The establishment of project-oriented and cost-based NPD performance evaluation

Abstract

Effectively managing and measuring the product development process is widely seen as a means of ensuring business survival through reduced time to market, increased quality and reduced costs. This article establishes a cost-effectiveness based performance measurement system for new product development (NPD). The purpose is to provide a methodology for integrating NPD teams and manufacturer capabilities through a common goal – “profitability improvement” – based on lowering the total cost of products. The merits of measuring NPD performance using total costs analysis include: (1) a common measurement language – money; (2) very simple and visible numbers along with direct and indirect ratios to help management and employees understand the importance of “doing things right the first time”. This study investigated the interactions and mutual movements among the three groups of organization: “NPD-manufacturer-customer”, integrated the results from events of poor quality caused by NPD in different stages: in developing process, in internal customer's process, and in customer's field. An equivalent total-costs (ETC) analysis along with the principle of Management By Objectives (MBO) were developed and utilized in planning and establishing this evaluation system for NPD project performance focused on satisfying customers, both internal and external, which leads to the best value for investing in organization's NPD team.