Supply Chain Design Executive Summary and Presentation

Riordan Follow Up Recommendations

Project - CardiCare Valve Proof-of-Concept Project Team: Craig Mulligan (Project Manager), Max Hartwell (R&D), Stu Petter (R&D), Clinton Northrup (Operations), Alejandro Lopez (Support, user representative contact) Date: December 3, 2004 Introduction

Riordan Manufacturing is a global plastics manufacturer employing 550 people with projected annual earnings of $46 million. The company is wholly owned by Riordan Industries, a Fortune 1000 enterprise with revenues in excess of $1 billion. Its products include plastic beverage containers produced at its plant in Albany, Georgia, custom plastic parts produced at its plant in Pontiac, Michigan, and plastic fan parts produced at its facilities in Hangzhou, China. The company's research and development is done at the corporate headquarters in San Jose. Riordan's major customers are automotive parts manufacturers, aircraft manufacturers, the Department of Defense, beverage makers and bottlers, and appliance manufacturers.

The R & D Department at Riordan’s Corporate Headquarters consists of five product development personnel. Their job is to research and develop the next generation of heart valves, medical stents, and complementary medical devices. It has been the believe of management that new product development efforts require only a small amount of raw materials and components to build proof-of-concept models or initial working models of potentially new products. Consequently, minimal investment has been made in materials and components. However, the experiences of the CardiCare Valve Proof-of-Concept project imply that a greater commitment to new development in the medical arena may be value added based on project closure documentation. The President’s office initiated this follow-up review to assess the company’s progress in implementing the recommendations noted in the closure materials for improving operational efficiency and reducing expenses when developing medical devices. Scope and Methodology For the follow-up review, Riordan management: - Reviewed the operating policies and procedures for research and development; - Developed summary matrices to track the recommendations from the CardiCare project documentation; - Interviewed CardiCare project staff, including the project manager, R&D and other staff, and user representatives; - Conducted on-site visits to Riordan R&D and operations facilities; and

Riordan Follow Up Recommendations

Project - CardiCare Valve Proof-of-Concept - Researched medical device R&D operations at several non-Riordan facilities to determine the reasonableness of current Riordan project costs and return on investment data and to identify best operational and internal control practices. We conducted the follow-up review in accordance with government and internal auditing standards. We initiated our follow-up review in September 2004, and completed our fieldwork and data collection activities in November 2004. Findings Based on the follow-up review of the CardiCare project, determined that Riordan management fully or partially implemented all four of the recommendations contained in the project’s Lessons Learned Report. Noteworthy improvements and additional operating efficiencies include: - Securing at least one user representative from 80% of the current population of current and potential product users. However, due to schedule limitations, ability to have full participation in all product review meetings is unlikely. To increase likelihood of obtaining substantive user feedback, Riordan management could supplement existing on- site meeting processes with online/virtual reviews using Web technologies or forward confidential documentation to users for off-line review at their convenience. Both options decrease dependence on on-site meetings, but may require Riordan to invest time/resources to a) develop and/or implement a Web tool that is easy enough for the user representatives to access and b) establish and/or enhance existing process related to proprietary information management to minimize chance that development documentation is shared with competitors. - Piloting an iterative development methodology with two current R&D projects. Upon conclusion of both projects, performance statistics (duration to completion, user satisfaction, expense data, etc.) will be compared with other projects completed using non-iterative methods. The results will help Riordan determine, at a high level, whether iterative approaches should be adopted on a wider scale. - Assessing feasibility of an R&D asset management strategy. A global, proactive strategy is seen as preferred over reviewing asset capabilities at the beginning of planning activities for individual projects. With a knowledgebase of asset information (version, install date, technical contact, etc.), can easily determine whether a proposed activity complements available resources. In addition, the resource could facilitate identification of antiquated tools/technologies that can be targeted for replacement so they do not become barriers to project progress. - Cross-training R&D staff on high profile project activities. The current R&D staffing level and workload precludes Riordan from adopting a paired development approach. An alternative process is being used to leverage existing staff meetings as training sessions to educate all R&D staff about high priority projects. Case study presentations provide an

Riordan Follow Up Recommendations

Project - CardiCare Valve Proof-of-Concept

overview of a project’s primary objectives, key deliverables and current status. In addition, the presentations highlight at least one project activity that serves as an opportunity for staff to develop task-level knowledge. All materials from these case studies are stored in a shared drive accessible to R&D staff for reference. Conclusion Although Riordan’s R&D activities may not require the level of investment in materials and components found in operational areas, process enhancements may facilitate improvements in the efficiency and effectiveness of product development activities. Progress made to date on published recommendations implies that management is supportive of such modifications. To reap the greatest benefits from the recommendations without overloading front line staff, management should take ownership for refining the existing administrative infrastructure (policies, rewards, etc.) to encourage the adoption of the recommendations.