New Product Development Process

profileDr Alphonse
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Supply Chain Management: From Vision to Implementation

by Stanley Fawcett, Lisa Ellram, and Jeffrey Ogden


Test Item File - Chapter 4: New Product Development Process


Multiple Choice


1. The customer satisfaction cycle shows that new product development is truly a ________ process, requiring extensive collaboration throughout a company.

A)    personal

B)     revolutionary

C)     cross-functional

D)    innovative



2. SC leaders regarding new product introduction rely heavily on a teaming approach that includes ________ and ________early in the process.

A)    raw materials, labor

B)     orders, inventory

C)     information, materials

D)    customers, suppliers



3. The first critical step in managing and controlling risk is to recognize the__________.

A)    products

B)     processes

C)     risks

D)    raw materials



4.  The use of new product development (NPD) teams reduces the risk that comes from poor ________.

A)    communication

B)     suppliers

C)     customers

D)    processes



5. As part of the design process, it is most important for each company to know its __________.

A)    core competencies

B)     raw materials

C)     marketing forecasts

D)  demands



6. The first step in the cycle of customer satisfaction is to get into the mind of the customer to identify customer __________ and    __________.

A)    products, processes

B)     people, products

C)     needs, desires

D)    goals, objectives



7.  One marketing department responsibility is to identify current and emerging ________.

A)    products

B)     competitors

C)     core competencies

D)    employees



8. Most viable ideas for new products don’t come as a flash of insight, but rather from ________ and ________.

A)    books, journals

B)     hard work, research

C)     suppliers, customers

D)    employees, partners



9.  Satisfying customer needs is not the job of the marketing department alone. It is

the task of the entire supply chain, sometimes called a __________ by customer focused


A)    contingency

B)     business

C)     organization

D)    demand chain



10. It is the job of all members of the ________ to understand, serve, and satisfy the end customer.

A)    supply chain     

B)     organization

C)     department

D)    team



11.  Customer focus requires that businesses look not only at their own operations, but also at

external ________.

A)    competitors

B)     organizations

C)     supply chains

D)    financial institutions



12.  Understanding your _______  and positioning the total package to meet their needs is critical to customer loyalty.

A) customers

B) suppliers

C) competitors

D) products



13.  The second step in the cycle of satisfaction is to take the product from idea to ________. 

A)    customer

B)     production

C)     end

D)    market



14.  A sequential NPD cycle is often ________ and ________.

A)    value-adding, effective

B)     fast, intuitive

C)     time consuming, inefficient

D)    quantifiable, efficient



15.  The first challenge of the new product introduction process is determining the________of the product.

A)    market

B)     target price

C)     attributes

D)    qualities



16. Deducting the target________ from the ________ yields the target cost.

A)    value, target price

B)     price, profit

C)     cost, profit

D)    profit, target price



17.  Getting ________  involved early through an ESI program is critical to the success of complex development efforts.

A)    suppliers

B)     managers

C)     competitors

D)    customers



18.  Assessing the cost and quality of a new product in the ________phase of development enables a more accurate prediction of customer acceptability of the product or service.

A)    production

B)     design

C)     marketing

D)    sales



19.  While the team is working on cost management activities, it must keep in mind that the new product it is creating must __________.

A)    be inexpensive

B)     meet the customer’s needs

C)     have the highest quality

D)    be technically excellent



20.  The NPD process and target costing process are ________ processes.

A)    competing

B)     successive

C)     complimentary

D)    intuitive



21.  The third step in the cycle of customer satisfaction is to verify the ________ viability of new products.

A)    production

B)     market

C)     technical

D)    financial



22.   ________ is a metric for monitoring and managing business activities.

A)    Financial performance

B)     Management

C)     SCM

D)    NPD



23.  The finance department at Intel sees itself as a _________ of cost management by providing the right tools and support.

A)    leader

B)     facilitator

C)     controller

D)    prime mover



24.  The __________is a measure of how much a company makes after paying all its expenses.

A)    sales revenue

B)     profit

C)     assets

D)    cash flow



25. ________  represents how much money a company makes from the ongoing business of selling its goods and services.

A)    Financing cash flow

B)     Working capital

C)     Operating profit

D)    Total profit






  1. Profit before taxrepresents the sum of operating profits plus or minus gains and losses from    other activities.  True Easy


  1. Cash also flows out to repay investors with dividends and creditors. True Moderate


  1. A long production time or high inventory levels tie up large amounts of cash. True Difficult


  1. A company with good long-term investments may look profitable before taxes, but actually be    losing money on operations. True Easy


  1. Cash flows out of the company when receivables are collected; the company borrows money, or sells shares of stock.  False Moderate


  1. EVA gives a longer-term perspective on whether a project is generating or destroying the firm’s value over the project life cycle. True Easy


  1. The top management is the driver of SCM. False Moderate


  1. The interface between marketing and SCM lies in developing the right product at a fair price and then positioning it properly in the marketplace. True Moderate


  1. New product development exists only as a function in many organizations. False Difficult


  1. Finance and accounting are the firm’s scorekeepers. They communicate performance results throughout the organization and to the outside world. True Easy


  1. As important as it is, few companies have mastered the new product development process. True Moderate


  1. Top management often gives the new product team responsibility for the entire customer satisfaction cycle. True Easy


  1. Companies like Intel have seen their product life cycles grow from 4 or 5 months to 4 or 5 years. False Moderate


  1. Honeywell’s Engine Division estimates that it costs them about $1 million a week to develop a new product. True Easy


  1. Because costly misunderstandings almost never occur with upstream suppliers, the NPD team need not include key suppliers of inputs and services. False Difficult


  1. Working together over a sustained time period helps companies get to know their suppliers’ capabilities and risk factors. True Moderate


  1. A company should never outsource its core competency or activities that support it.  True Moderate


  1. Explicitly focusing on downstream requirements can increase risks in the development and introduction process. False Moderate


  1. Excessive change can become a “habit” that does not add value, but adds unnecessary complexity and risk. True Easy


  1. As taught in any basic marketing class, the marketing mix is made up of four Ps: product, price, place, and promotion. True Easy


  1. Good marketing, advertising, and a sharp Web site can sell a product with little apparent value. False Moderate


  1. Satisfying customer needs is the job of the marketing department alone. False Moderate


  1. Failure in any aspect of the tangible or intangible product experience can leave a bad taste in the customer’s mouth and cause an organization to lose future sales. False Moderate


  1. It is the job of all members of the supply chain to understand, serve, and satisfy the end customer. True Difficult 


  1. Harley-Davidson gives all employees the opportunity to attend motorcycle rallies to talk to customers and get a feel for customer wants and needs. True Easy


  1. Cost management and product development beyond the concept stage are also marketing’s areas of expertise. False Easy


  1. Sequential NPD is a traditional approach based on strict functional boundaries. True Easy





1.      List the four phases of the ‘cycle of satisfaction’ and explain each in 2-3 sentences.


2.      Explain in brief the meaning of Formalized Risk Management and enumerate the 8 risk factors identified by Intel.


3.      Provide a possible reason for why IBM was losing money in the PC market.


4.      What are the 4 P’s of marketing? Explain what some people have started terming as the 5th ‘P’.


5.      Based on the reading provide an understanding of the changes that Harley-Davidson made and their results.


6.      What is target costing? And list down the determinants of target price.


7.      Explain in a short paragraph the role that finance plays in New Product Development (NPD)


8.      Describe in brief the meaning of Economic Value Added (EVA) and its implications.


9.      What are your takeaways from this chapter? List at least 4.


Fill in the Blank(s) (Blank Identified in RED)


  1. EVA  = Operating Profit  _________(Total Capital employed - Company’s Cost of Capital) Easy
  2. Experts say that more than 9 out of every 10 new products introduced ______ Easy
  3. At the heart of the new product development process is the ______ cycle. Easy
  4. The customer satisfaction cycle shows that new product development is truly a __ process. Easy
  5. Some companies continue to manage innovation_________. Others have adopted cross-functional teams. Easy
  6. Gillette spent $_______ on R&D to create its Mach III razor. Easy
  7. Intel has developed an excellent, formalized ___________ process for new product development. Moderate
  8. Risk is reduced when __________ is identified and applied. Easy
  9. Making the wrong decision on what to do internally versus what to ____________ can make or break a company. Easy
  10. In 2005, IBM sold its PC manufacturing business to_______, a Chinese firm. Moderate
  11. Many “_________” issues should be considered when a company is designing its products and services. Easy
  12. Design for______ represents the realization by many organizations that all change does not represent true innovation or improvement. Easy
  13. The original IBM PC became a___________ product. Easy
  14. Apple has really ____________the direction and future of its product. Easy
  15. It is the job of all members of the _____________ to understand, serve, and satisfy the end customer. Easy




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