The New Product Introduction Process Guide

Thanks to Kickstarter, Indiegogo, and other crowdfunding platforms, raising funds on the merits of a great idea has gotten much easier. Many new hardware products have been funded quickly, sometimes raising millions of dollars, without giving away control of the company to investors.

Meanwhile, the hard work of getting from a product design to the “production ready” stage hasn’t gotten any easier. New product introduction like this remains a challenge for teams doing it for the first time. For many, the dream stops here, and the nightmare begins.

The Uncomfortable Truth For Hardware Startups

• Around 90% of new products manufactured in China fail on at least one objective (timing, quality, cost).
• Around 80% of new products manufactured in China fail on at least two objectives (timing, quality, cost).

Think about these questions.

How many Kickstarter projects have been delayed by more than a year? How many had to throw in the towel before mass production even began? How many are called a scam by backers who complain about very long delays and poor communication about the project status?

This guide to the new product introduction process will show you how to avoid your project falling into the majority above.

If you decide on your product design and you “throw over the wall” to a contract manufacturer, you will probably suffer long delays, cost overruns, and poor quality. For best results, the design needs to be reviewed and adjusted, and it will have an impact on every aspect of your project.

If issues are found at the concept stage (when a design can easily be adjusted), the cost of that adjustment is much, much lower than the situation where that same issue is found later on. The bill goes up very fast when some products need to be reworked or scrapped because of quality issues. The time to fix issues also expands dramatically as you make progress. Several studies have shown this type of relationship in the NPI process of many different products (it is often called the ‘1-10-100 rule’).

Typically, catching a temperature problem at the prototype phase would cost next to nothing (the adjustment would be part of the normal iteration cycle), but noticing it once mass production is under way would lead to a lot of scrapped material, high cost overruns, and long delays. In other words, think very hard about design before moving onto the next stages of the NPI process.

Let’s focus on 4 common types of design reviews:

DFM, DFC, DFQ, and DFD are deep topics. Let’s proceed with an overview of what is usually verified in each of them.

The R&D team needs to ask these questions:

In these reviews and discussions, the more you involve your contract manufacturer, as well as the manufacturers of some of the parts, the better.

Here are 3 very common pitfalls that can be avoided thanks to good DFM.

Finally, a word of warning.
Some buyers seek perfection for the first version they will release on the market. They keep doing iterations, with no end in sight.

Most Chinese suppliers expect to have made, shipped, and collected money on a project within 6-12 months after they started working on it. We have seen cases where the manufacturer becomes resistant and then drops the entire project.

Discuss their expectations at the start, and do what you can (typically, some of the design and prototyping work can be done by a different service provider) if your product is particularly complex.

What is the cost structure of your product? It can be broken down as follows, to get a ‘big picture’ idea:

The whole DTC approach consists of starting with a realistic cost estimate, confirming the product’s features and their associated costs, and tracking cost changes over time. If a change pushes the total cost outside of your budget, you need to think of a reaction plan.

Cost of parts – a few quotation requests can provide an estimate early in the project. Fewer parts mean lower costs, so the product design can be optimised with that objective. Similarly, buying parts that are in the same shape, same color, and same material, will lead to lower costs. Here is 2 examples:

Cost of assembly work – includes the time for workers to do the assembly, quality control, packing, and shipping.
For example, in Shenzhen, the minimum salary (the basic amount without tax) is about 2100 RMB a month, but the total cost of an operator is actually 4,000 to 7,000 RMB per month once all taxes, electricity, dormitory, meals, and other expenses are included.

A frequent mistake here is to think of assembly as an easy step. Here are two recent examples:
– In one case, the customer evaluated it would take 8 min, but it actually took over 30 min due to unstable testing software and to repeated rework along the process.
– In another case, the buyer had a prototype made for more than 10,000 USD and assumed the production price would be below 100 USD per piece. They paid for all the tooling and yet did not validate that assumption with the manufacturer. In the end, the whole project had to be abandoned because production costs were too high.

Manufacturer’s margin – this is the difference between the selling price to the customer and the total cost (including overhead). In consumer electronics made in China, the margin is seldom below 15%, and it can rise to 50%.
A high margin might be acceptable if you need the factory to stop and retool a line to make a very small production run. But you should try to avoid it in other cases.
There are different ways to negotiate a lower margin:

Cost of logistics – this can be reduced in many ways: lower volume packaging, slip sheets instead of pallets, re-engineering of the parts & products flow, consolidation into a full container, and so on. Logistics often represents 30% of the total cost, so it is worth an in-depth analysis! Here are two examples of cost reduction:

You need to come up with quality standards, and then ensure production will meet those standards (DFQ). To increase your confidence, you can get a few samples and test them to standards higher than those you promise to your customers.

For example, Nokia did drop tests from 2 meters high, even though their target for production was only 1.2 meter. Their phones gained a reputation for robustness.
A design review, together with an analysis of pre-production testing results, can help avoid many quality issues down the road.

Here are some common mistakes:

Now that product design has been addressed we turn to prototyping.
This is an important part of your new product development process where you work on turning your design into reality… and you may well go back and improve the product design.

Before launching into creating your prototype, a design review is a necessary step which can help iron out various common issues.

You will need an experienced R&D or manufacturing engineer or manufacturing engineer to review the product design.

They’ll be looking for the following kinds of issues and will provide feedback on how to amend the design if any occur:

These design issues are why we always suggest a thorough design review with our clients before we start working on prototypes.

A key part of the new product introduction process, prototyping enables you to test your product design concept and assure that it is ‘manufacturable.’

Prototypes can be anything from a paper or cardboard ‘mock-up’ through to a fully CNC machined pre-production style prototype.

In China especially, manufacturers are keen to push forward and try to get to a “looks alike and works alike” prototype very quickly, however, this is a mistake for new or complicated products. You’ll often find that a simpler prototype, such as one made from cardboard, can be more helpful at proving the design’s concepts quickly because it’s faster and easier to create.

The improvement cycle of iterative prototype builds and testing is at the heart of the prototyping stage.

Here is a flow chart that shows a simplified iterative prototyping cycle which you will notice is quite similar to the PDCA cycle:

The continuous cycle provides test data output, and the development team can make decisions based on that output for the next iteration (design change, prototype build, test again).

At each decision point in the cycle, the question of ‘can design be signed off as acceptable’ is asked.

If the decision is ‘no,’ then the cycle must continue until all issues with the design have been resolved.

However, if the decision is ‘yes’ then we can consider the prototype to be approved and move onto the next steps in the new product introduction process.

Depending on your product category and the country(ies) you intend to sell in, certain compliance regulations might apply. And you might have to have your product certified by an authorized testing laboratory.

For example, an electronic product sold in the USA might need to be FCC and/or UL certified. This is compliance — it cannot be skipped. Your distributors and customers will probably ask for a proof of compliance, and you might face serious costs and charges should something go wrong.

This phase comes in once a final prototype (made of the same components, and using the same processes, as mass production) is ready. It may take more than a month and be quite expensive. Sometimes the firmware needs to be adjusted slightly, for example in order to pass FCC testing. In the worst case, a deep change in the product design will be necessary.

It means compliance requirements need to be taken into account at the design stage.

I want to touch on two ‘best practices’ that are seldom applied but that improve both cost and quality. The larger your expected volumes, the more you should follow this advice.

This is a part of the new product introduction process that is often overlooked.
Buyers often realize it after a few orders, when they see the devastating effects of unauthorized changes and/or of a lack of traceability.

Chinese suppliers sometimes make changes to a part (e.g. its material, its production process, and/or its supplier) or to the assembly process. They truly believe they are authorized to do it. They don’t let the buyer know about it, they don’t record the details of the change, and they don’t do a formal risk analysis.

As I wrote before, the buyer often pays the price of the manufacturer’s mistakes. So, you can’t expect your supplier to take all reasonable precautions. You need to clarify your expectations and ensure your supplier complies.

In practice, what does it mean?

What does it take to implement a good change management process?
Let’s face it, it can be relatively heavy if the manufacturer doesn’t already have a good system for it.

New parts and processes need to be approved (sometimes with a new pilot run). Records need to be made and kept. However, it is well worth the effort.

Let’s take the example of a supplier who suddenly uses a lower voltage capacitor. The result is failures coming up shortly after the product starts being in use. The customer notices it.
The question is, what portion of production has this issue? If traceability records were kept, it is possible to identify when the switch happened, which pieces have the new capacitor, and where (and to whom) they have been shipped out. Damages can be contained fairly quickly. Without any such records, the entire production of the last few weeks/months needs to be recalled. This can put a small company out of business.

As I wrote above, changes can happen anywhere. I remember a production manager decided to glue 2 parts together instead of screwing them. It saved them time and money. However, operators got tired, became less precise, spilled glue on the sides, and it led to a major quality issue. Not to mention concerns about the durability of the glue, which had been sourced on the local market and had no MSDS sheet (i.e. no specifications).

How to get a batch of products within specifications? By ensuring the processes are capable of producing nearly 100% of your products within specifications. (Note: this won’t bring much value if production volumes are under 1,000 pieces.) Let’s take a critical aspect of your product. It needs to be within specification, otherwise the product is defective.

For example, let’s take the diameter of the cap of a pen:

It means there is an upper and a lower tolerance. If 100 caps are measured, their distribution might look like this:

You cannot assume that production will go smoothly, but this can be checked.

If process capability is too low, changes need to be made before large volumes are released on the lines. Note that the shape of the distribution is sometimes different. It might show 2 or more peaks. It can lead the engineers to identify different causes of variation – for example, a metal tube is cut in a CNC machine and then adjusted manually. A small batch of between 20 and 200 pieces are made and then checked. A process capability index (Cp, or Cpk) can be calculated.
Based on these findings, it is possible to estimate the defect rate in production.

Very, very few Chinese factories do this type of study on their own. It is virtually always done at the request of their customers.
Why? Because the supplier wants to move ahead as fast as possible. (Remember, the customer is the one that pays most of the price when quality is bad, costs are much higher than anticipated, and there are long delays.) They want to skip all intermediary steps and move straight to large production runs. This brings us to the next part – the pilot run.

Based on our years of experience in China, we have come to some simple rules when it comes to new (highly customized) products:

A new product introduction is not complete without at least one small pilot run. This the phase where the product design and the production processes are tested and validated:

Typically, NPI engineers are responsible for the following deliverables:

As rule of thumb, these are signs that the processes are not ready for mass production:

As a buyer, how involved should you be in the New Product Introduction process?

As we saw, it can be quite time consuming and requires an array of competencies. The best contract manufacturers can handle it fully on their own (the buyer is not expected to take the lead) and the majority of Chinese factories are unable to do it well.

Depending on the situation, and the level of risk you can tolerate, let’s distinguish between 3 different approaches. (Remember, the risks range from long delays to poor quality, and many customers are actually ‘kicked out’ by their supplier when all the difficulties become apparent).

If you work with a factory that has already been making very similar product, or if the quantities are very low, this may make sense. You only request the minimum – a perfect sample before production, some photos during production, and a final random inspection before shipment.

If you place a large order and financial risks are higher, it makes sense to spend more resources on controlling what happens in the factory. We are assuming the factory has engineering competencies in line with the task they face.

The buyer needs to understand the process the supplier is planning to use, to review it, and, if needed, to ask for improvement. You don’t want to find in the middle of production that a part was not inspected prior to assembly and it doesn’t fit (and the entire line has to stop)… or, worse, that most of the products are unacceptable.

An independent quality inspection is strongly recommended for every batch, and probably at several points along the production of every batch. Many importers found out that Chinese manufacturers voluntarily relax their standards in the 2nd, 3rd, or 4th batch, which is known as “quality fade”.

This is what experienced R&D teams do.

Over time, their build an NPI process that makes sense for their needs, and that balances risks reduction with what it costs them.

Large companies such as Apple, HP, Dell, and many others take the lead on the NPI process. They set that process and control it all the way through. It allows them to enjoy lower risks, greater transparency into the situation, and a better alignment between the product design & pricing (for successful sales) and what production is capable of (for low cost, high quality, and few delays).

Most small companies that don’t have extensive experience manufacturing new products see the NPI process as an expensive proposition. They often reject it altogether, and they come back to it later after they have suffered through ‘production hell’.

As you have seen before, the buyer may play different roles in the NPI process depending largely on their chosen manufacturer’s abilities. It may be necessary to be more hands-on, or your manufacturer may be able to handle a lot of the work without your involvement if they’re experienced and capable.

Here is a video that outlines your possible involvement in a visual way:

Our main purpose for this guide is to help hardware startups understand the concept of NPI (New Product Introduction).

The New Product Introduction process can represent over 50% of the R&D cost for a new product.

Surprisingly, small companies always think they can skip it. They focus instead on product design and on marketing, and they count on the manufacturer to “do what they are good at”, which is not always a wise choice. The result, in many cases, is an unsuccessful project and heavy losses.

Investing in improving the design, production & testing processes at the outset maximizes the chances of getting good products on time. Inconsistent quality, non-compliance to safety standards, and long delays can kill your brand.

Now, let’s say you have already worked on your design and your sales projections. You have a budget and you can’t stretch it. What can you do?

You can roll the dice and hope all comes out well in the end. Sometimes it does.
Or you can make a second budget that includes a smaller first order or a simpler product. Look for an engineering company that can help you and is familiar with China manufacturing. Select a suitable contract manufacturer.

Doing the NPI process well requires a vast array of skills. Use your supplier’s internal competencies as much as possible, as this can save you substantial money. If they don’t have the resources to take on some of the work involved, or if you need someone to drive the process and review the milestones, work with experienced engineers.

You are not alone.

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It comes complete with an exclusive explainer video, where we walk you through its stages step-by-step, giving unique insights along the way.

Let the roadmap be your guide through the stages and tasks that are generally necessary to conduct a successful product launch, from partner selection & verification through to production and supplier development.

Importantly, each stage is broken down by task and approximate timescale based on our decades of experience in China, which we find is very useful for hardware startups and SMEs to know in order not to underestimate how long it will take to launch.

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