Concurrent Engineering and the Virtual Factory: Developing Products With Supply Chains

Abstract Several recent developments have led to significant changes in the way new products are developed. The emphasis on core competency has resulted in having many companies discard their manufacturing capability, and hence becoming dependent on outside manufacturing suppliers. At the same time, the cost of acquiring expensive modern manufacturing equipment has become prohibitive, and the pace of new manufacturing technology has quickened, making companies reluctant to invest in their manufacturing plants lest they become obsolete in a short time. In addition, the advent of global competition for quality and cost has increased the need for new product design teams to incorporate early manufacturing feedback into the design of the products. The confluence of these issues have led to a set of unique problems and trends in modern industry. Manufacturing has become a worldwide commodity through the growth of contract manufacturing companies, which supply product companies with manufacturing expertise and capability. The companies’ relationships with product design teams is much more formal and subject to a contractual bidding process, without the benefits of detailed designs that can be bid on. This paper addresses the conflicting issues raised above by identifying the changes required to the traditional methods of new product development and proposing a set of tools and metrics to address issues of manufacturing supplier selection, communications, cost, quality and capability in the new product development cycle. Methodologies and tools discussed in this paper include the modification of the product development process to include the contractors’ role in the timely execution of the project plans, the necessary identification of cost and quality for each manufacturing technology as well as volume level, and the clear understanding of the tradeoffs involved in the design and manufacturing process selection. In addition, the paper explores the issues of reduced manufacturing expertise within the parent company. As manufacturing becomes a world wide commodity, a good understanding of these issues is very important to the future survival of the manufacturing contracting enterprise. Contract manufacturers need to balance their investments in maintaining the technological edge in the manufacturing process, successfully bidding on their customers new products and clearly identifying their capabilities and levels of capacity, costs and quality without the risk of exposing their future strategy.