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R&D includes what areas: 1. to reposition a product perceptual map chart - shows how we track evolving customer demands in the industry - each solid circle represents a market segment of customers with similar preferences - customers expect your products to be positioned within these solid circles - every year the market segments are drifting down and to the right across the perceptual map as customer demands evolve - changing performance/size will reposition the product R&D revision date - after repositioning your product by changing the mtbf, size and performance the revision date is when your product will be produced and sold at the adjusted amounts - age at revision will be cut in half which can be seen in the age profile R&D cost - based on how long the project will take the company to complete R&D product name - maximum length of 6 characters - should begin with the same letter as that of your team name R&D pfmn = performance - indicates how well your product performs (speed, sensitivity) - long term trends is toward higher performance - for existing products, the farther the move the longer the time and higher the cost - for new products, project length depends upon proximity to existing products - is on perceptual map R&D size - on perceptual map - indicates physical dimensions of the product - long term trend to smaller products - for existing products, the farther the move the longer the time and higher the cost - for new products, project length depends upon proximity to existing products R&D mtbf - mean time before failure - predicts reliability - similar to improving the design - increasing MTBF increases the material cost and makes the product more appealing - indicates the average number of hours your product will operate before it fails - higher reliability implies higher material costs to build you product R&D revision date - date the project will complete - until this date, the project is produced with the old specifications - any existing inventory at that time is reworked to the new specifications at no additional cost - TIP: a new project cannot begin until the old project finishes - all projects begin on January 1 - projects that finish in december are better than projects that finish in january because the december revision date will allow you to begin a new project almost immediately while the january revision date will force you to wait until the next round R&D age at revision - new perceived age of the design when the product emerges from R&D - moving a product on the perceptual map affects the age BUT changing the MTBF specifications does not - when the product moves, cusotmers see the product as younger than the old design but not entirely new - they could the old agein half and behave as thought the design is younger R&D project costs - total cost of the project in thousands of dollars - most you can spend in any year is $1 - if the project costs more than $1 million, $1 million will be spent this year plus the remaining balance in future years R&D industry conditions report - has the drift rate for each market segment in table 1 to help plan R&D decisions - drift rates are how fast each market segment is moving across the perceptual map R&D process overall In summary, to reposition a product you would do the following: Research current customer buying criteria in the Courier report. Display the R&D worksheet. Adjust Performance, Size, & MTBF. Observe impacts upon age, material costs, and R&D completion dates. Save the decisions. Marketing - Price - customer expects prices to fall within a reasonable range and fall each year - EX) $15 low end and $40 in highe end - for this year's expected price ranges, visit the segment pages under "Last Year's Reports" - penalty for pricing product above the range: every dollar above the price range will lose 20% demand for your product ; at $5 above the price range, demand will fall to zero Marketing - Promo budget - in thousnands - promotion drives customer awareness and thus also sales - promotion drives all interactions with the customer BEFORE they begin to actively shop - awareness decays over time - you lose 1/3rd each year as customers forget the product - promotion is subject to diminishing returns Marketing - sales budget - in thousands - drives accessibility which examines "how easy it is for customers in the segment to interact with my company during and after the sale?" - it measures distribution channels, sales force, shelf space, order entry systems, customer support, etc - the easier it is to interact with your company the more likely a company will choose your product - 60% accessibility rating means 60% of customer find it easy to work with you and 40% don't - accessibility is a segment issue; products within the esgment are assigned the segment's accessibility - products in the rough cuts are prorated - diminishing returns apply - accessibility decays over time Marketing - benchmark prediction - estimates unit sales assuming your product competes with a standardized, mediocre playing field - it does NOT use your actual competitors products - is useful for experimenting with price, promo and sales budgets - is useless for forecasting - can be increased by lowering the price and increasing the promotion and sales budgets - is not accurate but if project increases it does indicate that the decision would typically result in selling more units - has no knowledge of what your competitors are doing in your simulation Marketing - your forecast - in thousands - represents what you believe you will actually sell - if left at 0 then the proforma financial report will use the computer's unit sales forecast - TIP: important to develop a sales forecast for each month - estimate sales based upon current market conditions, then develop a best/worst case spread - worst case goes under the "benchmark prediction" and best case into "your sales forecast" -- gives you above expected sales with all of your inventory converted to cash - what you are guaranteeing you will sell this year - it is encouraged to be a little conservative with this estimate - to help with this, refer to segment pages in reports and market share report Marketing - gross revenue - revenue forecast for each product - price * unit sales - assumes inventory will be available to meet demand - if your "sales forecast" is zero - the calculation uses the computers "benchmark prediction" Marketing - variable costs = (material cost + labor cost + inventory carry costs) * unit sales - if your "sales forecast" is zero - calculation uses the "benchmark prediction" calculated by the computer - the calculation uses the material cost and labor cost it finds in the production worksheet and assumes there is no leftover inventory to carry - Marketing - contribution margin = gross revenue forecast - variable costs Marketing - less promo/sales = contribution margin - promo - sales budgets Marketing - revenue - by changing sales forecast revenue projects increase - is equal to sales forecast minus variable costs and marketing expenses Marketing process overall In summary, to market your product you would do the following: Research the competitive environment in the Courier. Display the Marketing worksheet. Enter decisions for Price, Promotion and Sales Budgets. Observe the decision impact upon the benchmark forecast. Develop a worst case estimate for demand. Enter your worst case estimate for in the sales forecast. Save the decisions. Production - how to schedule production for your products and how to buy/sell assets in the simulation - review production analysis before making decisions - great place to look at what competitors are doing too - scheduling is in the thousands - how much production you can schedule for a product depends on capacity Production - unit sales forecast is the unit sales forecast brought forward from the marketing sheet - should represent the company's worst case scenario Production - inventory on hand - number of units sitting in your warehouse at the start of the year - inventory on hand + production after adj = number of units you could sell this year Production - production schedule - number of units you wish to build this year in thousands - you cannot schedule more than twice your first shift capacity - TIP: remember to factor in inventory on hand when determining how much to produce for each product this year Production - production after adjustments; there are 4 constants 1. capacity: cannot build more than 2x your 1st shift capacity bc there are only 2 shifts 2. complement: if you do not have enough workers, then you may not be able to produce the production schedule even after working 100% overtime 3. AP: lag policy from mkting spreadsheet; as you extend payables policy, vendors increasingly withold parts delivieries, making it impossible to meet production schedule 4. time in mkt: new products are constrained by time in the market. for example, if a product is introduced in october - you could only product is for 3 months - TIP: it is ok to produce more units that you are forecasting; number of units produced should repr the best case scenario; an extra 1-2 months of sales is reasonable - is what you will actually produce based on production schedule - inventory on hand + production after adj = MAX number of units you can sell for a product this year