Managing New Product Introduction: Life Cycle Phases

Solar Plus Managing New Product Introduction: Life Cycle Phases Team Members: Jhon Benavides Sabrina Patino Russ Watt June 5, 2009

Company Vision and Goals • Top 3 Solar Panel Manufacturer for US Home Market (Revenue) with at least 30% Year 1 Profit Margin for new product. • In the next year Solar Plus will: • Complete Milestone 3 in the introduction of a new Solar Panel employing a technology with improved efficiency and/or cost to the market. • In the next 2 years Solar Plus will: • Successfully Launch this product with 30% Gross Margin by the end of 2Q11. • Increase install base by 28% from 3Q09 installations. • Begin Sales in Canada and Mexico—will require CSA and UL-MX Nom Mark Approval. • In the next 5 years Solar Plus will: • Release second generation of product no later than 1Q12 with at least 30% Gross Margin and increase installation by 21% from 1Q10 installations. • Complete Milestone 3 with next new technology with improved efficiency and cost by 2Q13. • Begin Sales in EU—will require • New Product Introduction will support Top 3 Manufacturer Goal based on current projections.

New Product Goals • Total Cost of Ownership and Payback Period remain as the largest barriers to purchase for the homeowner. • Increases in Conversion Efficiency and Reduction in Cost will continue to address these issues along with the expected increase in energy pricing. • We cannot dictate energy pricing, but we can impact efficiency and cost. • We expect the payback period for 2Q13 product to be less than Four Years. • Both efficiency and costs are major areas of research by numerous startups, universities and national labs. • Different Materials (carbon nanotubes, organic dyes, printed plastics) • Different Processes (Silicon cutting, light collectors) • We intend to be the preferred manufacturer of resellers through the focus on reliability through design and ease of installation. • Both deliverables are significant efforts during entire development cycle.

Corporate Structure

Gap Analysis What exists today? • Existing Solar Cell Technologies use single crystalline silicon that offers high wattage costs that hampers the diffusion of solar energy use. Sector Growth • The current Macro Economic situation in the world today has sparked a renewed interest in “alternative energy sources”. • Installations (California alone) are on a excellent growth curve. www.solar.coolerplanet.com

Gap Analysis Business Opportunity • Multi-crystal silicon enables the production of 27% more efficient solar cells than the conventional technology available in the market today • New cell technology reduces the cost per watt by 21% allowing to expand current available market. • The largest barriers to more installations are payback period and initial costs of solar cells.

PLC - Phase Gate Model Concept Evaluation Idea Creation Phase Gate1 Planning & Specification Phase Gate2 Design & Development Phase Gate3 Evaluation Phase Gate4 Production Phase Gate5 Obsolescence

Phase Gate Review • Members: VPs of, • Mfg • Service • Distribution • Finance • Engineering • Purchasing • Main deliverable: review phase progress and make decision to move forward to next phase if resources and objectives continue to align to corporate strategies. • Outcome: • Pass • Fail • Request further information, go back to previous stage

Phase Gate Evaluation Check List 9

Phase 0: Concept Evaluation • Primary Phase Owner: VP of Technology Evaluation • Solar Plus will outsource the development of solar technologies due to, • We are a small company; it will free up substantial amount of internal resources • Will leverage the use of new technology equipment and use of testing labs • Ensure technical expertise • Ideas are submitted in 2 ways: • VP Technology Evaluation will attend trade shows, monitor university studies, the National Renewable Energy Lab to identify new technologies • Any employee can submit an idea • Ideas are entered into New Product Online System and a tracking number is assigned for traceability and accountability • What is the New Product Online System? An online web interface tool that contains all product ideas. All members of the Technology Evaluation Committee receive an email to notify of idea submission.

New Technology Review Committee Members: Tech Evaluation Committee comprised of VPs • Tech Evaluation (owner) • Mfg • Service • Finance • Marketing Frequency: monthly Method: • Each idea is presented by the person who submitted idea into online tool. • 10 Min presentation to describe idea and committee to have a chance to ask questions. • Based on team member input, list of projects is prioritized. • Concepts can be approved, approved upon more info, fail to delay at a later time, or fail (not aligned to corporate strategies). • Approved Ideas officially enter Phase 0, and Product Development Cycle Time Starts

TRL • NASA Method to assess the maturity of a technology • Process is based on answering a set of predetermined questions for each level. • Each stakeholder group, has submitted their list of questions that must be answered during presentation. • Examples: • Have submissions been made to begin UL (or equivalent) certification? • What is the maximum demonstrated efficiency which this technology? Describe the experimental setup used and what was the sample size used for this demonstration? • A numerical TRL rating will be given to each idea. Generally, no idea with a rating lower than 4 will be slotted into a product. • On some rare occasions, a level lower than 4 will be considered when the business benefit is much larger than other options. • Risk is openly discussed and the group must concur on the TRL rating. Source: Wikipedia

Phase 0 - Outputs • Outputs • Technology Readiness Level (TRL) Assessment • Preliminary Business Case • Preliminary Cost Model • Strategic Fit Summary • Risk Analysis/Identification • Preliminary Budge to complete phase • Core Team Assignments • Project Manager Assignment • Metric on how long phase 0 takes to complete • Main deliverable:a prioritized list of approved projects reviewed by Review Committee. • Phase gate review committeewill decide, at this point, for projects that are approved, whether it will be outsourced or produced in house. (Make/Buy decision) • Outcome: • Pass • Fail • Reconvene at later date for more information • Fail, delay for future review

Phase 1: Planning & Specification • Primary Phase Owner: Project Manager • Outputs: • Core Team is assigned • QFD used to create Product Definition (Marketing) • Risk Mitigation Plans and FMEA (Eng) • Budget for prototypes, testing, capital equipment (Finance w/ Eng & Mfg) • Resource plan for functional areas (Core Team Member for Each area) • Metric for time to complete phase 1 is captured and recorded (Project Manager) • Schedule for Remaining Stages (Project Manager) • Team is ready to move on to next phase if checklist with above required outputs is met and phase is approved by Phase Gate Committee.

Phase 2: Design and Development • Phase Owner--Project Manager • Outputs of Phase • Lab Manufactured Prototypes (Engineering) • Completed Drawings and Specifications (Engineering) • Functional, Reliability and Installation Test Plans (Engineering) • Prototype Test Results (Engineering) • Prototype Failure and Root Cause Analysis (Engineering) • Potential Supply Chain Established (Purchasing) • Completed Drawings and Specifications leading to a Manufacturing Acceptance Signoff are the most important Deliverables for the Phase.

Manufacturing sign-off form 16

Phase 3: Evaluation • Phase Owner--Project Manager • Outputs of Phase • Manufacturing Support Build Occurs in Pilot Plant with Process Development Personnel with parts that are not fully qualified (Manufacturing) • Manufacturing process flow chart and capital expense plan (Manufacturing) • Quality Systems, Prototype Yields and Costs Established (Manufacturing) • Production Cycle Time and Yield Targets Established Continues to Phase 4 (Manufacturing) • Distribution and Final Product Logistics Plan (Distribution) • Final Cost Targets Established (Finance) • Marketing Collaterals and Promotion Materials Prepared (Marketing) • Manufacturing Process Flow Defined and Capital Equipment Plan (Manufacturing) • Completion of the milestone represents commitment to Pilot Production.

Phase 4: Production • Phase Owner--Project Manager • Outputs of Phase • Pilot Production build begins and produces first saleable product (conditional upon test results) • Baseline Manufacturing Metrics Established (Yields, Cycle Time, etc.) • Quality systems operational • Supplier Qualification and First Article Inspections • Samples sent for agency approval • Change Management process (with engineering involvement) • Field Service Training Scheduled and Executed • Yield and Cost Targets Met • Production Ramp Commitment

Phase 4: Production (continued...) • Phase Owner--Project Manager • Production Ramp Commitment • Quality systems operational • Continuous Improvement plans • Customer Satisfaction Surveys and feedback (Project Manager) • Review of field reliability and service activity • Ongoing SPC • Supplier Feedback System • Customer Satisfaction Feedback System

Phase 5: Obsolescence • Phase Owner--Marketing • Outputs • Schedule for obsolescence (Marketing) • Customer Service part planning (Service) • Inventory of finish goods projections (Finance) • Final Project Profit and Loss Summary (Finance) • End of Life Tool Monitoring (Manufacturing) • Incoming Part Inventory (Manufacturing)

SUPPLIER FEEDBACK USE A FORMAL RATING SYSTEM FOR OUR SUPPLIERS Not Certified – • The quality process is not implemented yet • Communication with suppliers is open Qualifying – • There is a formal commitment to quality, • but the process is not yet implemented. Certified – • Most of the agreed-upon requirements are met, • but the quality process is only partially implemented. • The supplier is working toward and committed to achieving a preferred rating. Preferred – • The quality process is fully implemented. • All key requirements are being met. Award – • A key supplier is eligible for Award.

INCOMING SUPPLIER QUALITY AUDITS (SUPPLIER FEEDBACK SYSTEM)Improve quality by improving supplier’s product and delivery quality. • MEASURING &TRACKING COST OF POOR SUPPLIER QUALITY • COST OF POOR SUPPLIER QUALITY (COPQ) ATTRIBUTED TO THEIR SUPPLIERS. SUCH COPQ MAY ADD UP TO OVER 10% OF THE ORGANIZATION’S REVENUE. • THE FOLLOWING SHOULD BE TAKEN INTO ACCOUNT TO CALCULATE THE ACTUAL COPQ. • SCRAP, REWORK, SORTING AND PROCESSING COSTS DUE TO POOR QUALITY • MRB INVENTORY AND PROCESSING COSTS DUE TO INSPECTION FAILURE • LINE SHUTDOWN ATTRIBUTED TO POOR QUALITY • USING EQUIPMENT THAT IS CAPACITY CONSTRAINED FOR REWORK DUE TO POOR QUALITY, REDUCING THE OVERALL UTILIZATION OF THE PRODUCTION LINE • FREIGHT COSTS DUE TO EXPEDITED SHIPMENT TO CUSTOMERS/DOWNSTREAM PLANTS • WARRANTY EXPENSES DUE TO POOR QUALITY • RECALL EXPENSES DUE TO POOR QUALITY OF PRODUCTS SHIPPED TO CUSTOMERS

Cost recovery • TOTAL COPQ IS EQUAL TO THE COPQ OF OEM PLUS INHERITED COPQ OF SUPPLIERS. • PROACTIVELY WORK WITH SUPPLIERS TO IMPROVE QUALITY • REDUCE COPQ. HENCE A COST-RECOVERY SYSTEM • SUPPLIERS ARE CHARGED BACK FOR PROVIDING POOR QUALITY OF COMPONENTS • INTRODUCE BUSINESS DISCIPLINE AND ACCOUNTABILITY INTO THE SUPPLY CHAIN. • INSTITUTES A QUALITY MANAGEMENT SYSTEM TO AGGREGATE SUCH COSTS AND USE IT FOR CHARGE-BACKS • RECOVER THE COSTS OF POOR QUALITY FROM SUPPLIERS, • INSTITUTE A DISCIPLINE THAT FORCES THE SUPPLIERS TO QUICKLY IMPROVE QUALITY OF PRODUCTS SHIPPED

SUPPLIER AUDIT • ENSURE THAT SUPPLIER IS FOLLOWING THE PROCESSES AND PROCEDURES THAT WAS AGREED TO DURING THE SELECTION PROCESSES • SUPPLIER AUDIT IDENTIFIES NON-CONFORMANCES IN MANUFACTURING PROCESS, SHIPMENT PROCESS, ENGINEERING CHANGE PROCESS, INVOICING PROCESS AND QUALITY PROCESS AT THE SUPPLIER. • AFTER THE AUDIT, THE SUPPLIER AND MANUFACTURER TOGETHER IDENTIFY CORRECTIVE ACTIONS WHICH MUST BE IMPLEMENTED BY THE SUPPLIER WITHIN AN AGREED-UPON TIMEFRAME. • A FUTURE AUDIT ENSURES THAT THESE CORRECTIVE ACTIONS HAVE BEEN SUCCESSFULLY IMPLEMENTED. • OUR MANUFACTURE ORGANIZATION ENSURE THAT THE AUDIT PROCESS IS EFFECTIVE AND EFFICIENT AND ALLOWS THEM TO AUDIT THEIR ENTIRE SUPPLIER • SCHEDULE AT LEAST ONCE A YEAR WHILE MAINTAINING A LEAN STAFF OF AUDITORS. • THE FOLLOWING PICTURE SHOWS THE BEST PRACTICES PROCESS FOR INTERNAL AUDITING

SUPPLIER SCORECARD • Use of scorecard technique to rank the supplier’s performance based on: • IMPROVEMENTS • QUALITY Key operational metrics that lead our organization track the supplier scorecard: • # OF CORRECTIVE ACTIONS LAST QUARTER • AVERAGE RESPONSE AND RESOLUTION TIME FOR CORRECTIVE ACTIONS • # RMAS PROCESSED PER MONTH • MRB INVENTORY LEVELS • # OF REWORK HOURS DUE TO SUPPLIER COMPONENTS • # OF CUSTOMER COMPLAINTS ON PRODUCT QUALITY • WARRANTY RESERVES • RELATIVE RANKING OF SUPPLIER • PERFORMANCE AGAINST BENCHMARK

ENGAGING SUPPLIERS IN QUALITY SISTEMS • Engage suppliers in all aspects of their quality management system, so that the supply-base is fully integrated into the QMS being rolled out. Key requirements include: • Supplier should be able to provide quality-related data to our company • Feeding information from supplier’s quality system into manufacturer’s quality system • Getting the supplier to use a manufacturer’s web-based quality management system • Provide the right information to a key customer without having to deploy software in-house

CLOSED LOOP CORRECTIVE ACTION • Implementing a Quality Management System (QMS) that provides a closed loop corrective action process to fix problems • Identification of quality problem. • Initiate an investigation and identify the root cause of the problem • Create corrective actions to be approved • Implement appropriate action which represent procedures, training or recalibrating the equipment • Use the entire information to initial a cost recovery with the supplier • Deploy a closed-loop, integrated quality management system. • Audits become a core driver into the corrective action process and become a key tool for continuous improvement

CUSTOMER SUPPORT IMPROVENMENT KEEP CUSTOMER HAPPY BY RESPONDING THEIR NEEDS • PROVIDE COMPREHENSIVE MANAGEMENT OF CUSTOMER SUPPORT • GENERAL CUSTOMER’S NEEDS • APPOINMENTS • AVAILABILITY TO THEIR PRODUCT • STATUS OF THEIR PRODUCT AT ANY TIME • OFFER CUSTOMER SELF-SERVICE OPTION Create websites services creating secure access to network for the customer and his needs • KEEP CUSTOMER DATA SAFE AND ACCESSIBLE Have accurate and complete information of the customer Customer responsiveness rather than say I will call again • HELPING CUSTOMER TO CONTACT THE RIGHT PERSON Customer may want to make phone calls Contact customer directly with the right person who has experience and background and answer their specific needs • MEASURING CUSTOMER LOYALTY EFFORTS • Use of networking for measuring the responsiveness to the customer • Listening the customer’s voice

Customer Satisfaction Survey and feedback The best way to find out whether your customers are satisfied is to ask them. What, How, when Ways to ask customer satisfaction or not • Face-to-face • Call them on the phone • Mail them a questionnaire • Email them a customer satisfaction survey • Email them an invitation to take a customer satisfaction survey • SCHEDULE TO CONDUCT A CUSTOMER SATISFACTION The organization will conduct a survey after the customer have received the product

Managing New Product Introduction: Life Cycle Phases