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Textile New Product Development

Wool Item Developement
by

Gabriele Rudatis

on 9 August 2016

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Transcript of Textile New Product Development

AGENDA
Introduction
Market and Competitors Analysis
R&D and Engineering
Production Costs and Timing
Finance
Logistic
Time-to-Market Analysis
Supply Chain Planning
Marketing: Product Launch
Conclusions

- NPD is the set of activities beginning with the perception of market opportunities and ending in production, sale and delivery of a product

Pina Leo
Giuseppina Solaro
Gabriele Rudatis
Well Dressed
- Our Focus will be to explore the market opportunities and customer needs in the
Wool Knitted Female Apparel
and specifically
Pullovers
- Development of a new product (NPD) is interdisciplinary activity requiring contribution from nearly all the functions of a company, from marketing, to Design, to Manufacturing, to Finance

New to the world (total innovation)

THE DEVELOPMENT OF A NEW PRODUCT MAY FOCUS ON:
Cost reduction (replace with lower cost products)
Repositioning (new market segment repositioning)
Product Improvement (improving an existing product)
Additional to product line (extend or create a product line) :
OUR TARGET

New category entries (totally new category)
Competitors Analysis
Company Focus:
Firm oriented to Customers
Identification customer needs: Voice of the Customer
Marketing strategy: Creative Fashion Orientation
Market Orientation: Customer Needs
Market Trends
Competitors Activities
Innovation Management: Strategy Management: Integration Approach
Information and Communication
Planning and Selection
Time to Market: NPD cycle time
First to Market: Premium Prize
Quick changes in both Technology and Customer need
Max Mara
PRICE: 240 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Strenesse
PRICE: 230 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Gant
PRICE: 235 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Ralph Lauren
PRICE: 245 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Barbara Beckett
PRICE: 250 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Patrizia Pepe
PRICE: 225 Euro
Characteristic: 100% Wool
Sales Point: Boutiques
Critical Success Factors
Definition of Market segment:
Analysis of the competitors (Reactive strategy)

We follow the competitors but focusing on new details of high quality
Analysis of the customers

(Proactive strategy)

We focus on Customers demand of differentiation and

exquisite details

Target price : 220-250 €
Product opportunities
: Large market of fashion
oriented Customers who needs to buy exclusive pullovers in specialized Boutiques
Industrial Process: Costs and Timing
Industrial Process: Costs and Timing
We take in consideration six mayor competitors brands
PRODUCTION
ARTICLE: Pullover
CLIENTS: Boutiques
QUANTITY: 100 pieces (starting new production)
Prototyping and sampling cost: 175 €

Size/Weight: S= 250gr+10gr neck= 260gr (single consumption)
M= Size S + 8% = 280,8gr
L = Size M + 8% = 303,3gr
Colors: 50 Black pieces / 50 Sandy pieces
S = 15 Black / 15 Sandy
M=20 Black / 20 Sandy
L = 15 Black / 15 Sandy
Yarn and Weaving Costs
Finishing and Accessories Costs
COSTS and TIMING
10 sales point in 10 different italian cities
10 pullover for each sales point
Shipment cost: 15 € x 10 sales point = 150€
LOGISTIC
Industrial Process: Production Cost
Total costs in production
FINANCE
Financial Costs Calculations
LOGISTIC
STORE REPLENISHMENT
STRATEGY
New Product Development
INTRODUCTION
LOGISTIC
Boutiques Replenishment Outsourced
by TNT Logistic Company
March
April - August
April
September
January-February
September - December
PRODUCT DEVELOPMENT: TIME-TO-MARKET ANALYSIS
Study of the market - Check Target Costs
Study of the competitors
Yarn selection
Colors selection
Trade shows participation
Research and Development of the Collection
Prototyping
COLLECTION 2014
2013
2014
2014
2014
2014-2015
Presentation of the collection to the agents
Presentation of the collection to the best representative customers
End of Sell-In sales campaign
Forecasting of the Sells and Production
Pre-order Yarns: critical Factor
Pre-order Components
Start of production-April
End production- August
Delivery of the Collection to the stores
Marketing campaign
Return in Investments
October - February
Sell-Out sales campaign
2015
2014
AUTUMN WINTER COLLECTION 2014/15
1.1 New item planning: how can you forecast the sales of the new item during the first sales campaign / collection?
2) Analogy forecasting : (product links)

- The forecast for the new couple product – client is calculated using classic Time Series algorithms
- The historical sales patterns of the new couple is “created” by linking the historical series of an old product/client to the new one.
- The underlying hypothesis of this method is that the customers will perceive the new product sold in a given market as “substitution” (totally or partially) of an obsolete one, progressively removed from the market offer of the company.
New product forecasting: methodologies
1) Pattern matching algorithm:
- Initially we build a pattern library (percentage or absolute series of numerical values with time flag identifier: sales percentage of the first week, of the second week, etc.) based on historical values of new item introduction occurred in the Past.

- The initial sales pattern for the new segment or couple product – market is chosen, manually or using automatic criteria (ex: highest similarity, same family, same channel, …), inside the pattern library previously built inside the Sales Data Mart.



New product forecasting: methodologies
Single or multiple link
Link 1:1 = 1 new product / 1 obsolete product
Link 1: n = 1 new product / n obsolete products

Linearity of the link
Linear: the historical sales of the old product are copied “as is” over the new item phantom «historical sales»
Not linear: to the historical sales of the old product, we apply multiplicative coefficients for increasing (new product is better than old one, or better promoted) or decreasing historical sales (the new item is only partially substitution)
…if the link is not possible we go back to the first methodology!

In our case we don’t need to apply the Sales Cleaning Methodology because is a new product in the market.
New product forecasting:
methodologies
Irregular pattern
New product forecasting:
methodologies
In season budget: 650 pieces
Seasonal campaign duration for the item
New into the Store A: 4 months (Oct ’14 – Jan ‘14 )
Linear Trend

New product forecasting:
methodologies
Our sales forecasting curve is not regular so it makes difficult to perform an accurate forecasting
When you develop a new product you may have different problems:
To do the forecasting of a new item when you don’t have the historical sales series is done taking a forecasting of a similar product already available in the market
During the sales campaign we have to verify the changes in the sales forecasting and perform a Re forecasting
In the fashion industry is possible to do a pre-season forecasting which is the forecasting for the launch of a brand new product
Our product is a one-season product and thus it presents the life cycle curve/pattern shown in the graphic
NEW PRODUCT FORECASTING
For increasing or decreasing the sales I can adjust the future sales based on the past sales. It is possible to use this formula:
1.2 How can you monitor the sales and correct them during the seasonal campaign?
Re forecasting : IV step
- During a sales campaign the forecasting of the sales may be subjected to variations (you may sell less or more) and then is necessary to update the forecasting through the use of a Re forecasting algorithm

- Re forecasting algorithm can be used to deal with products / markets having a limited lifecycle:
- Fashion products (clothes) sold during specific collections
- Brand new products having time reduced sales campaigns

Re forecasting
Third step: run Re forecasting algorithm to generate a new forecast plan F*t for that new product / market; analyze adjustment made by Re forecasting algorithm; optionally modify them manually
Re forecasting : III step
Second step: collect and gather from ERP systems historical sales At for that new product / market
Re forecasting : II step
First step : having a new product / market, generate the initial forecast without having available any historical demand: curve Ft, for t = 1, ..., T
Re forecasting: I step
2. Define the supply network in terms of logistics levels (plants, warehouses; number and locations) for the new item development and distribution.
Our product is a winter seasonal product, so we replenish the warehouses and the boutiques in the month of September
We have a weekly replenishment plan for the boutiques with a minimum stock quantity of 40 pieces in a way that is obtained a minimum service level of 95%.
The boutiques are filled up with an open- to- buy strategy
Our supply network will be based on two stock houses:
Turin
and
Naples

that will replenish our net which is based on 10 boutiques
Our distribution logistic net is carried out by an external agency (TNT) which will transport the goods from the production plant to the stock houses and to the boutiques
3) Which methodology could you use for store replenishment and for warehouse replenishment during the first sales campaign?
In our case we adopted the policy of a fixed quantity reorder: The reorder is performed with fixed lots known before thanks to an EOQ algorithm, and requires a continuous monitoring of warehouse level. In our case the reorder happens when the stock level reach the safety stock of 40 pieces. The lead time for the delivery is set to one week.
With this reorder model ideally the stocks will last until the next reorder cycle time.
EOQ Algorithm Model
…but how can we project this link?
Management POS A
EOQ= 50 , SS = 40

Management POS B
EOQ = 40, SS=40

Management Warehouse
Fixed lot =100 SS= 100
CONCLUSIONS
Industrial Process: Quantity
MARKET STUDY
Our First Collection will be based on 100 pieces shipped directly to the Boutiques
Supply Chain Planning
Uniform pattern
F*t =Ft x (1+FC)

FC= forecast correction factor
HYPOTESIS:
Increase of the demand
R&D and Engineering
The next step after the Market Study is to start to develop the prototype of the product
Many patterns are created before to choose the right one that will be the final collection item
Many styles and accessories are considered for the prototype but we choose
Lace
as the distinguishing Mark of the
Collection 2014/15
When the Prototype is finalized a technical data sheet is created to evaluate consumption and to start the production
The product that we chose may seem simple but it offers infinite possibilities of development.
From the Market analysis we performed, emerged clearly that Pullover is always considered a "Classic" for winter season, so we decided to enrich it with elegant details which place it in an high range of products.

Our Product study goes through the analysis of all the production phases, examining also the R&D, Costs, Timing, Logistic and Financial aspects.
Our objective is to rely on few selected Boutiques to keep our product in a niche market.

Project #1 is the first prototype:
Rejected
Project #2 is the second prototype:
The final choice
We defined the standard measures for all the sizes in order to finalize the product
We finalize all the additional measures that will define each consumption cost and will enable the starting of the production
Product Launch
The final phase of the product development is a Marketing campaign
Advertising will promote the product through channels like Press and Magazines starting few weeks before the launch and following all the seasonal campaign
Full transcript