• those announcing new, higher-performance
machines and processes, usually co-written by
machine manufacturers and powder suppliers;
• those describing technical feats achieved by
a handful of large corporations: for instance,
the indirect manufacturing of the moulds used
for Michelin’s new Cross Climate tyres, and
the production of large-dimension aluminium
antenna supports by Thales Alenia Space for
Koreasat 5A and 7.
These publications rarely address economic
considerations; and when they do, they generally
do so in vague terms, focusing instead on the
technology’s long-term potential. The majority
of industrial companies wishing to explore
the potential of this innovative technology
use the same approach: request a quotation
for an already existing part. But no matter
First Priority:Assess Your Value Creation Potential
which process they are considering (metal,
plastic), the manufacturer’s answer is always
disappointing, with prices always exceeding
those of conventionally manufactured parts.
Today, unit manufacturing costs for additive
manufacturing are still superior to those for
conventional production processes; and will
probably continue to be so for a few more years.
When reasoning only in terms of production costs for parts intended to be manufactured conventionally, additive manufacturing is currently not a competitive solution.
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Competitiveness improvement projects recently
led by IAC have confirmed that this technology’s
benefits are mainly indirect, and have no impact
on production costs by current calculation
methods.
In the following pages, we will outline how
additive manufacturing is changing the industrial
paradigm of mass production, which generates
profits through scale, and whose performance
is almost exclusively measured by a product’s
recurring production cost.
The added value created by this process is
nevertheless significant, as illustrated by two
of IAC’s cases presented below.
Industrial companies recently counselled by IAC focus on the indirect benefits of additive manufacturing.
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Context
Development of medical equipment on a
very short time frame.
Significant investments urgently needed to
acquire aluminium pressure casting moulds.
Complicated relationship with the Asian
mould supplier.
Introducing Additive Manufacturing
A succession of prototypes were
produced for sand casting using additive
manufacturing.
These iterations provide the possibility to
adjust both the mould and the part jointly.
Prototype parts are exactly identical to
mass-produced parts, which was not the
case with traditional machining.
GO Hard tooling can be delayed and
certification procedures can be initiated
sooner.
Two Practical CasesC
umul
ated
inve
stm
ent
(pro
toty
ping
+ p
rodu
ctio
n to
olin
g)
Time
Initial samples
Off tool
GO Hard tooling
Prototyping
Conventional processAdditive manufacturing
1
2
1 20% reduction of cumulated expenditures.
Improved time to market: • 1 month gained for first mass-produced part • Certification procedures initiated 1.5 months early
Reduced project risks: disputes with mould supplier, travel expenses to Asia to discuss changes in mould design, etc.
2
Context
High-precision titanium ammunition body.
Prior manufacturing process: shells and fins
are machined, then fins are welded onto shell.
A complex supply chain:
Supplier 1: machined shells
Supplier 2: machined fins
Supplier 3: welding and dimensional control
of finished product
Introducing Additive Manufacturing
The process delivers standard-compliant
parts with a 5% reduction of recurring costs.
-5%
Additivemanufacturing
Conventional manufacturing
Shell
Welding
Fins
The process led to two design optimizations:• Latticed walls: 30% mass reduction.
• Improved thermal decoupling: internal
heating significantly reduced.
Two notable indirect benefits resulting from
this new process:
• No more pieces rejected due to shell
deformation incurred during the welding
process.
• Supply chain simplified: one supplier
instead of three.
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Additive manufacturing directly impactsall ROCE-related factors, listed below genericallyfor all industry 4.0 technologies:
2. M. Blanchet, 2016, Industrie 4.0: Nouvelle donne industrielle, nouveau
modèle économique, Lignes de Repères
The two previous examples highlight the benefits
of additive manufacturing, and show that relying on
production cost analysis alone is not an effective
method to measure the added value of this new
process.
However, they are unique examples, which cannot
necessarily be transposed to other industrial
sectors, nor do they show the full scope of
potential benefits this technology has to offer.
In order to grasp all of these possibilities, business
leaders should use ROCE* — as proposed by Max
*ROCE (Return On Capital Employed) is a financial indicator, which compares the margin rate of a company with
the amount of capital invested to achieve that result. It is an accurate indicator of the company’s efficiency and
competitiveness.
ROCE may be split into 2 key ratios: profitability and capital turnover.
Blanchet in his book Industrie 4.0 — as their key
indicator.
Additive manufacturing isa formidable tool to increase ROCE, the only real competitiveness indicator for industrial companies.
ROCE Profitability
• Product personalization
• High-value added products
• Lower total production costs
• Negative complexity costs(digitalization)
• Leaner flows, higher quality,less rejected products
Economic factors in industry 4.0(2)
• Greater asset flexibility
• Complexity cost transferredto digital innovation
• Better asset utilization (TRS)
• Reduced stocks
Capital turnover
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3 Major Typesof Benefits IdentifiableWhen Reviewing ROCE-Related Factors
Additive Manufacturing Increases Product Value: Optimized Designs, Higher Performance
Higher-performance products for customers:
lattice structures delivering higher mechanical
strength, reduced pressure losses for
channel networks too complex to make using
conventional processes, optimized heat transfer,
etc.
These improvements increase product value and
sometimes lead to innovations that would have
been impossible to make using conventional
technologies (for instance, Michelin’s Cross
Climate tyres).
Asset Turnover Can Also Be Optimized Dramatically with Additive Manufacturing
In addition to indirect equipment manufacturing,
additive manufacturing also offers a wide range
of opportunities to cut down ‘hidden’ indirect costs.
• Stock optimization as a result of on-demand
production.
• Stocks of physical parts intended for
maintenance replaced by digital models
printable on demand.
• Reduced non-quality rate for complex multi-
process parts, involving several employers:
- overall lead-time optimization;
- smaller number of suppliers, resulting in
streamlined logistics, lesser risks of disputes
and lower transport costs;
- no more special processes, too limiting;
- lower product rejection rate.
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Additive Manufacturing OpensNew Business Opportunities:Reaching Smaller Markets,Expanding Product Portfoliosin a Cost-Effective Way
Additive manufacturing offers the chance to
no longer depend on expensive custom-made
equipment such as injection moulds, and
guarantees products identical to their mass-
produced equivalents.
Thus, it provides a way to lower fixed development costs for new products, and contributes to reducing a project’s time to break-even point, while minimizing financial commitment and risk
levels.
As a result, it opens new long-term and short-lived
market opportunities, and the possibility to develop
product portfolios in a cost-effective way.
When implemented optimally, the process
gives companies the possibility to offer product
personalization based on platform manufacturing:
a cost-effective platform is manufactured using
conventional processes, and personalized parts
are manufactured additively.
This new process challenges the pursuit of large
cost-effective batches, the basic principle
underpinning mass production, which requires
targeting solely large-scale markets.
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Identifying Potential Benefitsfor Your Operations
Product Value Approach:Optimized Design, Higher Performance
Unsurprisingly, the best method for this approach
is functional analysis, which provides a way to
identify:
• functions bundled into a single component
• improvement opportunities on the product’s key
specifications (mechanical strength, thermal
resistance, etc.), which can be achieved using
topology optimization, as well as lattice structures.
As previously outlined, the actual benefits of
additive manufacturing are not evident when
requesting quotations for existing parts designed
for conventional manufacturing processes.
Therefore, industrial manufacturers should follow three complementary approaches, together with the relevant associated tools:
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Engine part with lattice structure manufactured by EBM using Ti6A14V to reduce engine weight and increase
robustness(3).
Market Approach
Industrial companies need to invest resources
to identify which new markets can be captured
and in which directions they should expand their
product portfolios to maximize profitability.
In order to reveal these opportunities, the
following two methods could prove helpful when
used jointly:
• a discovery matrix, a double-entry table used
to cross-check two types of information.
Empty cells show ‘innovation windows’ — where
research efforts should be allocated.
• a blue ocean strategy(4), i.e. removing oneself
from a highly competitive environment by
pursuing innovation and originality, in order to
reach new competition-free markets.
Capital Turnover Approach
Possible optimizations revealed by this
approach will mostly be invisible for clients.
However, they are of paramount importance
for industrial companies. Improving capital
turnover automatically leads to an increase of
the company’s operational performance, which
translates to a greater capacity to initiate new
projects.
Methods to use for this approach are:
• Product life cycle analysis, especially during
the development and prototyping phases to
deliver improved time to market and minimize
investments.
• Analysis and optimization of financial indicators:- stock volume and turnover rate;
- extraordinary transport costs — for instance,
emergency plane deliveries;
- disposal of components due to new product
specifications;
- cost of allocating employees to the support of
LCC suppliers and non-quality control.
3. M.C. Leu, N. GUO, 2013, Additive manufacturing: technology, applications and research needs, Front Mech
Eng, 8(3): 215-243.
4. W. Chan Kim, R. Mauborgne, 2005, Blue Ocean Strategy, Harvard Business School Press.
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Identify benefits in all three categories
Product designoptimized design,higher performance
Initiate POCs* to assess the potential of innovative designs and acquire knowledge of the additive manufacturing ecosystem.
New range of higher-performance products.
Teach new skills needed and implement necessary organizational changes.
Broader product offeringNew markets reachedNew business models
Identify quick win opportunities to fund future projects and promote the benefits of additive manufacturing in house.
Define new business opportunities and build the resulting business plan.
Short-term Mid-term
Operational efficiencyImproved capital turnover
New marketsBroader offering and new markets
Build and roll out the additive manufacturing roadmap01 02
(*) Proof of Concept
IAC Methodology:Two Steps to Identify and Quantify Opportunities
Relying on a clear roadmap for implementing additive manufacturing contributes to the formal definition of short- and mid-term objectives for each of the three approaches described above.
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Phase 1 is dedicated to the identification and assessment of potential benefits, and typically lasts
3 to 4 months.
Lasting approximately 6 months, phase 2 aims at producing a clear roadmap and defining short- and mid-term objectives. Quick win savings due to
increased operational efficiency provide tangible
results to communicate on the benefits of the
technology and to initiate an innovative design
process with confidence.
Considering additive manufacturing from the perspective of added value, this two-step methodology yields very tangible results.
It provides an effective way to minimize concerns about the major strategic shift brought on by the generalization of this revolutionary new manufacturing process.
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by Jean-Baptiste Guillaume, Partner
Accelerating Your Time to Market:What Challenges? What Solutions?
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Slow and SteadyWins the RaceAccelerating Your Time to Market / Introduction
Keeping a product launch — a.k.a. time to
market — calendar can sometimes prove
extremely challenging. All industrial professionals
have on one occasion or another experienced a
rushed product development, either to meet the
deadline of a trade fair or take advantage of a
seasonal sales opportunity. And there is not a
single R&D professional who has never had a
confrontational meeting with a sales department
colleague, because today’s products meet
yesterday’s needs and tomorrow’s products will
not be released until the day after that.
Unfortunately, the impact of bad time-to-market
management is far from insignificant.
For industrial companies facing deadlines
because of trade fairs or seasonal market
opportunities, rushing a product launch
inevitably leads to higher costs and diminished
economic performance. Product features are left
out, negotiations with suppliers are cut short and
existing technical solutions are reused without
being optimized.
Of course, there are those who would rather
secure their profit margins and favour the
product’s performance over deadlines, but
pushing back a launch date has a negative
impact on development costs, gives the
competition additional time to gain a foothold on
the market and increases the chances of there
being a discrepancy between your product and
your customers’ expectations, which might have
evolved during that extra time.
On the contrary, compressing your launch
calendar for a new product certainly is a good
way to keep non-recurring costs down, reduce
your time to return on investment and show
greater adaptability to market shifts than your
competition (see figure 1).
So, how do you design a strategy to help
you accelerate new product launches? What
parameters do you need to focus on and what
challenges will you be facing?
28
Jean-Baptiste is IAC’s specialist on time-to-market
improvement and process optimization.
He is also responsible for modular design projects in
a variety of sectors: household appliances, medical
equipment, industrial roller shutter doors, shipyard
compressors, etc.
Jean-Baptiste Guillaume
[email protected]+33 (0)6 21 62 55 99
Clients:
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Fig. 1 — Standard vs optimized time to market
Reduced costs: optimal product development requires less resources.Faster ROI: new products generate profit sooner.Increased value: new trends are integrated into your offering sooner than your competition, more products are launched with the same resources.
1
3
2
Cas
hflow
Time
Optimized time to marketStandard time to market
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Building a Consistent Product Strategy
The first key to managing and improving your
time to market is to adjust your organization by
providing it with a consistent product strategy,
the right processes and effective operational
tools.
Some of our clients even go further than that by
developing modular product ranges. The goal is
to invest money at the beginning of the process
and be in a capacity to launch more products in
the long run, while keeping recurring and non-
recurring costs down.
An organization that focuses on time-to-market
optimization invariably keeps a simple product
development roadmap, with clear priorities.
Experience has shown that initiating more
projects doesn’t translate to more products
reaching the market — quite the opposite.
The reasons are well-established: divided
resources, priority changes during development,
impossibility to allocate resources on objective
criteria.
Some effects are clearly visible: delayed
launches, conflicting alternatives, a sense
of urgency, etc. Others, not so much: loss
of employee efficiency, loss of information,
difficulty to implement a comprehensive cost
optimization strategy.
Therefore, it is the Board of Directors’
responsibility to define a roadmap, based on
economic and strategic considerations, the
company’s competitive context, and their
precise evaluation of corporate resources.
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Optimizing Processes
Boosting Operational Efficiency
Once those foundations have been laid, project
leaders can then start assessing their product
development processes, without forgetting to
compartmentalize: a minor cosmetic redesign
should not be treated on par with a breakthrough
innovation.
The main challenge at that point is to break
through those glass walls that stand between
departments: sales and R&D, R&D and production,
procurement and the rest. All companies,
including the most high-profile corporations,
suffer from a lack of communication between
departments: customer needs are insufficiently
or inaccurately reported, issues regarding
manufacturing are only addressed at the end
of the process, procurement is involved too late
in the definition of technical solutions, the list
goes on.
Additionally, some companies compound
the issue by implementing very standardized
phase-gate processes, which for instance
require formal approval before any step can be
initiated — including design reviews, Go tooling
or any other major project milestones. Most
of the time, taking a more flexible approach,
eliminating unnecessary approval processes
and shifting to a more pragmatic approach, can
greatly increase efficiency.
Building a process that involves everyone at the
right time, where information flows freely and
delays can be compensated quickly, requires
all employees to question their methods.
Behaviours and work patterns are sometimes
deeply ingrained, but promoting information
sharing can make old boundaries disappear.
The last step, once the product development
strategy and associated processes have been
implemented, is learning to work more efficiently.
As we saw it earlier, optimizing your development
processes yields greater and earlier commitment
of all departments to R&D, which is usually the
core of most product development projects.
Managing more collaborators with greater
efficiency requires practical tools and methods.
The development phase must be limited in time
to encourage focused efforts on high-value
added tasks.
The best way to go about this is to use visual
management tools and hold short, but regular
meetings with the entire team — the so-called
stand-up meetings, which originated in start-up
companies.
However, the terms of these meetings need to
be tailored to reflect the company’s cultural
identity and the project leader’s personality. A
very directive system is just as possible as a
more participative approach, where employees
take turns leading every meeting.
Another essential factor is to keep track of your
collaborators’ charge rate: it is well established
that efficiency drops dramatically beyond an
80% threshold. Abandoning a culture where an
excessive workload is constantly weighing on
the design office can sometimes prove a defining
change.
31
Designing a Modular Product Range
However, for a long-term perspective, the
most effective tools are technical rather than
organizational.
Industrial companies that develop their ranges
based on a modular concept systematically
outpace even the most ambitious calendars
set by competitors carrying traditional product
ranges.
Modular design consists in breaking down
products by function, then designing a module —
i.e. functional unit — for each function, to cover
the entire scope of features.
The point for industrial companies is to be in
a capacity to introduce a growing number of
products on the market, without having to
change more than one or two modules, instead
of starting from scratch every time.
We have seen an example of this with one
of our clients, a company that designs and
manufactures air compressors for industrial
sites and shipyards. The goal was to launch 100
different models over the following 10 years, as
opposed to one or two models a year previously!
So for each element type (pistons, cylinders,
engines, housings, etc.), we have determined the
variety of parts necessary to build the entire
range and offer optimal solutions in terms of
technical performance. We carried out a cost
assessment and drew up a development calendar.
The conclusion was that 81 basic modules were
enough to develop 100 different products, when
initially each new product was made up of 10
unique functional elements.
Our client then designed the modules that were
needed for the first products. So after just two
years, the first four compressors were launched
on the market. But the pace of the releases will
pick up in the years to come, as new models
will use increasingly more existing modules.
Figure 2 below shows that with only 4% of the
range already on the market, 22% of the modules
have been designed and almost half of the R&D
efforts have been made.
Products
Modules
Effort
Fig. 2 — Acceleration of launch pace
4% 96%
78%
51%
22%
49%
Completed Remaining
32
Modular design phase
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8
Thorough development of modules resulting in accelerating launch pace
PROJECT LAUNCH
4 814
26
46
64
100
Fig. 3 — Acceleration of launch pace
The pace at which new products are introduced on
the market accelerates as more modules are being
developed (see figure 3 below). Ultimately, the mean
time to market, smoothed over a 10-year period, will
be 5 to 10 times lesser than initially!
What major steps are involved in designing a modular product range? What actual economic benefits are to be expected? What are the best practices by sector?
All of these questions will be addressed in an upcoming publication!
33
Inter Action Consultantsprovides support for:
Designing a product development strategy
consistent with your economic context and
corporate resources:
• mapping, optimizing and securing your
development processes;
• auditing your operational practices and
introducing tools and practical solutions to
achieve greater efficiency;
• defining and carrying to completion all of
your modular design projects.
Example of resourcesallocated to a projectin the healthcare industry
• 3 IAC consultants for a 6-month period.
• Cross-functional project involving all
departments, from sales to production.
• Time to market reduced by 5 months from 18.
• Best practices gained for future projects.
34
35
by Jean-Baptiste Guillaume, Partner
Connected DevicesPlace the Device First!
37
Connected Devices / Introduction
Mass-market connected devices still have not
found much of an audience and have still to meet
the tremendous success that was predicted for
them only five years ago.
The reasons are well-established: their perceived
value is too low and their price too high.
First of all, let us just rule out pointless inventions
like connected toilet paper holders to focus
instead on actually useful products. Even when
a product’s connected capabilities are actually
considered useful, the price difference with the
However, we have noticed that smart capabilities
caused issues in our clients’ usual product
development process on three distinct levels.
The first problem is increased difficulty to assess
with precision the actual perceived value for
consumers to make sure that the development
team is heading in the right direction.
The second lies in the need to rapidly acquire
expertise in and assess new and unfamiliar
technologies — electronic sensors, networks,
etc. — during the development phase.
The last issue is the added complexity, which
interferes with quality assurance and time to
standard equivalent remains too substantial (see
figure 1).
Is that reason enough to retire the idea of
developing mass-market products with smart
capabilities? Of course not. Some rare success
stories attest to the fact that it is possible. But
after the frenzy of the last few years, industrial
companies now need to go back to the basics
of product development: perceived value, cost
management and time to market. The bottom
line is, if you’re considering launching a smart
device, be smart and place the device first!
market. Industrial companies wishing to go in
that direction will be meeting new partners and
facing new challenges: online privacy legislation,
data security, data management, application
development, etc.
In short, there are three conditions to reach
success:
• confirm the product’s perceived value as soon as possible;
• keep control over design and costs;• adjust to a more complex ecosystem to keep your time to market goal.
350
300
250
200
150
100
50
0
€329
€181
Connected deviceStandard device
€135
€20
€63
€8€38
€3
Fig. 1 — Price difference between mass-market products and their connected equivalents(1)
1. Source: retail prices for similar standard and smart models found on various shopping websites in May 2017.
Fork Shower head Electric toothbrush
Pressure cooker
38
Jean-Baptiste is IAC’s specialist on time-to-market
improvement and process optimization.
He is also responsible for modular design projects in
a variety of sectors: household appliances, medical
equipment, industrial roller shutter doors, shipyard
compressors, etc.
Jean-Baptiste Guillaume
[email protected]+33 (0)6 21 62 55 99
Clients:
39
Confirm the Product’s Perceived Value
The choice to develop a connected product can be justified by one of several distinct strategic goals, presetned below in an Ansoff matrix(2):
Reacting to a new standard on the market
Example: roller blinds, with the growing prevalence of home automation.
Exis
ting
mar
ket
New
mar
ket
Exisitng product New product
Pursuing breakthrough innovations
Example: connected watch offering a wide array of services beside time-keeping.
Reaching a more profitable audienceExample: connected pressure cooker with access to
hundreds of recipes for twice the price.
Introducing a diversification strategyExample: connected activity-tracking bands by printer
specialist EPSON.
2. Matrix by product and market types (existing or new) to identify an appropriate growth strategy.
Once the strategy has been decided and whatever
the angle chosen, the first important order of
business is to define in very practical terms what
needs your product’s smart capabilities will be
addressing, and to confirm the concept’s relevance
as soon as possible.
Though broad market surveys are useful to draw
the first outline of a project, the best approach
is unquestionably to establish direct contact
with potential consumers. Focus groups led by
marketing professionals are an opportunity to
Fig. 2 — Strategic goals when launching smart products
put various hypotheses to the test in order to
confirm your product’s (actual and monetizable)
added value, and move past ideas that simply
look good on paper.
In a market development situation (as defined
by the Ansoff matrix: existing product / new
market), the difficulty is learning to target new
customer profiles with precision. Marketing
professionals can of course seek the counsel
of a wide array of specialised consulting firms.
40
Confirming the relevance of a concept can prove
quite challenging for experienced professionals
used to developing standard products, especially
when it comes to unfamiliar technologies and
features.
At this point, conducting a PoC (Proof of Concept) can help solve this difficulty, while
providing a chance to actually experiment
with various options in terms of materials
and software solutions — thus exploring user
experience (UX).
For instance, one of our clients used an iPad to
simulate the control panel of an air compressor,
using a PowerPoint presentation to mimic the
user interface. This inventive solution was an
opportunity to have potential consumers test
Data Future benefits
Conventional strategy Digital strategy
Requirements & Specifications
Requirements & Specifications
Development & Design Development & Design
Product use testing Product use testing
Sale Sale
Customers Customers
Preliminary studies Preliminary studies Savings
Actual uses
Failure and breakage depending on cases
Datamonetization?
Time savedQuality and volume of data generated
Fig. 3 — Benefit of data management on development process
two concepts before any financial decisions
were made.
The use and monetization of product-generated
data is equally strategic and can take one of
three forms (see figure 3):
• CRM: connecting consumer profiles with
product uses;
• predictive maintenance: learning how to
anticipate failures depending on how the
product is used;
• Marketing analytics: studying product-
generated data to produce useful indicators.
Ultimately, the decision should also be guided by the following question: are profit and productivity
increases superior to the total cost of developing smart capabilities (TCCA: total cost of connecting
assets)? This is the second condition for success: keeping control of design and costs.
41
The first aspect resides in the product’s new technologies (TCCA):
Electronics, software, network, data management,
etc. The temptation is great to outsource
architectural and technical decisions to an
outside consultant offering turnkey solutions.
The danger is to find yourself stuck with a
proprietary solution and miss the chance to
evaluate all options available, which translates
to a negative impact on direct costs, as well as
associated management costs.
It is essential to take the time to conduct a
comprehensive review of potential partners and
technologies, taking into account the evolution
of norms and formats, as well as the solution’s
degree of openness.
For example, we could mention the choice for
a low-power wide-area network (LPWAN), which
offers several options, including the LoRa and
Sigfox technologies, in addition to the LTE-M
standard (heralding 5G expected for 2020).
The second aspect is related to defining your priorities between developing new features and cost management.
Many smart product development projects see
their time to market uncontrollably delayed,
which often leads project managers to take a
safe way out and settle for expensive solutions.
Direct costs should remain a key element of your
reporting process, as is the case with any other
industrial project; it is the beacon that will help
collaborators navigate this unchartered terrain.
Aside from progress reports, and to avoid
having to choose between minimizing costs
and shortening time to market, efforts must
be invested into keeping calendars, regardless
of the growing number of stakeholders in your
environment.
Keeping Controlof Design and Costs
During a connected product’s (re)development phase, there are two main aspects that require careful consideration to keep costs under control.
42
During the preliminary phase,
experts can provide support
on designing app prototypes or
exploring User Experience in
general, or even on identifying
potential customers and
organizing focus groups in
order to define the product’s
specifications.
During the development phase,
the challenge is to integrate
specialist technologies: sensors,
software programmes and
networks – a very broad and
constantly renewed offering that
will need to be assessed and
integrated into the process
(see figure 4).
During the rollout phase,
different possibilities for
challenging established
processes can be used, from
processing and updating
data to integrating predictive
maintenance, or even shifting
your entire business model.
Adjusting to a More Complex Environment
The greater the number and diversity of parties involved in the development process, the stronger it needs to be.
43
1 2 3Physical device
Ecosystemof a mass-market connected device
Optical
Presence, proximity
Electric, magnetic
Position, speed, tilt
Acoustic, sound, vibration
Flux, flow, leakage
Force, couple, pressure
Temperature, humidity, gas, chemical
Digital platforms: QR code, NFC
Fig. 4
Sensors
Connected capabilities
Applications 1
3
2
Applications are designed by developers using APIs — Application Programming Interface.
Different technologies depending on bit rate and range.
Developer
Connected device Application
API
Bluetooth std
Bit
rate
in K
bits
/s
Range in m
WiFi std
Zigbee std
Ant+ std
NFC
BluetoothZigbee
WiFiZ-Wave
Ant+
Z-Wave std
10,000
10,0001,000100101
1,000
100
10
44
01
02
03
Develop Brand New Planning Toolsas Soon as Possible
Recipes of the past do not continue to work as complexity increases. Experience has shown that methods like Value Stream Mapping (VSM) can help the project team identify all of the project’s stakeholders and phases.
Involve Outside Stakeholdersfrom the Very Beginning
This is a way to identify upstream and downstream parameters, as well as each phase’s duration and resources needed – all basic information for effective time to market management (see our December 2016 publication).
Conduct a Risk Assessmentfor the Project and DefineResulting Action Plan
A project combining new technologies, new partners and organizational changes is by definition riskier. However, risks can be identified and assessed early into the project, and those posing the greatest threats can be anticipated. Tools like FMECA can provide a very effective tool for this purpose.
Three measures can help you compress and manage your time to market.
45
In Conclusion
The few guidelines presented above constitute
a healthy framework to ensure your project’s
success, provided the market responds to your
product. But this methodology, with a few minor
adjustments, can also be used for developing
connected equipment for a B2B market.
And this is precisely where connected devices
will find the greatest potential. Pay-per-
use, predictive maintenance, leasing, route
optimization, logistics, etc. The possibilities are
endless.
As a result, industrial companies have no choice
but to start exploring how smart capabilities
could impact their market, their business model
and industrial processes, in order to anticipate
future breakthrough innovations and strengthen
their position.
.
46
01
02
03
Preliminary Studies
• Identifying and qualifying consumer needs and behaviours• Conducting market surveys• Defining and challenging business models
• Designing prototypes and testing concepts (UXD, product, etc.)
• Defining a data strategy
Development
• Desigining to cost or value• Identifying and picking competitive suppliers• Communicating and co-designing with suppliers and partners
• Implementing a data management strategy (technologies, migrations, new corporate IT services, developing in-house data management tools, etc.)
Rollout
• Managing complex projects• Compressing time to market• Assessing and managing risks and defining corresponding action plan
• Monitoring and analysing results (reporting, etc.) + building predictive models (maintenance, costing, etc.)
Inter Action Consultants Provide Support Throughout the Development Process
47
by Nicolas Huygevelde, Manager
DomesticRelocationThe Case of France
49
Remaining competitive without outsourcingDomestic Relocation / Introduction
2013 and 2014 marked a turning point in the
history of globalisation, with several high-profile
companies deciding to move their production
not to China, but rather back to the USA or
Europe. Why?
The answer to this question lies in several
factors:
Shorter delivery time, fluctuating demand, issues
with quality, the need for specific expertise
in some sectors, the unique nature of some
products, a lack of qualified workforce available
locally, the need for greater coordination
between R&D and production.
Even though there are still few occurrences
of domestic relocation, the paradigm of
systematically moving large-scale production
operations to China is now being called into
question. China’s declining competitiveness
as a result of rising direct costs is not being
compensated by other low-cost Asian
countries. And Eastern Europe remains an
alternative few companies choose. But more
importantly, increasingly decisive factors like
competitiveness, product personalisation,
automation and eco-friendly design are weighing
toward maintaining or even relocating production
domestically.
How do you gauge the potential benefits of
domestic relocation? A total cost of ownership
approach provides a way to assess hidden
benefits. It should be noted that the choice to
relocate does not need to apply to the entire
production. However, it should be very clear
which operations are to be maintained abroad
and which to be relocated domestically. The
initiative is usually paired with a complete
supply chain overhaul. Lastly, a design-to-
cost approach applied to both products and
production provides an effective way to re-
create value when adapting to a domestic
industrial context.
50
Nicolas is IAC’s specialist on the redesign to
cost methodology and increasing production
competitiveness in France.
He has spent the last 10 years conducting
competitiveness improvement projects for existing
or new products in a wide variety of sectors.
Nicolas Huygevelde
[email protected]+33 (0)6 20 30 86 06
Have also collaborated:
Aman Ranjbaran
Project Leader
Barriatou’lah Achimi
Consultant
Clients:
51
What Benefitsto Relocating Your Production Domestically?
China-Based Production, an Increasingly Less Pertinent Choice
Chinese Labour Cost on the Rise
Since 2008, Chinese wages have risen by 13 to 15%
annually, as opposed to an annual increase of 1-3%
in France and the USA.
The gap is so wide that Chinese workers, who
were 20 times cheaper than the French 12 years
ago, are only 5 times cheaper in 2017. According to
projections, this ratio should drop to 2 or 3 times
cheaper by 2022.
In addition, social contributions are also going up,
from 23% of an employee’s pay in 2002 to 35%
in 2009. The result is a dramatic increase of the
total cost of workforce by 15 to 20% over the last
ten years.
Dol
lars
per
hou
r
0
4
8
12
16
20
24
2004 2008 2012 2016 2020 2024
USA
79%
95%
59%
Fig. 1 — Comparative evolution of hourly wages
FRANCE
CHINA
52
Increase of Other Hidden Costs
This analysis should also consider labour
productivity to establish a comparison based on
unit labour cost — i.e. the ratio between hourly
labour cost to production output.
The increase of unit labour costs in China has
accelerated in the last 10 years, to reach 80% of
US unit labour costs in 2017 — a 93% increase
since 2005.
Beside labour costs, China is also registering an
increase of costs related to transport, real estate,
taxes and energy; and the trend is expected to
continue over the next five years. This change is
a result of the global economic context, Chinese
inflation and the Yuan’s appreciation.
A complex supply chain can lead to extended
delivery times and higher warehousing costs.
Chinese productions are less responsive and
less flexible to accommodate requests for
rapid design modifications. Because of its
geographical distance from Europe and the
US, and because of its choice to specialise in
high-volume low-diversity products, China is
at a disadvantage to respond to fast-changing
demand on Western markets. The result is that
For the same output, the cost of labour per unit
in both countries is converging. Which means
China’s only real value would be its massive
production capacity, owed to its large readily
available workforce.
China’s competitiveness is not clear for time to
market goals ranging from 3 to 6 months.
Furthermore, there are still significant risks of
intellectual property theft, due to the fact that
China has developed its industry on a model
based on reproducing products designed abroad.
Even though manufacturing in China can still be
the right choice for products intended for high-
growth Asian markets, the widely-held opinion
that China is the best option for relocating your
production is no longer justified.
% o
f U
S un
it la
bour
cos
ts
0
40
80
120
160
2005 2009 2013 2017 2021
FRANCE
CHINA
Fig. 2 — Comparative evolution of unit labour costs between France and China
+14%
+93%
53
What Possible Alternatives Are There?
Relocating to Other Countries:
A Risky Choice with Limited Options
Vietnam, Indonesia: lower costs, but higher risks
Poland, Romania: limited options
In some Asian countries, labour costs are still very
low, and are increasing at a pace much slower than
in China. Hourly wages in countries like Vietnam,
Bangladesh and Indonesia are still twice to four
times lower than in China.
But taking a look beyond financial considerations,
the risks we identified in China are even greater
in those countries: supply chain complexity and
And what of Eastern Europe, another option
closer to domestic markets, where cost and risk
factors are less dissuasive? For instance, a growing
number of companies are choosing to establish
production sites in Poland or Romania. However,
there are only a limited number of alternatives to
associated costs, longer delays, lower-qualification
workforce, lesser quality, low responsiveness and
flexibility. These countries’ capacity to absorb
China’s current output is also limited by the
substantial lack of infrastructures: transport,
energy, automation.
Asian countries and they do not necessarily offer
more satisfaction for productions that require high
levels of automation, because the labour cost
factor becomes insignificant.
54
What Solutions to MakeYour Domestic Production More Competitive?An Increasingly Favourable Contextfor France-Based Production
Visible Costs, Hidden Benefits
The increasingly large number of possibilities
for automating certain processes can reduce
your labour needs, for instance in sectors like
mechanics or the automotive industry.
While the number of incentives to invest in
China tends to decline, Europe is currently
launching an array of economic recovery
measures. Among those worth mentioning in
France: reindustrialisation subsidies (Aide à la Réindustrialisation) and tax credits on labour
costs to boost competitiveness (Crédit d’Impôt Compétitivité Emploi).
At first glance, choosing to relocate manufacturing
operations to your domestic market seems to
induce a number of visible direct costs, such as
availability and labour costs, as well as equipment
and automation investments.
In addition, the growing diversity of consumer
needs requires greater adaptability, smaller
production batches, and more responsive
design and manufacturing processes to face
intense fluctuations on the market. The trend
toward higher personalisation to address
consumer needs requires industrial flexibility
and excellent coordination between R&D and
production, which are only possible when
production operations are based locally. This
proximity provides higher traceability, essential
to meet quality expectations that usually come
with personalised products.
But investigating hidden costs incurred as a
result of basing your production operations in
China and the hidden benefits of manufacturing
in France provides a best-cost country approach,
as opposed to a lowest-cost country.
CHINA FRANCE
79%
3.5%
84%
17.5%
-6.5%
22.5%
+29%PROFITMARGIN
Visible costsHidden costsHidden benefitsNet margin
Fig. 3 — Proportion of hidden costs in China vs. hidden benefits in France
France, Best-Cost Country VS China, Lowest-Cost Country
55
Lower Logistic Costs
• Shorter transport times.
• Smaller outstanding inventory and lower
obsolescence costs.
• Fewer intermediaries and lower associated costs.
Lower Non-Quality Costs
• Shorter certification procedures.
• Lower product rejection costs due to higher
quality.
Lower ‘Inefficiency Costs’
• Greater coordination between stakeholders,
made possible by the proximity of R&D,
production, suppliers, subcontractors and
consumers: this synergy delivers lower materials
costs and higher-value added products.
Reduced Costs
56
Increased Revenues
France-Based Production:Gauging Your Value Increase Potential
CapturingNew Markets
• Creating value through innovation: new
developments, products tailored to individual
consumer needs and high adaptability to
market shifts.
• Product personalisation: control over volumes
and production outputs is essential to face
greater product personalisation and broader
ranges.
• Increasing perceived quality: a result of higher
perceived value associated with French-made
products in the eye of the consumer.
Considering each line item individually is
certainly not the best approach, as it invariably
leads to focusing on direct costs, which remain
lower in low-cost countries.
On the contrary, the point is to cast a
comprehensive and meticulous eye on the
situation, to determine the right market and total cost of ownership (life cycle cost) for each
product.
For this reason, it is essential to identify ways
to impact other cost factors, including design,
procurement, your supply chain and production.
Considering that France and low-cost countries
have very distinct business environments,
all four factors can be optimized in order to
make France-based production profitable and
attractive.
Ultimately, the goal is to increase
competitiveness on direct and indirect costs
and factor in intangible benefits: flexibility, time
to market, etc.
Better Service Offeringand Increased Customer Loyalty
• Taking an eco-design approach: an effective
way to create value added, both through
reduced costs and higher perceived value
by customers. The possibility to repair eco-
design products will be a decisive criterion for
tomorrow’s consumers.
• New services possible, as a result of proximity to
your customer base: information to prospective
customers, installation, training, maintenance,
etc.
57
IAC’s Four-StepTotal Cost of Ownership Methodology
Identifying and Assessing Indirectly Appreciable Costs and Benefits
Picking relocatable products
Business model &market analysis
Segmenting yoursupply chain
Logistic flowmapping
Determining direct costsand the benefits
of redesgin
Productredesign to cost
Identifying the benefitsof CAPEX optimization
Factory redesign to cost
01 02 03 04
58
01
02
The first thing to do is break down the market into
sub-categories and find the subtle distinctions
between them, in order to identify which products
would gain from being relocated domestically. Is
the market strictly domestic or does it extend
across national borders? The image conveyed by
French-made products can generate a significant
competitive edge, whether on a local or global
market. The presence of quality suppliers in the
region is also an important aspect to consider.
Then, build your positioning: for instance, in
luxury and high-end sectors, Asian consumers
are very receptive to the ‘Made in France’ label.
But looking past the label, the value of French
know-how can also give access to certain
certifications or appellations, which can prove
very differentiating on the market, especially for
artisanal or niche products.
It should be noted that in order to receive the
prized ‘Made in France’ label, products assembled
The precise analysis of logistic flows is a good
way to gauge the benefits that could be accrued
from domestic relocation.
To that effect, industrial companies need to
break down their supply chain into segments, and
identify hidden costs and associated risks. This
is a way to assess exactly how much transport,
warehousing and handling weigh on production
costs. For Asia-based productions, one hidden
cost that is often overlooked is time to market
delays, as a result of longer delivery times (15 to
21 days on average) and other unforeseen events.
Picking Relocatable Products
Segmenting Your Supply Chain
or transformed in two countries or more need to
meet at least one of the two following criteria:
• the last substantial transformation or
operation — i.e. resulting in a new product — is
performed in France;
• at least 45% of the product’s added value is
produced in France.
The ‘Made in France’ label does not necessarily
mean that products are 100% made in France.
Your domestic relocation project can be partial
and target only those products and operations
you deem worth relocating. It can also apply to
a specific component of a product, depending
on its value, or a specific operation of the value
chain.
The new positioning is also an opportunity to
offer new high-value added services, including
stronger customer service or greater possibilities
for product personalisation.
This approach also provides a way to gauge the
economic benefit of time saved on travelling and
transport, reduced parts obsolescence and lower
product rejection costs.
The choice to relocate domestically necessarily
calls for a complete overhaul of your supply
chain strategy for each segment identified — an
opportunity to achieve maximum flexibility and
efficiency.
59
03
04
One of the ways to reduce operational costs is
to improve productivity in the relocated factory,
in order to compensate the difference in labour
costs between both countries.
An efficient way to lower production costs is
to (re)design products to cost. This approach
provides an opportunity to identify potential
savings on materials costs and procurement.
Relocating sometimes involves making new
investments: the right approach is to optimize
collateral costs in order to become competitive
with emerging markets.
The usual factory design process — project outline
by engineering consultants, in-depth studies, then
detailed infrastructure costing — should be altered
to integrate a design to cost approach.
To achieve that, industrial companies should
involve suppliers in costing studies to explore lean
co-design solutions and define a target factory
cost.
Assessing the Potential Benefits of Redesign
Identifying the Benefits of CAPEX Optimization
But another important benefit of redesign is a
chance to streamline your product by reducing
the number of components or production steps,
or by automating some processes to reduce
labour needs. Lastly, reworking a product’s design
or architecture can also lead to significantly
increased flexibility in your production.
Factory revamping is another way to lower
investment costs, much like extending an existing
factory or vertical construction, which increase
production capacity and create connections that
contribute to optimizing the new factory.
In addition, introducing new innovative industry
4.0 processes, including additive manufacturing, is
also an effective way to draw value from relocating
to a technologically advanced country.
60
Inter Action Consultants provides support for:
• building a product relocation strategy
that is consistent with your business
goals;
• mapping, optimizing and securing
logistic flows;
• defining and conducting product and
factory redesign projects;
• auditing your operational practices
and implementing practical tools and
methods to achieve greater efficiency.
Example of a consulting project successfully conducted by IAC:
Partial domestic relocation to obtain
‘Made in France label’ and win
a contract.
The goal was reached, with 63%
of the product’s value resourced
and a 54% cost reduction.
61
by Nicolas Huygevelde, Manager
Platforming ManufacturingBuild Your Competitiveness
63
What IsPlatform Manufacturing?Platform Manufacturing / Introduction
Platform manufacturing is a design principle
originally developed in the automotive industry,
based on delayed differentiation.
Large automotive groups like Volkswagen and PSA
Peugeot Citroën manufacture a variety of models
using the same technical platform, distributed
under different brands (VW, Škoda, Peugeot,
Citroën, etc.).
This trend is far from being outdated in the
automotive industry: Volkswagen AG is expected
to introduce its MQB modular platform for brands
Audi, Seat, Škoda, and Volkswagen this year in
plants worldwide. And it is certainly gaining
momentum in other industrial sectors.
64
Nicolas is IAC’s specialist on the redesign to
cost methodology and increasing production
competitiveness in France.
He has spent the last 10 years conducting
competitiveness improvement projects for existing
or new products in a wide variety of sectors.
Nicolas Huygevelde
[email protected]+33 (0)6 20 30 86 06
Clients:
65
IAC’s last two collaborationswith the SEB Grouphad the following goals:
To design a robust and competitive modular platform for mid-range steam irons marketed by the Group’s 3 brands: Rowenta, Calor and Tefal.
IAC lent its expertise to teams of both the Pont-Évêque (France) and Erbach (Germany) factories,
exploring all possible synergies between the two industrial sites, investigating past designs and their
respective strengths.
At the end of the project, the French professional journal L’Usine Nouvelle awarded Factory of the Year to the Calor (SEB Group) Pont-Évêque site — which pioneered the project.
To redesign the architecture of steam generators so as to achieve greater industrial flexibility.
The Pont-Évêque factory is now in a capacity to deliver product innovations, both in terms of design
and technical specifications, in less than 3 months, as opposed to an average of 8-9 months previously.
01
02
What resources...
3 IAC consultants for a 6-month consulting
project
Departments involved in the project:
• Marketing• Design Office• Procurement• Industrialization
... for what results?
Time to market decreased by 20%
10 to 15% growth of turnover
Investments reduced by 40%
Several hundreds of thousandsof Euros freed up
66
Freedom in the Design
A modular platform system offers the benefits
of greater design diversity with the same level of
technical performance, thus satisfying a wider
audience, and making it easier to pursue several
international markets.
Greater Reactivityto Capture New Markets
Platform manufacturing is a significant advantage
in a highly competitive environment. With
this model, the SEB Group can seize short-
lived and seasonal opportunities, delivering
very competitive special edition products (for
Mother’s Day, Christmas, L’Oréal, etc.) in a very
short time virtually anywhere on the globe.
As product personalization / customisation
comes at the very last stage of production and
because it builds on an existing technical core,
new product developments require considerably
less resources.
For the steam iron market, this can translate to a potential 10% increase of annual turnover.
Better Forecastingfor Partners and Suppliers
Your standard parts suppliers will be glad to see
that your forecasts on your upcoming purchase
orders have gone up. This should also increase your bargaining power, if you can produce comprehensive forecasts.
67
Stock Optimization
Another advantage of introducing platform
manufacturing in your production process is
optimized inventory management, with fewer
components needed to build a common technical
core, i.e. the platform. Your supply chain, which
now covers a whole range — or several! — is greatly
simplified and the value of your incoming inventory
is significantly reduced. In the example we gave
earlier, this means several hundred thousands of Euros freed up to be reallocated elsewhere.
Greater Offering Diversityand Control
The technical architecture of modular products
delivers higher adaptability, making it possible
to offer a broader array of designs and features
to your customers and acquire new ones. The
resulting diversity is built into the original design,
which automatically generates a 5% drop in operating costs.
68
Inter Action Consultants provides support for:
• identifying the products or product ranges
for which platform manufacturing could
provide a strategic competitive advantage;
• leading, monitoring and structuring modular
design projects, helping you identify which
concept/architecture will deliver the
greatest flexibility;
• introducing platform manufacturing and
building product diversity, while keeping
control on direct costs. With over 35 years
of experience in platform manufacturing,
IAC is the best partner to help you improve
your competitiveness.
And for the years to come?
The trend toward highly personalized
products is accelerating, so manufacturing
processes must evolve to face an
increasingly faster-changing market.
Keeping a close watch on new technological
advances and collaborating on projects in
all industrial fields, IAC is uniquely equipped
to suggest entirely configurable production
solutions (including additive manufacturing,
etc.). Relying on a network comprised of
thousands of partners offering a wide array
of technologies, IAC is the perfect ally
to help you identify the right solution to
manufacture your products.
Lower Investments
Mutualizing technical elements across
several ranges of products, or even several
brands, yields significant savings on
development costs: investments are fewer,
smaller and can be amortized across a
broader range of products. Components
are more often standardized and used in
new models, so are technical elements
and processes.
For instance, the operating model defined
by IAC for the SEB Group project led to a 40% decrease of investments across the Group’s three brands — in the previous
situation, expenditures were duplicated
on both industrial sites.
Facilitating Sales
Paired with a configurator, these platforms
provide a considerable advantage and a
differentiating element for your sales
department. It enables them to adjust
the product’s configurations during
client meetings and discuss time frames and prices right away. As a result, they
can effectively provide immediate
answers for a variety of needs depending
on the market’s nature. The complexity
of industrial processes is no longer an
obstacle and companies are in a capacity
to immediately pursue most national and international markets.
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How to Succeed?
by Jean-Baptiste Guillaume, Partner
Emerging Markets
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Emerging Markets:How to Succeed?Emerging Markets / Introduction
Today, the dilemma that industrial companies
are facing is no longer whether or not to expand
commercially into emerging markets, but rather
how to develop an effective action plan to
maximize chances of success.
The fact is that the dynamics at play in emerging
markets are very different from those of more
mature economies: client profiles, industrial
ecosystems, demand variability, labour market,
workforce education, etc.
The opportunities they present are immense;
the perspective of new business (vs renewals),
pioneer advantage, and strong economic and
demographic growth rates are pushing industrial
companies of all sectors to take an interest.
But the challenge is just as immense as the
reward.
First, let us have a look at a strategy that does not
work: duplicating an offering that was successful
in Europe without adapting it to the specificities
of the target market. This is not just about pricing.
The entire range of the offering may need to be
re-examined: products, services, value chain.
So how can you break into an emerging market
with minimal risks and costs? How do you develop
a fresh and tailored strategy without losing touch
with your history, your experiences and those
trusted, time-tried solutions?
The expertise that IAC has developed while
collaborating with industrial companies that have
managed to gain a foothold on emerging markets
has brought to light three conditions for success.
The first condition is to have precise insight into
your prospective customers’ product needs and
value chain.
Equally important is the technical agility to adapt
rapidly to diverse and fluctuating demand.
The third key to success is having an effective
rollout plan that addresses issues related to
supply chain strategy and time-to-market
optimization.
Emerging country: a country that stands out among other developing countriesdue to strong macroeconomic results (industrial production, employment)and a high economic growth rate (Larousse French Encyclopaedia).
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Jean-Baptiste is IAC’s specialist on time-
to-market improvement and process
optimization.
He is also responsible for modular design
projects in a variety of sectors: household
appliances, medical equipment, industrial
roller shutter doors, shipyard compressors, etc.
Jean-Baptiste Guillaume
[email protected]+33 (0)6 21 62 55 99
Clients: Has also collaborated:
Timothé Delorme
Senior consultant
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Understanding the Needs of the Market
Country profile France Algeria Tunisia Vietnam Cambodia
Total population (million) 67 41 11 93 16
Population growth rate, annual (%) 0,4 1,8 1,1 1,1 1,6
Surface area (million sqm) 549 2382 164 331 181
Urban population growth rate, annual (%) 0,7 2,6 1,4 3,0 2,6
GNP (billion USD) 2465 156 42 203 20
GNP growth rate, annual (%) 1,2 3,7 1,2 6,2 6,9
GDP per capita, Atlas method (USD) 39,0 4,3 3,7 2,1 1,1
Value added of industrial production (% of GNP) 19 36 28 36 32
Value added of services (% of GNP) 79 51 61 45 42
Number of days to establish a company 4 20 11 24 99
Internet users (% of total pop.) 86 43 51 47 26
Access to secondary education (% of total pop.) 100 97 88 58 45
Tableau 1 — Compared macroeconomic data by country (source: World Bank)
As explained above, companies wishing to
penetrate emerging markets will need to do
more than simply transpose their offering and
the marketing strategy they are successfully
conducting in developed countries into these
new territories.
Emerging markets are a diverse reality; each
country has its own unique set of circumstances
and specific needs.
To develop a tailored strategy, industrial
companies first need to get acquainted with
some general data, even before they delve into
the thick of things and start poring through
market analyses.
A macroeconomic approach yields a
comprehensive overview of the market: level
of advancement and education, volume of
prospective business, demographic segmentation.
In this instance, we learn that despite the fact
that some figures — annual urban population
growth, proportion of industrial production in the
GNP — are similar for North African and South-
Eastern Asian countries, there still remain some
dramatic differences:
• the GDP per capita is twice higher in North
Africa than that of South-Eastern Asia ;
• access to secondary education in North Africa
is similar to that of France, much higher than
in Vietnam and Cambodia ;
• the economic growth rate is twice higher in
Vietnam and Cambodia.
Depending on the sector, it might be pertinent
to consider other indicators: mean age, life
expectancy, annual cement production for the
vitality of the construction industry, etc.
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Another fundamental parameter to explore is
regulatory environments, in order to anticipate
hidden costs (border taxes, local standards) that
could impact your penetration strategy.
But only a market analysis, with a very practical
field approach, can help industrial companies
clearly identify the needs of their prospective
customers.
Let us illustrate this with the case of one of
IAC’s clients: a manufacturer of turnkey solutions
for brick-making equipment had reached its
maximum potential on Western markets, so
they started considering turning to high-growth
markets.
An in-depth market analysis of the brick
industry in Iran and North African countries was
conducted through face-to-face interviews with
local business owners. It found that:
• local quality standards were not the same as in
Western countries;
• the extent of automation expected by local
prospective customers was much lower
than what European manufacturers were
accustomed to;
• product ranges were usually much less
diversified (one or two products, as opposed
to over 30 on more mature markets) ;
• structural works were performed by local
artisans.
A competitor analysis — provided there
are competitors already established on the
market — is another crucial element to help
determine goals in terms of pricing and product
performance. In this particular instance, the
competition consisted of Southern European
and local companies, usually family-owned or
small-scale operations.
Lastly, once the customer’s product expectations
have been determined and prioritized, a value analysis approach provides the means to adjust
the product’s specifications and design to match
actual needs:
• a particular feature can be altered to meet
local expectations. For instance, LG developed
higher-quality sound systems for their
televisions when they became aware that Indian
consumers often used theirs to listen to music;
• new features can be added to an existing
product to differentiate it from competing
offerings. For instance, Samsung launched on
the Indian market a washing machine with a
‘sari’ cycle, specifically developed to prevent
the clothes from getting tangled;
• some features can be removed in order to
match actual needs and take into account the
variability of resources available. For instance:
automation on brick-making equipment.
So does a distinct offering always translate to a distinct technical solution? Not necessarily. In some cases, a modular range approach can be an appropriate strategy to minimize costs and risks associated with expanding into new markets.
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Developing a Modular Product Range
In the case of this company, what they wanted
was ideally to develop a basic low-cost and little-
automated solution, delivered unassembled, with
no turnkey installation services associated,
specifically targeted to Iran and Algeria.
However, this solution also had to accommodate
the possibility to meet renewal demand on more
mature markets by delivering machines with
greater automation, better control of baking
temperatures and turnkey installation services.
And of course without spending twice the
amount in development costs.
Modular design is a cost-effective solution to
develop a diverse product range. The concept is
quite simply to design a module — i.e. functional
unit — for each operation, which can be
combined to develop an offering just as diverse
as a regular range.
That is how IAC helped its client develop a
modular brick-manufacturing line consisting of:
• a basic baking unit,
• with the possibility to attach several units
together to increase baking time, depending
on outside temperature,
• and a range of measuring devices (analogue
or digital, depending on employee skills) and
closed-loop temperature control systems,
which can be installed on the unit if needed.
The same principle was applied to each single
technical unit of the production line, regardless
of its intended market:
• Iranian market: outside temperature around
22°C, low-skilled workers and cheap labour;
• German market: outside temperature around
15°C, rare and highly-skilled workers.
However, transitioning to a modular range alone
is not usually enough to deliver a competitive
offering. Additional steps must be taken in order
to reduce the cost of each individual module.
At this stage, a design-to-cost approach can yield
significant cost savings, ranging between 20-
25% compared to a non-optimized equivalent.
Preparation
Manual
Platform Upgrade
Automated Automated
ManualSolutionsfor Iran
Solutionsfor Germany
Baking units
Shape A
Multipleshapes
Drying
Drying
Control Automated control
Pre-
shap
ing
Pre-
shap
ing
Shape B
Shaping Drying Baking Packaging
Fig 1 — Diagram of modular offering for brick-manufacturing equipment
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Rolling Out to Success
Punctuality is the politeness of Princes — not
to mention the best way to guarantee pioneer
advantage —, so reaching time-to-market goals is
of paramount importance.
A product’s overall cost can also be significantly
impacted by post-production supply chains —
transport, warehousing, distribution —, so control
over the supply chain is one of the essential
parameters for success.
To continue our analysis, we will assume a clear
market penetration strategy has been formulated,
that it is a priority to the company and that all the
necessary resources have been allocated to the
project.
To streamline processes and ensure a timely rollout, there are still four elements to consider:
• Planning: Does your company have the right
processes to succeed on an emerging market? Do
you have visibility over the entire value chain of your
products?
• Process efficiency: Do information and employees
travel with optimal efficiency? Does your company
comply with lean management principles?
• Associated skills: Have all collaborators received
sufficient training to perform all the tasks they are
given?
• Tools: Does your company have the right tools?
What opportunities does industry 4.0 offer: additive
manufacturing, smart factory, smart supply chain?
Determining the company’s maturity with regard to
each of these parameters prior to rolling out can
save industrial companies a number of unfortunate
surprises down the line.
Emerging markets can also be a catalyst for supply
chain optimization, if your offering is tailored to
match actual needs of local customers and if you
use your new position to form collaborations with
local partners.
Additionally, establishing product assembly
operations in a country with low labour costs and
using it to source a number of technologies provides
a significant competitive lead. Low-skilled workers
might give you pause, but the problem can be solved
by temporarily relocating collaborators to these
new markets, so they can train new employees and
supervise operations for the first few months.
But proceed with caution. Procurement managers
should be aware that suppliers will need to be
continually assessed and qualified throughout the
early rollout phase, and that dual sourcing from
reliable and trusted suppliers is absolutely vital to
ensure business continuity.
This approach focuses on four parameters in addition to those addressed above:
• Technical solutions: reducing complexity,
choosing the right materials, the right
technologies;
• Procurement, depending on activities: Global
or local suppliers?
• Co-designed or standard components?
• Manufacturing process: these choices will impact
labour costs down the line and companies need
to assess their supply chain and decide whether
to make or buy ahead of time, all the while
keeping the local context in mind.
Once the offering and the product have been defined, all that is left is implementing the proposed action plan and successfully rolling out.
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In Conclusion
The three conditions for successfully expanding
into emerging markets are:
• having precise insight into target markets,
prospective clients and their needs;
• Developing a modular and adaptable technical
solution;
• Streamlining your supply chain and minimizing
time to market.
In the end, harnessing the potential of emerging
markets is no small endeavour. Success is only
possible if the company is wholly committed to
the project, with clear support from Executive
Managers, and is willing to challenge its taboos
and preconceived notions.
Inter Action Consultants can provide support
throughout the duration of the project, from
early-stage market analyses to the final rollout,
helping you optimize processes and ensure a
successful outcome.
Keep in mind that emerging markets are much
more than merely untapped sources of growth
for the Western industry: they are a fantastic
laboratory to develop flexibility, agility and find
meaning!
The principles of lean management and business
agility — that rely on a deep understanding of
actual client needs, so essential to succeed
when expanding into emerging markets —, could
very well turn out to be the basis for future
innovations in large Western corporations. The
Dacia Logan and micro-loaning are two very
informative illustrations of business concepts
that were successfully imported from these
markets.
Our upcoming publicationwill be titled:“ What can we learn from emerging markets?”
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All of our publications and news
are available from our website:
www.iac.fr
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