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Early Supplier Involvement in New Product Development

Herdelt, C. (2017) Early Supplier Involvement in New Product Development.

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Abstract:This research was conducted in order to determine the role of the overall purchasing function in companies for the topic early supplier involvement in new product development. Nowadays companies focus more on that topic because the markets are highly competitive and technology is changing rapidly. If companies engage in supplier inclusion activities they improve quality and reduce costs. It appears to be important especially for complex products because buyers do not have the know how of products that are highly specialised. For that matter supplier act as experts in the innovation process and help the buyer to innovate as a strong partner. For that purpose a good buyer-supplier relationship is in the interest of the parties that are collaborating. The inclusion of a supplier early in the process has risks, pitfalls but also benefits that all companies that want to engage in that need to be aware of. As for the risks and pitfalls it can be mentioned that communication with the supplier especially for international projects is important and can cause problems if it is not executed properly. In addition to that there needs to be a high level of trust and commitment between the buyer and the supplier to make the project successful. Otherwise there is a lack of information sharing and assumptions are made. Suppliers need to be chosen carefully and the buyer needs to be aware of their technical capabilities in order to avoid different expectations. Both parties should be aware of power disparity and how it will be handled throughout the collaboration time. Additionally, firms should pay attention to factor market rivalry and scarcity of suppliers. Top-tier suppliers with technical expertise become rare and buyers that want to partner up with certain suppliers need to put extra effort into that. On the other hand side the benefits for early supplier involvement in NPD projects are valuable for companies throughout almost all industries that want to innovate and face the challenge of complexity of products and missing know how. There are short-term benefits namely reduction of development cost and development lead-time and reduction of product cost and gain in product value. The long-term benefits are getting access to technological knowledge and development risk sharing between buyer and supplier. The risks and benefits concur with the perception of the firms’ employees with the exception of development risk sharing, which was not taken into account. When the risks and benefits are known, the firms need to plan internally the actions and processes they need to execute. The degree and timing of supplier inclusion depends on the product where the complex product should be included earlier and suppliers get more responsibility within the project. The concurrent engineering approach fits best for incremental innovations and the purchasing department should act as a coordinating function in NPD projects where the supplier is involved, and make sure that the purchasing staff has the right skillset in order to execute that task and make sure cross-functional teams are being set up. Furthermore, a good buyer- supplier relationship should be established. With pro-active actions the buyer has to achieve customer attractiveness, supplier satisfaction and eventually become a preferred customer. While following the literature, there is an exact model developed for the company that was investigated, which can be used to improve their overall early supplier involvement in NPD strategy and process. Key words: early supplier involvement, open innovation, new product development, buyer-supplier relationship, preferred customer status
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/72340
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