In our previous blog, we talked about the first of our three steps to better product innovation: how a more collaborative approach can create items that will truly add value to customers. But this closer alignment will only be successful for retailers and suppliers when combined with robust data that drives production decisions.
Manufacturers will know that tinkering with the innovation process can have massive knock-on effects. At Newton, we have also seen first-hand how the pursuit of creating an ‘imperfect home-baked appearance’ can reduce production line efficiency to less than 50%, whilst tripling the volume of waste. But the big question is: did customers really want a “imperfect” looking Victoria Sponge in the first place?
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Did customers really want a “imperfect” looking Victoria Sponge in the first place?
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These incremental cost increases often relate to raw materials, manufacturing and the supply chain – and they can add up significantly. But the key point here is that many fall-outs in production can be prevented with better upfront analysis.
The impact of getting ahead of the smallest changes to the new product development (NPD) process cannot be underestimated – even the colour of packaging can make a difference. We’ve also seen how opting for a slightly cheaper coating can result in machinery being unable to form the packaging for a popular ready meal. In this case, line efficiency dropped to less than 30% and it took four months to fix the issue.
These real-life examples show how the true cost of a change in specification or process is frequently hidden, or worse still, not understood in the first place. The consequence is squeezed margins and requests to pass on these costs in the next round of price negotiations across the whole range.
With the right data driven, analytical approach, it is possible to mitigate these costs. When armed with the detail of every aspect of production – from the ingredients to how many people are required to make a product – retailers and suppliers can work together to pinpoint any inefficiencies back to an actual SKU. This means they will know exactly what to fix and whether it adds enough value to the customer.
Furthermore, it’s vital that the production implications on what is agreed are properly understood and that a product meets a genuine customer need from the start. Combine this with a recognition of what people are prepared to pay, and an end-to-end understanding of the entire NPD process will finally become visible.
Ultimately, with closer collaboration and by sharing this insight early on, production errors are avoided and margins will be properly calculated. And with the discounters still gaining market share and an estimated £3bn of wasted cost in NPD – producing exciting products at the best possible cost could really make all the difference to a customer’s shopping experience.
Our next blog will explore in more detail how the final of our three steps, iteration, can boost the innovation process. Click here to download Newton’s report ‘Creating Passionate Shoppers: The Science of Product Development’.
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Ultimately, with closer collaboration and by sharing this insight early on, production errors are avoided and margins will be properly calculated
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This article originally published on Linkedin
