L4M2 Chapter 3

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Chapter 3 covers specifications:

3.1: Specifications

3.2: Sections in Specifications

         3.3: Inadequate Specifications

         3.4: Regulating Specifications

3.1: Specifications

Conformance specification: uses defined standards that a product has to adhere to e.g. blueprints, chemical formulae.

Performance specification: defines what the product needs to achieve, leaving freedom for how the supplier delivers/designs that.

 

Conformance specifications

The risk of the specification being inadequate is the buyer’s risk; the supplier simply delivers according to the specification given to them.

Technical specifications: A description of the technical requirements, outlining the terms of acceptance alongside (could allow for tolerance limits against the design)

• ‘Tolerance’: allows for some variation within a certain bound around the technical spec

• Will include the specification scope, material requirements and drawings, for example

·       Closed vs open specifications: closed specifies a certain product with no alternatives, whereas open specs don’t name a specific product

•       A brand could be specified, that a supplier then has to use in its product

The advantage of a technical specification is buyer can be sure what they’re going to get: it’s a transparent way of delivering and measuring the product.

However:

• The buyer needs to have proper technical knowledge to be able to draft a detailed spec

• This can take a lot of time to develop, and involve design costs

• For the above reasons, conformance specifications aren’t as common anymore: markets are more dynamic and there is a need for continuous innovation.

Specifications by chemical/physical properties: Specify the chemical or physical properties e.g. a particular formula of the product required.

Specifications by sample: A buyer may have a prototype or sample that they want a supplier to reproduce. This can then be sent to the supplier. Alternatively, the supplier can provide samples and then the buyer can select.

KPIs could complement a conformance specification (but importantly, isn’t part of the spec itself). These could cover things like delivery times, or aspects of the product’s performance.

 

Performance specifications

This type of spec will include the functionality or outcomes that need to be achieved, rather than outlining specific designs.

This might be conveniently used when:

• Suppliers have more technical information

• There is less time and money to draft a conformance spec

• If you want to leave flexibility to account for evolving technology.

Functional specification: outlines the functions that a product needs to provide e.g. an app needs to have certain functionality (like certain icons/options).

Output specification: basically asks for a product that satisfies the purpose of buying it, rather than specifying designs.

Outcome specification: more high-level and conceptual, stating the buyer’s ultimate end goal using the purchase.

 

Technical standards

These can be incorporated into both performance and conformance specifications. They specify a minimum level of performance required.

• One example is ISO 9000, which is a quality standard used across industries

• ‘Market grade’: refers to certain materials which have a grading system based on quality

Statement of work-based specifications (SoW)

Used in contract and project-based work. Outlines the requirements for all work that needs to be done.

• These can be conformance or performance specification based

• They’ll outline the purpose of the work, scope, deliverables and milestones

 

Service specifications

Service specs use a Service Level Agreement (SLA). Services can be harder to measure because they are intangible.

Techniques to get information for specifications

·       RFIs: suppliers can provide their view on what should be provided

·       Early supplier involvement (ESI): a pre-qualified supplier could advise from an early stage in the sourcing process

 

3.2: Sections in specifications

Through-life contract: a supplier takes care of design, manufacture, support and decommissioning of an item (i.e. end-to-end).

• It’s common for IT products, where a supplier will create software and provide updates/maintenance through-life.

• It gives the buyer security that the product will be taken care of for its life, and that they don’t need to search for a new product.

Integrated logistics support (ILS): provides equipment, spares, personnel and information required to meet the buyer’s needs.

• A single supplier provides all services needed to support an item through-life

 

Scope: will identify all materials and items needed initially + all services needed for support and disposal.

User requirement document (URD): sets out what the user wants from a product, and a specification can be produced from this.

• With consultation, these requirements are refined

• Requirements need to be cognisant of the cost envelope, which can lead to decisions to exclude some services from acquisition or support if they’re too expensive

 

The detailed requirements for a through-life contract would mostly be output or outcome-focused as opposed to conformance.

• This is because they are long-term contracts where technology will change

• The detailed requirements will be the longest part of a contract and will have sub-sections covering the various services required

 

Testing and acceptance

Testing by the supplier is known as ‘alpha testing’. This will happen before it’s passed to the buyer.

Testing by the buyer is called ‘beta testing’, or user acceptance testing (UAT).

·       These are done on the buyer’s premises and in simulated environments.

 

Change control

This is how requests to change requirements are carried out.

• A change control procedure governs how these requests are done, negotiated and then implemented

• In a through-life contract, these may be inevitable due to changes in circumstances and demand

 

ESG: Remember the ‘Triple Bottom Line’: People, Profit, Planet.  This is becoming increasingly important in contracts, in order to hold suppliers to account for achieving ESG.

• Environmental criteria are important for provision of goods/machinery, less so for services where the carbon footprint is less

• ISO 14001 is a standard for environmental management

• Social criteria apply to promoting wellbeing of society and employees e.g. adhering to workers’ rights

• Governance criteria refer to things like business ethics, legality

3.3: Inadequate specifications

Specifications could be inadequate if they’re under-specified, over-specified or vague.

Under-specified could refer to:

• Insufficient scope e.g. on quantity, or doesn’t cover enough through-life support

• Bought the wrong thing: specifications might point to the wrong type of product, or quality

• Missing out items from the specification

 

Over-specified could refer to:

• Too strict a tolerance limit, which is unnecessary and adds cost

• Extra and redundant features

• Excess quantity

 

Vague specifications: could lead to contract disputes, or the buyer having to pay to address issues.

 

How do you write better specifications?

• Employ or train people with skill in writing specifications

• Use best-practice templates for specifications

• Use pre-existing specifications

• Make sure to involve the relevant stakeholders throughout the drafting process

• Value analysis (estimate the costs and benefits of each additional requirement you add)

• Standardisation: use standard products rather than bespoke ones where possible

 

You should monitor the quality of specifications over time, as it provides valuable lessons and ensures you take appropriate remedies.

·       Check that specifications are being used

·       Hold people accountable for preparing specifications

·       Record issues with them, and take remedial actions

 

3.4: Regulating specifications

Standardisation

Ensure there’s a set and uniform standard for an item across the organisation, but this can apply more widely at national and international level.

·       Use standard specifications: ensure that there’s minimum variability in stock bought where possible.

• ‘Stock proliferation’ refers to a situation where there are rising numbers of particular types of stock that are ‘slightly’ different from each other

• Stock proliferation unnecessarily inflates inventories and can be difficult to track and move

• Standard specifications can minimise this proliferation

·       

     Variety reduction: reducing the different types of components and materials used where possible

•      Proactive approach: encourage designers to think about standardising when they design a product

•      Reactive approach: management/procurement standing up a team to investigate variety reduction across teams

This can ensure that there is a smaller range and quantity of stock held, smaller number of suppliers to manage and simplifies procurement process using a standardised process.

 

Value

Value: when the final product is worth more than the sum of inputs going into it.

Use value: the value that is derived from the use of a product.

Esteem value: the value that the buyer associates with an item from a prestige perspective.

Value = Function / Cost, where function can be understood to mean the benefit provided by the use of an item.

 

Value analysis (VA)

A method of studying the value of existing products. It analyses each function provided by a product and attempts to find ways to provide these functions at the lowest cost possible.

• It will attempt to re-specify the product, in a way that provides the same function but at a lower cost

• A multi-functional team would be set up to do a VA exercise on a particular product

• Possible lines of analysis could look at the purpose of the product, its performance, reliability and maintenance requirements

• The process would consist of an information-gathering stage, analysis, idea generation, evaluation, development and presentation.

Function analysis: used in VA to break down a product into sub-functions which are thereby analysed to evaluate whether they add value.

• One method is to use a noun and a verb for each function e.g. provide X

Cost analysis: used in VA to break down the direct cost for each sub-function of a product.

 

How do you measure value to the customer? This is quite subjective.

• Functions could be categorised in qualitative ways, as this is difficult to quantify

·       Kano Model: describes five reactions by customers to a particular product feature

•       Reverse quality: causes dissatisfaction

•       Indifferent quality: don’t really care

•       Must-be quality: has to have these functions

•       One-dimensional quality: cause satisfaction when done well, dissatisfaction when not

•       Attractive quality: cause satisfaction when provided, no dissatisfaction if not provided

 

Value engineering

Similar to VA, sometimes described along with it as ‘VA/VE’. VA applies to existing products, VE applies to new products that aren’t in production yet. VE is used to:

• Produce value at lowest cost

• Increase value without increasing cost

It needs to consider the entire lifecycle of the future product, including whole-life costs. This will include a prediction for when the product would become obsolete, i.e. plan out the expected lifecycle (planned obsolescence).

• But noting that this shouldn’t cause a degradation in the product’s perceived value over the course of its life

The stages of VE are similar to VA, i.e. information gathering, analysis etc.

Target pricing: the process for how you arrive at a competitive price for a new product. This will then yield a target direct cost. The VE team will then try to ensure that the planned product produces value that is worth the target price.

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