It’s nearly Easter and the shops are as filling up with crazy Easter Eggs such as the Marmite flavoured Egg for humans and the dandelion egg for pet rabbits; not forgetting the sweet memory of the most expensive Egg two years’ ago (£25,000 Choccywoccydoodah concoction!). Product Development fulfils sales and marketing strategies. In a BDO survey undertaken in 2017, 92% of industry participants agreed that New Product Development represents the biggest opportunity for growth.
You need to track the costs of NPD to ensure that your bottom line is as delighted as your customers. You need accurate data to ensure the winning recipe makes it to production.
1. Researching with Social Media
“Sentiment analysis” has proved a great use of social media to spot up and coming trends that can lead to successful new product development. Market entrants are great at this, using social media to test public appetites for a new granola recipe as well as using big data streams to anticipate the next big thing (that habit of posting pictures of your lunch can help a food manufacturer consider new product development). The drive for plant-based alternatives is a great use case for any doubters.
2. Recipe Management and Versioning
Flag that BOM as “under development” to make sure your development kitchen recipes don’t end up on the Shop-floor. Keep track of the versions and use questionnaires to rate the test results. Model the production impact alongside the recipe, no point developing the most delicious product if it is cost prohibitive to produce.
3. Ingredients Management
You may be buying in new ingredients specifically for the new product under-development. You will want to keep these separate to main stock but still part of inventory with the same stringent Quality Control, Lot and allergen management etc.
4. Track Development Costs
You’ll want to identify and report on all development costs, successes and failures. If you are an SME you can apply for tax relief on new product development. You’ll also want visibility of roll-up costs to help determine the price of your new product.
You’ve found the perfect recipe! How much will you sell? Consider using machine learning and data modelling to draw comparisons from similar product lines and don’t forget to consider the new product’s impact on existing lines (did Greggs start selling fewer meat sausage rolls after the successful launch of the vegan alternative or did they reach more a wider audience who also enjoyed sparkling water etc!).
Reinventing existing recipes, perhaps to reduce sugar, fat or cost, needs the same tracking as a “start from scratch” new product. For “improved” products you do have the benefit of reasonable data to base forecasting on.
Consider the impact on older/similar stock lines before your launch to avoid ending up with an unpalatable write-off. Although you could gamble on an announcement of the end of a product resulting in a revival (Heinz Salad Cream is a great example of this when an announcement plan to product withdrawal led to a massive spike in sales).
Use the same analysis tools to track costs of packaging from design to delivery. With multi-dimensional analysis, you can then split out packaging cost from the recipe as well as build it back in.
Reporting on the cost of development alongside predicted and actual sales revenue. Pulling in all of the above, including the +/- impact on existing product lines.
New Product Development turns great ideas into commercial successes, with a few misses along the way. It is an investment by the business and so needs to be planned and measured. How well does your current ERP/systems help support your New Product Development processes? Our ERP quiz helps direct you to a plan for improvement.