Operations Management

New Product Development at HPM

Company Background

• HPM Industries is a privately owned company established in 1925. Its core business is in the design, manufacture and distribution of electrical wiring accessories such as electrical power plugs, power outlets and light switches.

• The company had its origins in button production, when Ruth Simon’s parents (Ruth is the wife of the current chief executive officer, Peter Simons) started HPM in the button-moulding business.

• In 1948 they bought a tool at auction to make plug-tops and started turning out about 20 products.

• The company’s backbone of success: electrical wholesale

• It has also been successful on developing and marketing main products for the retail market sector.

• HPM has been the dominant player in the Australian domestic market for many years.

• The company has also managed to break into a number of special niches.

• It employs, at present, more than 1,100 employees working in various factory sites, warehouses and sales offices around the country, from which it supplies over 3,500 product lines.

Goals of HPM:

пЃ¶ To effectively compete in the most challenging market that is continually evolving.

пЃ¶ To improve its product development process in an increasingly fast-paced, globalized market.

Strategy:

пЃ¶ Use innovation and technology to differentiate itself in the market

пЃ¶ Concentrate on using the latest technology in both its new products and new manufacturing processes

Problem

• There has been a change in the length of the product life cycle.

o Products had a life cycle of 8-10 years during the 1970’s and 1980’s. However, the company must now contend with product life cycle of two years and less.

Causes of the problem:

(a) Impact of technology вЂ" This is not only because competitors are able to develop alternative products on a much more frequent basis, but also because competitors are able to reengineer exact duplicates of HPM’s products and saturate the market with cheap copies

пÑ"Ё Improvements in technology made the quality of imported products coming to Australia really good.

пÑ"Ё Competitors can optically scan a product, reverse engineer it and then produce a product with all the same characteristics as the HPM product.

пÑ"Ё Competitors are causing severe price pressure in the marketplace even though they have not been very successful in gaining market share.

(b) Impact of cheap imports вЂ" This primarily refers to the low-cost Chinese sourcing

пÑ" HPM held a unique “in-house” manufacturing philosophy and sourcing structure, in contrast to the recent trend for companies to outsource their manufacturing requirements

пÑ" The logic behind the domestic manufacturing strategy was that the company would be able to overcome the cheap labor and the lower set up costs of overseas competitors by investing in more automated manufacturing technology and by utilizing the superior skills that exist within the company.

пÑ" HPM might be forced to totally reposition its manufacturing strategy.

пÑ" The domestic manufacture of standard, low technology products has become uncompetitive against low-cost imports from Southeast Asia

Options for the Company

Technology in New Products

HPM’s strategy is to concentrate on highly innovative products, particularly focusing on those that hold the following characteristics:

(1) Where there is added value

(2) Where the company has some intellectual property in the product

(3) Where the product can’t be copied or will take a long time to copy.

Rapid Product Development

HPM recognizes the importance of getting new products to market quickly and therefore pays particular attention to new developments in the area of rapid prototyping technology.

1 - Conventional Process (46 weeks)

1. Ideas drawn

2. Design of Tools

3. Creation