Performance measurement for new product development: a model based on total costs

Abstract

The modern market is characterized by consumer demand for quality products (at lower prices), reduced time to market, and cost-savings pressures on manufacturers. To survive in this competitive environment, enterprises must be able to manage and measure their performance with respect to new product development (NPD). This paper presents a cost-effective performance-measurement system for NPD. The model is based on the concept of total-costs analysis. This provides a transparent statistical model that assists management and employees to understand the importance of doing things right the first time. The model incorporates the interactions among NPD teams, manufacturing teams, and customers. It also integrates the results of instances of poor quality at various stages of the NPD process, including: (1) development; (2) manufacturing (the internal customer's perspective); and (3) external customers. A total-costs analysis is thus developed and utilized in planning and establishing a measurement system for NPD performance. The model can be used to satisfy both internal and external customers, and to ensure optimal value for investment in NPD teams.

Keywords:

• Management by objective
• New product development
• Total cost
• Quality improvement
• Performance measurement