SECTION B New Product development is a crucial part of business. A company needs continuous innovation in order to protect its market share and support growth. It also has a great impact on operations, since it determines the specifications for the product. Likewise, operations can constrain a firm’s ability to develop new products and make them more costly to produce. As a result, operations should be deeply involved in new-product development.
THE NPD process is often specified as having three phases: Concept development, Product Design and Pilot Production/Testing. Products should be designed from the start for manufacturability. This is done by considering design of the production process as part of product design and utilizing a concurrent engineering approach.
Concurrent engineering, uses overlapping phases for product design rather than a sequential approach. This will work well if an NPD team is formed with representation from all major functions (marketing, engineering, operations, and finance&accounting) to ensure cross functional integration. Concurrent engineering also works best if paired with a design oriented NPD strategy. This type of strategy as illustrated below builds on the consumer’s needs – a competitive advantage by means of staying ahead of competitors because the customer’s needs are accurately read and acted upon through the creation of new products.

Inventory management is a key operations responsibility because it greatly affects capital requirements, costs and customer service. Inventories are held for many purposes, including cycle inventory, safety stock, anticipation inventory and pipeline inventory. A decision rule specifies how much to order and when. In the calculation of decision rules, there are four inventory costs to consider: 1) Item cost – the cost of buying or producing the individual inventory usually