Introducing the product life cycle and V--modell in the leasing companies.

Mustea-Serban, Razvan ; Folcut, Ovidiu ; Ciocirlan, Doinita 等

1. INTRODUCTION

The legislation in force and the prospects of its evolution in the near future entail both at national and European levels, the aggregation of leasing companies into corporations able to cater both to the demands of market rigors and to the customers' complex requirements. Beyond consumption leasing there is a customer segment with a tremendous financial potential, which primarily requires solutions and not a mere purchase variant.

The accrued experience in the field of car leasing cannot be transferred as such to the new fields. The essential difference lies in the operational risk management strategy. Thus, the following are known in the case of vehicles: the functions of the respective good, means of use, necessary qualification. Taking this risk, coupled with the existence of a secondary market or of collateral security, makes total exposure acceptable (or even minor--in most cases).

Several critical points need to be outlined for industrial machinery and plant (Walker & Hampson, 2003):

* They are part of a manufacturing system;

* Technical, functional specifications and performance levels--are not necessary part of the toolkit of leasing company analysts;

* The secondary market is difficult to tap into directly companies specialize din remarketing are used as a rule, when the contract is not secured through buy-back.

Consequently, the leasing company has either the option of specializing in certain fields--for instance metalwork machinery leasing--or of defining and following a procurement model through which it can tap into a wider range within the new fields.

Specialization in itself leads to market atomization and, consequently, goes against the consolidation trend evinced by strong companies and otherwise supported by most Central Banks.

The remaining eligible variant is defining complex procurement models based on project management, since any client calling for a solution (not necessarily a good) shall be the user of a production system that is in fact property of leasing companies.

In other words, limiting and controlling operational risk from the standpoint of leasing companies can only be undertaken with their involvement in technical issues--as assumed owners.

Thus one of the major differences from credit financing becomes apparent, namely: if in the case of a manufacturing system, the client submits a business plan (the project) that the bank checks from a financial and technical point of view, in the case of leasing, the company will interact with the client in drawing up the business plan, through its own procurement model.

These methodologies are not world novelties, since they have been used by Defense Ministries and Public Administration in European countries in order to have an effective and efficient control over public money engaged in defense or public infrastructure procurement.

2. INTRODUCING THE PRODUCT LIFE CYCLE AND V-MODELL IN THE LEASING COMPANIES

The leasing company is--objectively--under obligation to understand the life cycle of the product it finances. If in the case of cars this visibility is still necessary, especially in the case of used cars, taking into account real estate development and re-technologization, it turns into a critical desideratum in approaching a new leasing product.

Having emerged in the field of IT product development, the V-model is the German standard for federal administration and defense projects.

Its applicability for leasing companies stems primarily from the status of ownership. Thus, when setting up a new financial product, the frequency of "sale" for this product in time shall be considered. This frequency is determined by the user's (functional and design) requirements to be found in the left branch of the V-model.

Product Life Cycle Management

The market evolution stages can be identified simultaneously with the life cycle (Westland, 2007). Thus:

i. Market formation--the latent demand for a certain product category is outlined by introducing the new product.

ii. Market expansion--other companies enter the market, and the number of informed customers for the product category increases.

iii. Market fragmentation--the entire field is subdivided into countless competing groups due to crowding competition.

iv. Market consolidation--companies start leaving this field, due to fierce competition, dropping prices and decreasing profits.

v. Market termination--clients do not support the same level of demand and companies abandon the product.

In our approach, the product life cycle management is two-fold applicable:

--Internally, by drawing up the financial product strategy to be launched on the market.

--Externally, by validating the product life cycle advocated by the client.

For instance: if a customer requires a technological line for the specialized manufacturing of metallic structures, their plan will be adjusted / interactively remodeled, by taking into account the product life cycle (which can be long-lived yet also exposed to operational and market risks that the leasing company decides to accept or not).

The V-Modell Methodology

To summarize, this methodology is a graphical rendering of the life cycle and comprises the main steps to be taken according to the project evolution, so that the desired outcome is secured (Droschel & Wiemers, 1999). In practice, V-Modell describes the activities and outcome it needs to put forth while developing the system.

Even though initially the "system" meant software, modern approaches in numerous other fields involve the design of a system at the same time with the product/service to be supplied on the market. Thus the company redefines its internal processes, aiming at setting up a unitary, coherent and functional whole that will provide the market--under desired circumstances--precisely with the desired product, and not solely with the product itself (Boehm, 1981). This integrated approach ensures visibility of costs and outcomes as early as the initial stages and, moreover, the ability to control the economic phenomenon throughout the life cycle and to mitigate exposure due to strategy and decision-making errors.

The left branch of the V-Modell represents the flow of specifications, where system requirements are defined. The right branch is the test flow as per specifications. The peak where the two branches meet--corresponds to the development itself (the actual emergence of the product). The V representation allows for monitoring the mapping of demand specifications onto their testing. The differentiation between validation and verification resides in the fact that verification is performed by comparing the project execution stage with the company's internal specifications that are specific for the product under analysis, while validation entails an external comparison of the product against the requirements of the customer/market and decision-makers within the company.

Thus, the V-Modell defines a unitary product development procedure, and at the same time describes "who" has to do "what" and "when" according to every stage. Product installation occurs when the latter is checked for all predefined design requirements. The operational qualification matches the validation of the product's operational requirements as defined by the customer and by the leasing company's decision-makers, as well as by the technological, legal or commercial limitations at the given time. Performance qualification concludes the V model branch and attests the validity of the requirements of the specified user / market at the onset of the development process.

[FIGURE 1 OMITTED]

Adjusting the V-modell to the actual situation involves extending or restricting the outlined stages for the two branches function of current needs. Figure nr. 1 has provided you with a summary of this methodology.

Process-Orientation

Although loosely used, the concept of process proves its usefulness only once it has been properly understood. Applying models to company strategies needs to draw on a good definition of processes.

The process (in the business sense)--is a sum of activities conducive of value by turning inputs into higher-value outputs. Both inputs and outputs can be physical objects or information, and transformations can be carried out by people, machines or complex systems comprising both people and adequate tools.

Processes are classified as follows (Nelis, 2008):

1. Management processes--that govern the operation. Typical examples are "strategic management" and "company operation".

2. Operational processes--are those giving rise to value flows and that are part of the operation core. Examples: processes whereby materials are prepared to enter the manufacturing flow or, in the case of leasing companies, the process of analyzing request files.

3. Support processes--they back main processes. Examples: Accounting, Staff recruitment, etc.

Any process can be broken down into several subprocesses, each with their own attributes but that contribute to fulfilling the objective of the process they stem from. Process analysis is performed by breaking them down into activities that do not include and decision-making and, therefore, don't need to be further broken down.

In order to undertake a business process company resources are used and the process is at the same time limited by constraints--of various natures--, so that target achievement should comply with all conditions imposed by the business environment.

One of the tools used in process analysis is the ICOR (inputs-constraints-outputs-resources) diagram. Its usefulness is obvious when the super-process is traced back starting at the bottom (the bottom-up approach--i.e. from subprocesses upwards), and it is necessary to coordinate the input and output along the string of processes.

3. CONCLUSION

The applicability of project management in the leasing businesses stems from systems engineering, and it has become a necessity once the complexity of a leasing operation is recognized and the need for planning in the project management sense--a technique equally well defined in SE (systems/software engineering).

As a natural outcome of this BUSINESS-SYSTEMS connection, another major standard can be applied in the leasing industry, namely the CMMI--Capability and Maturity Model Integrated. It outlines the path to follow in order to achieve higher performance levels in developing complex systems. We undertake to pursue further, extended research along this line in the future.

4. REFERENCES

Boehm, B. (1981): Software Engineering Economics, Prentice-Hall Inc., ISBN 978-013822122, London

Droschel, W.; Wiemers, M. (1999): Das V-Modell 97, Oldenbourg, ISBN 978-3486250862, Berlin

Nelis, J. (2008): Business Process Management--Second Edition, Butterworth-Heinemann, ISBN 978-0750686563, Oxford

Walker, D.; Hampson, K. (2003): Procurement Strategies: A Relashionship--based Approach, Wiley-Blackwell, ISBN 978-0632058860, Oxford

Westland, J. (2007): The Project Management Life Cycle, Kogan Page, ISBN 978-0749449377, London