Management

CMR161
F a l l 1 9 9 9 | V o l . 4 2 , N o . 1 | R E P R I N T S E R I E S
t
California
os
rP
Management Review
yo
Involving Suppliers
in New Product Development
Robert B. Handfield
op
Gary L. Ragatz
Kenneth J. Petersen
Robert M. Monczka
tC
No
Do
© 1999 by The Regents of

the University of California
Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

t
os
Involving Suppliers
in New Product
rP
Development
yo
Robert B. Handfield
Gary L. Ragatz
Kenneth J. Petersen
Robert M. Monczka
ithin the last decade, the rapid rate of technological change,

op
W shortened product life cycles, and globalization of markets have
resulted in renewed executive focus on new product develop-
ment processes. In a competitive environment, suppliers are an
increasingly important resource for manufacturers. Across all worldwide manu-
facturers, purchased materials account for over 50 percent of the cost of goods
sold. In addition, suppliers have a large and direct impact on the cost, quality,
tC
technology, and time-to-market of new products. Effective integration of suppli-

ers into the product value/supply chain will be a key factor for manufacturers in
achieving the improvements necessary to remain competitive. As integration
increases, joint resource dedication will follow. For instance, it is now common-
place for companies to dedicate engineers who learn the systems, procedures,
and processes of suppliers in order to improve communication, reduce errors,
and understand capabilities.1 Many companies have recognized that involving
No
suppliers in new product/process/service development efforts has the potential

to provide significant results.2 A number of reports in the popular press have
highlighted the fact that supplier participation in product development projects
can help reduce cost, reduce concept-to-customer development time, improve
quality, and provide innovative technologies that can help capture market share.
For instance, in developing its compact sedans (the Chrysler Cirrus and Dodge
Stratus), Chrysler Corporation presourced 95 percent of the parts required for
Do
This research was supported by the Global Procurement and Supply Chain Benchmarking Initiative
in the Eli Broad Graduate School of Management at Michigan State University, and by the National
Science Foundation under grant #SBR-9422407. A complete report on the results of this study can be
found in the book Product Development: Strategies for Supplier Integration, by Monczka, Handfield, Ragatz,
Scannell, and Frayer (Milwaukee,WI: American Society for Quality, 2000).
CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 59

t
Involving Suppliers in New Product Development
os
production. Chrysler used a team approach and chose the suppliers before the
parts were even designed, which meant virtually eliminating traditional supplier
bidding.3 The results of this effort included significant reductions in cost, quality
improvements, and innovative new designs. While such results typically go
undisputed, there is mounting evidence that not all such efforts are successful.
rP
Moreover, successful supplier integration involves a large number of vari-
ables. Questions that arise include tier structure, degree of responsibility for
design, specific responsibilities in the requirement setting process, when to
involve suppliers in the process, inter-company communication, intellectual
property agreements, supplier membership on the project team, and alignment
of organizational objectives with regard to outcomes. While the benefits of sup-
plier integration appear to be obvious, successful supplier integration projects
yo
have special common characteristics. Specifically, successful supplier integration
initiatives result in a major change to the new product development process. Further,
the new process must be formally adapted by multiple functions within the
organization to be successful. One of the most important activities in the new
development process is understanding the focal suppliers’ capabilities and design
expertise, conducting a technology risk assessment, and weighing the risks
against the probability of success.
op
This article presents a model of the product development process and the
opportunities for supplier integration at various points of the process. This model
is based on case studies of 17 manufacturing organizations and on results of a
recent survey on supplier integration in 134 companies worldwide.
Prior Research
tC
Several prior studies allude to the specific processes that occur when sup-
pliers become involved in new product development. Kamath and Liker exam-
ine Japanese product development practices and identify a variety of roles that
suppliers may play.4 Littler, Leverick, and Bruce examined the key success fac-
tors for collaborative new product development efforts in 106 UK firms in which
the collaborative partner could be a supplier, customer, or competitor.5 They
No
concluded that frequent inter-company communication, building trust, estab-

lishing partnership equity, ensuring that parties contribute as expected, and
employing a product or collaboration champion increased the likelihood of suc-
cess. There is evidence that the way firms organize their product development
efforts has an impact on results. Larson and Gobeli found the project matrix and
project team to be the most useful organizational structures for product develop-
ment projects.6 In their study of 108 cross-functional sourcing teams, Monczka
and Trent identified a preliminary, yet strong link between formal supplier
involvement and team performance, including teams responsible for new prod-
Do
uct development.7 Smith and Reinertsen reached a similar conclusion, suggest-

ing that “suppliers particularly need to be included as team members when the
60 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

t
os
new product involves critical technologies in which the company is not expert.”8
Hartley, Meredith, McCutcheon, and Kamath found that the time of supplier
involvement was significantly related to the perceived contribution to the new
product design. 9
rP
A number of differences in supplier integration practices exist between
companies in the U.S., Japan, and Europe. Clark10 and Clark and Fujimoto11
compared Japanese and U.S. manufacturers’ use of suppliers in new product
development and found that the contribution of suppliers to competitive advan-
tage is especially critical in cases where R&D activities are shared. Several studies
have also found that Japanese manufacturers made more extensive use of sup-
plier involvement than American manufacturers.12 A study by Liker, Kamath,
Wasti, and Nagamachi found that the gaps between U.S. and Japanese automak-
yo
ers’ use of supplier involvement in new product development has narrowed
significantly.13 However, the study found that Japanese automotive companies
rely on target prices, performance monitoring, competition, and mutual depen-
dence more than their U.S. counterparts to control suppliers entrusted with the
design of complex auto systems. In general, all of these studies found perfor-
mance improvement outcomes from supplier integration in the form of reduced
cycle time, improved quality, greater technological improvements, and reduced
costs.
op
A second body of literature emphasizes the importance of relationship
development as a precursor to successful supplier involvement in new product
development. Dyer and Ouchi suggest that the length of a buyer/supplier rela-
tionship has a positive effect on product development efforts.14 The supplier’s
existing knowledge of the buying firm’s internal processes and objectives enables
tC
the supplier to plan for future product development efforts and to develop, in
advance, the capabilities to meet those needs. Kanter argues that a well-devel-
oped ability to create and sustain fruitful collaborations can provide significant
advantage, especially in new product development ventures.15 This research
further concludes that North American companies, more than others through-
out the world, take a narrow, opportunistic view of relationships between
buyers and sellers. Slade concurs that collaboration can create competitive
No
advantage by saying that “the supplier relationship is only one of the many
aspects of management that contribute to a company’s performance. But . . .
the management of this relationship [is] of paramount importance to any com-
pany’s success.”16 While the importance of supplier involvement is unarguable
in these works, it is apparent that organizations still struggle with the fundamen-
tal changes to the new product development process that must occur to facilitate
supplier integration. Some of the major questions that arise include:
▪ Which suppliers should be involved?
▪ Is the supplier able to meet our requirements?
Do
▪ Is the supplier’s technology roadmap aligned with our roadmap?

t
os
FIGURE 1. New Product Development Process
1 2 3 4 5
Idea Business/ Product/ Product/ Prototype
Full Scale
rP
Generation: Technical Process Process Build,Test
Production/
Voice of the Assessment Service Service and Pilot/
Operations
Customer (Preliminary) Concept Engineering Ramp-Up for
Development and Design Operations
Possible Supplier Integration Points
yo
▪ Given the level of technical complexity, to what extent should the
supplier be involved in the project?
▪ When exactly should the supplier be involved in the project?
op
Supplier Integration Approaches
The possible forms of supplier integration can be framed within the con-
text of the “generic” new product development process shown in Figure 1. The
new product development process is a series of interdependent and often over-
lapping stages during which a new product (or process or service) is brought
tC
from the “idea” stage to readiness for full-scale production or service delivery.
As the product concept moves through these stages, the idea is refined and eval-
uated for business and technical feasibility, the design is firmed up, prototyping
and testing are done, the design is finalized, and preparations for full-scale oper-
ations (e.g., tooling, layout, personnel, equipment) are finalized. During this
process, cost, performance, timing, quality, and other problems often crop up,
which results in tradeoffs and changes in the design. The design may be modi-
No
fied numerous times before it is finalized.

In the first stage (idea generation), designers and marketing personnel
consider the need for the product and typically tap customers for their ideas and
input on what such a product/process/service might do, how much it might cost,
and so on. Potential technologies may also be assessed at this point, especially if
an existing supplier possesses an exciting new technology. In the second stage,
the team may perform a business assessment of the product, and also identify
the technical solutions to the customer’s requirements. In product and service
design, tools such as Quality Function Deployment may be used to develop
Do
technical specifications that specifically address customer requirements. In the

third stage of development, the product/process/service concept is effectively
conceived, with performance specifications “frozen”. In the case of product

t
os
development, a preliminary prototype model may be created for purposes of
concept definition. Next, the actual development process begins, wherein
designers from both the supplying and buying organizations create blueprints
and design specifications. A working prototype is created, which enables testing
and verification of existing production systems. Finally, the product enters full-
rP
scale production and supplier volumes are ramped up.
Outside suppliers provide materials and services that constitute a majority
of the cost of many new products. In addition, suppliers may provide innovative
product or process technologies that are critical to the development effort. The
supplier may have better information or greater expertise regarding these tech-
nologies than the buying company’s design personnel. Supplier input and/or the
active involvement of suppliers may be sought at any point in the development
yo
process (see Figure 1).
While the concept and design engineering phases of new product devel-
opment incur a relatively small portion of the total product development costs,
these two activities commit or “lock in” as much as 80 percent of the total cost
of the product. Decisions made early in the design process have a significant
impact on the resulting product quality, cycle time, and cost. As the develop-
ment process continues, it becomes increasingly difficult and costly to make
op
design changes. It is crucial then, for firms to bring to bear as much product,
process, and technical expertise as possible early in the development process.
tC
The NSF/MSU Supplier Integration Research Project

This study was part of a larger project funded by the National Science Foundation
and the Michigan State University Global Procurement and Supply Chain Elec-
tronic Benchmarking Network (GEBN). Members of the GEBN have agreed to
participate in a series of benchmarking surveys conducted each year as part of a
larger research initiative. Based on a preliminary model developed by Sussman and
Dean17 specifying methods of integrating internal cross-functional team members
No
into new product development, the researchers carried out seventeen field stud-
ies in the U.S. and Japan to validate and verify the model.To further enhance the
validity of the discussions, documentation of purchasing policies were obtained at
each site when possible, as well as organization charts, product descriptions, mar-
keting reports, and so on. Following each interview, the field notes were written
up in typeface.The next step involved coding this data.18 The transcribed field
notes were reviewed several times by the researchers in order to code the events
into their appropriate categories (consistent with an a priori conceptual model
Do
developed by Sussman and Dean) and to compare field notes taken during the
same interview. In so doing, the events and processes observed at each site were

t
os
classified according to the conceptual structure they described.The resulting
process model of supplier integration is shown in Figure 2.
Concurrently, a survey was developed, which was pre-tested and reviewed by a
team of industry experts and a team of academics from organizational behavior,
rP
marketing, operations management, and purchasing. An initial 2 page commitment
letter and fax response form was mailed to approximately 3000 companies in 18
countries around the world, and of these 225 indicated that they would be willing
to participate.19 Surveys were mailed to the 225 companies, and 134 responses
were received.The responding companies represented a wide range of industry
groups, including aerospace (12), automotive (24), chemicals (11), computers and
electronics (19), consumer products (18), Industrial equipment (20), medical prod-
yo
ucts and services (6), process industries (10), telecommunications (9), and govern-
ment services (6). About 12.5% of the responses came from non-manufacturing
organizations.The companies’ 1996 sales (in U.S. dollars) ranged from $3 million to
$160 billion with a median of $3.1 billion. A majority of the responses (68%) came
from U.S. and Canadian companies. Just over 20% of the responses came from
Western Europe, 7% from Asia/Australia, and 4% from South America.
A five-stage New Product Development model was presented in the survey as
op
a reference point.The five stages precede full-scale production and include idea
generation, preliminary business/technical assessment, product/process/service
concept development, product/process/service design and development, and
prototype build, test and production ramp up.The following definition of supplier
integration into new product development was also included in the questionnaire
to provide a solid base for response analysis.
tC
“Supplier integration into new product/process/service development suggests that

suppliers are providing information and directly participating in decision making for
purchases used in the new product/process/service.This integration can occur at
any point in the five stage new product/process/service development model.”
The survey was divided into two major sections.The first section addressed ques-
tions related to the organization’s overall strategy and experience with supplier
integration.The second section asked the respondent to limit their responses to a
No
single supplier integration experience. Both sets of responses were used to derive
the results discussed in this study.
In addition, companies whose development plans are well aligned with those
of their key suppliers can shorten overall development time.
Based on a detailed analysis of our case studies, we developed a process
Do
model of supplier integration shown in Figure 2. This model was developed

after reviewing a number of companies’ supplier integration processes and com-
piling their best practices into a generic process model. Additional insights into

t
os
FIGURE 2. Process Model for Reaching Consensus on Suppliers to Integrate
into New Product Development Project
Product Development Team Corporate Commodity Team
rP
• Customer requirements • Market information
• Shortfall in internal capability • Performance / evaluation skills
• Technical specifications • Potential suppliers
• Potential suppliers • Negotiation skills
• Cost/performance targets
Identify Pool of
yo
Potential Suppliers
Acceptable History / Prior Experience /

Industry Reputation / Pre-Qualified?
NO
Pre-Qualify
op
YES
Risk Assessment: Is supplier able to meet

requirements for integration (cost, technical capability,
quality, capacity, ability to meet development schedule)?
YES
tC
NO
YES Risk Assessment: Is
Critical Technology? Develop Supplier supplier’s technology roadmap
aligned with buying company’s?
NO
YES
Return to NO
Supply Pool
High degree of
Critical Technology? technological change?
No
NO YES YES NO
Integrate Supplier; Integrate Supplier in

Return to Seek to Improve Latter Stages of High degree of required
Supply Pool and/or Find Other NPD Cycle for supplier design expertise?
Long-Term Sources Current Project
NO
YES
Do
Return to Fully Integrate Supplier Integrate Supplier

Supply Pool Early in NPD Cycle When Appropriate

t
os
company practices at various stages of the model are provided in the form of
summary statistics from our mail survey results.
Identifying Desired Supplier Capabilities and Potential Suppliers
rP
In all the companies studied, the importance of the design/manufacturing
decision is being subjected to a much more thorough analysis than in the past.
An important initial decision involves a formal statement on the level of
insourcing/outsourcing that will occur in core technology development. In
reaching a consensus on difficult insourcing/outsourcing decisions, successful
organizations have developed a systematic process for defining the level and types
of product/process technologies to be outsourced. Whenever possible, companies
are approaching the outsourcing decision from a systems perspective and are
yo
asking suppliers to increase their responsibility for subsystem integration. This
was observed to be the case across a variety of products and processes, including
chemical molecules, automobiles, installation and maintenance of new
processes, and computer components.
The decision-making process begins at a high systemization level, where
strategic core competencies in product and process design and manufacture are
assessed (see Figure 3). At this level, the unit of analysis involves decisions
op
regarding core technologies, system integration, and return on investment for
resource allocations leading to internal technology development. Our study
revealed a trend towards outsourcing commodity-like items and focusing inter-
nal efforts on added-value activities such as system integration. In all of the
companies, this decision was made at higher levels in the organization and
involved a strategic vision regarding the organization’s future markets and
tC
technology roadmap in the next ten to twenty years.

Most of the supplier integration cases reported in our survey involved
the supplier of either a customized product component or a product sub-assem-
bly, sub-system, or system. Several cases also dealt with suppliers of materials,
process technology, or capital equipment. A few cases dealt with suppliers of
services or commodity-type components.
Once consensus is reached, executives formalize the insourcing/
No
outsourcing technology strategy and communicate it to the divisions, who

are then responsible for establishing current and future new product require-
ments. The process of cascading the decision to the next organizational decision-
making level is achieved through a variety of means. One of the prevailing
organizational structures to interpret and deploy technology strategies is the
advanced technology group. These groups are typically located centrally and are
assigned the task of identifying major new subsystem and component technolo-
gies required in new products. Another approach involves integration of suppli-
Do
ers into process development and start-up. Some companies use institutionalized
“platform teams,” responsible for new product development with suppliers on a
permanent basis. Finally, other divisions employ a “letter of intent” that formally
specifies the nature of the relationship. Note that the decision making at this

t
os
FIGURE 3. Insourcing/Outsourcing Decision
Cross-functional
rP
executive decision
Advanced
Technology groups;
Product platform
teams
Commodity/NPD
yo
Teams
Components: Subsystems: High level of

Cost, quality, delivery Cost and specific systematization:
criteria process decisions Core product / process
technology decisions
op
• High internal capability • Established internal core
• Product specification control competence
• Government mandated design • Develop promising new
Insource • Proprietary design process technology
• Available manufacturing
capacity
tC
• Supplier design expertise • Cost

• Proprietary supplier • Quality
technology • Delivery
Outsource • Potential for joint development • Lack of internal capacity
• Reduce time-to-market • Commodity-like products
through • Non-core processes
Design and Development Manufacture

No
stage is typically done by product development teams, which use the executive
core competence vision as a guide.
The final insourcing/outsourcing decision-making hierarchy occurs at
the component level, where decisions are typically made jointly by the product
development and purchasing commodity teams (see Figure 3). Purchasing is
responsible at this level for identifying leading suppliers within a commodity
Do
class and sharing this information with the commodity team. In some cases,
however, the decision may be made independent of a commodity team.

t
os
After completing this initial stage of the strategic process, teams should
have identified a vision statement regarding the company’s internal core compe-
tencies, established a set of requirements for success in current and future new
products, and have a general idea of the technology needs within these product
groups. In addition, the company should have a general idea of the specific roles
rP
and responsibilities it wishes to place on suppliers that are selected for new prod-
uct development. Product development and commodity teams should seek to
formally specify these objectives in as much detail as possible. As shown in the
next three stages in Figure 2, they become the primary criteria used in supplier
selection, negotiation, alignment, and relationship management.
A number of case examples illustrate this process. At a major manufac-
turer of printers and faxes in Japan, the primary metric used to drive all supplier
yo
integration projects is target cost. For example, a target cost for a fax machine
was first developed based on marketing’s input and was broken down into dif-
ferent categories of parts based on historical costs. The mechanical parts target
cost was broken down into a target cost for all metal parts, of which about 90%
were within the scope of the single metal parts supplier’s production capability.
This target cost was submitted to suppliers. Suppliers share their cost data with
engineers, and provide information on labor, overhead, and material costs. To
op
achieve the target cost, changes in processes and changes in materials are dis-
cussed first (avoiding the topic of profit margins). If the supplier still cannot
meet the target cost, the company initiates negotiation of profit margins based
on volume considerations.
Other considerations that may influence the decision to integrate suppli-
ers include a lack of internal design capability and the need to develop a non-
tC
core technology. For example, a major electronics components manufacturer

relies extensively on its suppliers to deliver state-of-the-art process technology
that it cannot develop internally. The key strategy within this organization
involves holding suppliers responsible for delivering, installing, servicing, and
maintaining machine tools costing well over one million dollars each. Suppliers
are responsible for process ramp-up and maintenance of equipment in wafer
fabrication facilities. While the company is also involved in supplier integration
No
into new product development, process integration represents a truly unique

application in a non-traditional area. Suppliers are first fully responsible for the
maintenance of these machine tools and the maintenance tasks are then gradu-
ally turned over to internal people. Each supplier is responsible for a single
process, which is identically carried out at its three facilities in different parts of
the world. The company emphasized the exact replication of processes across all
of the facilities—this principle is emphasized throughout all of its business strate-
gies. The principle refers to the fact that any time a specification or task is trans-
ferred between functions or suppliers, the other party is responsible for exactly
Do
reproducing the requirements.

In another case, a company’s core competency is considered to be an
overriding factor. A chemical manufacturer considered portions of molecules

t
os
as building blocks in assessing supplier competence. The company’s strategy
was to accelerate the rate of new product development by focusing on fewer
compounds annually and integrating suppliers who have proven capabilities and
can perform multiple steps in the intermediate product process. Instead of asking
suppliers to supply basic elements only, they are actively asking suppliers how
rP
to make the intermediate molecules with the final molecules in mind. This
involved showing them a bigger picture (not just a small piece of the process),
posing the question more broadly, and getting the supplier to perform a greater
share of the process. Supplier integration was facilitated by having broader
secrecy agreements to cover more issues as the supplier gains access to more
pieces of the molecule puzzle. In some cases, the company even licensed parts
of molecules from university research centers. The strategy driving this integra-
yo
tion was to push increasingly higher up the compound chain, becoming more
of an “assembler” of the final compound or molecule.
Supplier Risk Assessment

Once the product development/commodity team has reached consensus
on the key objectives for integrating suppliers, a set of specific performance mea-
sures related to customers’ needs and requirements should be used to reach a
op
consensus on potential supplier capabilities and subsequent selection. Cost, qual-
ity, and delivery are, of course, relevant, but evaluating suppliers for potential
integration into new product development should involve criteria beyond those
used to evaluate ordinary material/service suppliers. Based on the experience of
the companies studied, the following elements are likely to be important in con-
sidering new or existing suppliers for integration:
tC
▪ Targets—Is the supplier capable of hitting affordable targets regarding cost,

quality, and product performance/function (e.g., weight, size, speed)?
▪ Timing—Will the supplier be able to meet the product development sched-
ule?
▪ Ramp-Up—Will the supplier be able to increase capacity and production
fast enough to meet volume production requirements?
▪ Innovation and Technical—Does the supplier have the required engineering
No
expertise and physical facilities to develop an adequate design, manufac-

ture it, and solve problems when they occur?
▪ Training—Do the supplier’s key personnel have the required training to
start-up required processes and debug them?
All of the above criteria must be tied into the evaluation/measurement
system in order to develop a comprehensive risk assessment that answers the fol-
lowing questions:
▪ What is the likelihood that this supplier has the ability to bring the prod-
Do
uct to market?
▪ How does this risk compare to other potential suppliers (if there are
others)?

t
os
▪ At what point are we willing to reverse this decision if we proceed, and
what are the criteria/measures for doing so?
▪ What is the contingency plan that takes effect in the event the supplier
fails to perform?
rP
It is no longer enough that a supplier be able to design and manufacture
a prototype or start-up small volume production. Because of the intense compe-
tition and short product life cycles in many industries (such as electronics and
computers), suppliers must also be able to meet product introduction deadlines
and ramp-up their production volumes very quickly. Several of the companies
we studied assessed these criteria through a variety of means.
A good example of a commodity team in action involved a U.S. computer
yo
manufacturer team negotiation with a European supplier, who was selected
after ten suppliers presented their design for a new project. The presentations
were formally evaluated quantitatively by the commodity team. During the
course of the selected supplier’s presentation, the team found it could satisfy its
requirements with an “off-the-shelf” chip set from the supplier. The team also
visited selected supplier facilities, and the supplier deployed a dedicated engi-
neering team over the course of the project. The commodity team also works in
parallel with other commodity teams on the product development group. A key
op
element in the structure of the teams in this company is that it is not a one-
hundred percent engineering-led process, even though engineering has tradi-
tionally dominated decisions. The new vision is to retain a core set of knowledge
to respond to end-customer needs and develop more interfaces with suppliers to
identify which technologies can meet these requirements. The company cannot
afford to be “shut out” of a new technology, so the group must constantly be
tC
transferring knowledge from a variety of sources, including customer require-

ments, after-market efforts (where new technologies often show up first), trade
shows, competitive assessments, and alliances.
For another company (a U.S. computer manufacturer), the supplier’s
capacity and flexibility are critical issues, and the team will examine what kind
of agreements the supplier has with their contract manufacturers and how they
affect the supplier’s ability to increase output quickly. The supplier must have
No
upside flexibility requirements amounting to:

▪ 25 percent up in 4 weeks
A U.S. computer peripherals manufacturer faces the problem of having
a very limited number of potential suppliers of several of its key components,
worldwide. Because of the small number of suppliers, however, the company
has done business with most of them and has experience with their capabilities.
Do
Supplier selection is based primarily on the supplier’s capability to design and

manufacture the product in large volumes to performance specifications within
the required time.

t
os
TABLE 1. Company Objectives for Supplier Integration
Effect of Supplier
Importance Integration on
Objective of Objectivea Achieving Objectiveb
rP
Reduce design or development time 5.83 5.43
Reduce procured item cost 5.76 5.27
Improved procured item quality 5.70 5.49
Improve procured item reliability/durability 5.65 5.45
Reduce design and development cost 5.45 5.23
Access and improve product technology 5.27 5.20
yo
Develop a long term supplier relationship 5.26 5.45
Improve product features 5.21 5.32
More effectively use human resources at my
business unit and at the supplier 5.18 5.31
Improve customer service 5.02 4.98
Reduce technological risk 4.89 5.12
Reduce financial risk 4.78 4.83
Access and improve process technology 4.74 4.87
op
Improve my business unit’s position as a
preferred customer to the supplier 4.59 5.19
Comply with environmental regulations 3.88 4.61
Comply with other government regulations 3.77 4.64
a. 1=“Totally Unimportant” to 7=“Very Important”

tC
b. 1=“Strong Negative (Bad) Effect” to 7=“Strong Positive (Good) Effect”
At another U.S. computer company, in the first stage of the new product
development process (definition and planning), material support involves selec-
tion of a technology given the requirements of the product. Once this is com-
plete, corporate materials can come up with a potential list of suppliers. If the
supplier is new to the company, the supplier will first perform a self-assessment
No
survey. Then the team will visit for several days and examines eight separate
modules (including quality systems, control, reliability, financial analysis) and
arrive at a performance score.
In our survey, respondents were asked to indicate the importance of vari-
ous objectives related to integrating the supplier in this product development
effort and also rate the impact that supplier integration had on achieving that
objective. The objectives that emerged as most important to the companies are
consistent with the competitive/strategic factors that are driving supplier integra-
Do
tion (see Table 1). Further, the respondents believed that supplier integration
had a positive impact on all of the objectives.

t
os
One other result is of interest. For the four objectives on which supplier
integration had the least positive impact (financial risk, process technology, envi-
ronmental regulations, and other government regulations), approximately ten
percent of the respondents indicated that supplier integration actually had a
negative effect on the objective. For the other objectives, no more than five per-
rP
cent of the respondents reported a negative impact. This suggests that in some
cases, supplier integration efforts may not always result in successful outcomes.
In cases when the supplier’s capabilities may not be up to desired levels,
the product/commodity team has one of two options. If the technology is not
critical to the product’s functioning, a different supplier may be investigated.
However, if there are limited numbers of suppliers available and the technology
is critical to the product, than a more detailed technical assessment of the sup-
yo
plier may take place in an attempt to develop and improve the suppliers’ capa-
bilities early in the product development process.
Several of the companies carried out detailed assessments of the supplier’s
technical capabilities prior to selecting them for a new product development
project. In most cases, both formal and informal approaches were required to
develop a reliable assessment. A typical approach would start with a formal stan-
dard survey-type assessment, which would be augmented by informal assess-
op
ments by internal engineer’s assessments, based on face-to-face discussions with
the supplier’s technical personnel. The most detailed technical assessments con-
sidered both of these inputs, as informal discussions can often reveal problems
that may not be obvious to an external uninformed party.
A good example of how this decision is made involved a component sup-
plier who made lead frames and overmolding for a U.S. semiconductor manu-
tC
facturer. Although the company had the capabilities internally, they chose to
team up with the supplier to produce them after an insourcing/outsourcing deci-
sion was made by the product team (consisting of engineering, design, quality,
marketing, and procurement). The outsourcing decision was made because the
internal process could not meet the quality requirements (0-6 ppm required by
the customer). After requiring the product and process FMEAs and control plans
from the supplier and observing their capabilities, the supplier was selected.
No
Next, the team was expanded to include the supplier to determine if they could
meet the customer’s requirements. Once it was established that they possessed
the capability, the supplier became a full-time member of the team.
Suppliers involved early in a U.S. oil and chemical company’s develop-
ment efforts are evaluated using a number of criteria in a “Total Cost of Owner-
ship” type of model that considers:
▪ reputation for meeting requirements
▪ cost/availability of raw materials
Do
▪ difficulty of the process matched against the supplier’s capability

▪ waste generated in the supplier’s process

t
os
▪ number of steps required of the supplier
▪ environmental compliance
▪ technical competence
The choice of supplier is a decision made by the whole team, but not everyone
rP
on the team necessarily gets directly involved. A smaller group within the
commercialization team may make a recommendation. Following the recom-
mendation, the company audits the supplier’s facilities for contamination, envi-
ronmental compliance, quality, technical capability, cost, quality, and location—
all of which are weighted (weights vary by commodity).
Assessing the Supplier’s Technology Roadmap
yo
After a detailed performance assessment has been carried out prior to
selection, a second type of assessment must be carried out to ensure the long-
and short-term alignment of the objectives and technology plans of the buying
company and the supplier. To obtain maximum strategic benefit from the inte-
gration of the supplier, both parties must share objectives and have complemen-
tary future technology plans. This is most commonly described in terms of a
convergence of the companies’ technology “roadmaps,” which describe the per-
op
formance, cost, and technology characteristics of future products each company
plans to develop/introduce over some specified time horizon.
The specific approaches companies use to assess and achieve alignment
of technology roadmaps with suppliers varies considerably. Regardless of the
specific approach, sharing information is one critical element of the process. A
second important element is providing some incentive or motivation for suppli-
tC
ers to work at alignment with the buying company.

This is reflected in the importance of Supplier Selection Criteria for Sup-
plier Integration (see Table 2). As shown in this table, the criteria for selecting
suppliers for integration which are most critical include “soft” elements, such as
product/process knowledge, production capability, trust, and design expertise.
Prior to establishing the relationship, managers from both organizations should
meet and engage in a frank discussion of the types of technologies that they
No
intend to develop. As organizations seek to improve the technological capabili-

ties of their supply base, they will need to first build stronger relationships with
suppliers, which involve sharing future product plans and alignment of technol-
ogy roadmaps. In turn, suppliers may need to adjust their technological plans to
align them with those of major customers. As this exchange of information takes
place, industry standards may be influenced. This will require an intimate
understanding of not only current suppliers’ capabilities, but a commitment and
willingness to trust the other party.
At the same time, buying companies must maintain a competitive edge
Do
and be aware of potential new suppliers and technologies that emerge on the
horizon. Organizations may need to create separate organizational groups within
the business responsible for advanced technology development and expertise.

t
os
TABLE 2. Supplier Selection Criteria for Supplier Integration
Objective Mean Responsea
Supplier’s product/service knowledge/capability 6.07
rP
Supplier’s process knowledge/capability 6.00
Supplier’s production quality capability/certification 5.85
High level of trust between my business unit and the supplier 5.80
Supplier’s design expertise 5.76
Supplier’s willingness and ability to communicate effectively 5.65
Supplier’s innovativeness 5.62
Supplier’s flexibility to respond to design changes 5.60
yo
Supplier’s commitment to continuous improvement 5.42
Supplier’s expertise in reducing/controlling cost 5.36
Supplier’s flexibility to respond to requirements volume changes 5.35
Previous experience with supplier 5.34
Supplier’s ability to quickly ramp-up to required output level 5.21
Supplier’s ability to develop new technologies for future products 5.15
Supplier is fully certified by business unit 4.84
op
Supplier’s goals are aligned with my business unit’s goals 4.80
Supplier’s culture is compatible with my business unit’s culture 4.59
Supplier’s use of concurrent development/engineering practices 4.51
Supplier’s use of JIT manufacturing and purchasing 3.92
Supplier’s geographical proximity to my business unit 3.5
tC
a. 1=“Totally Unimportant” to 7=“Very Important”
These groups will need to continuously monitor competitors’ products, proc-

esses, and supply bases and will need to suggest modifications to current sourc-
ing strategies. In some cases, joint technology development with suppliers may
yield substantive results, providing that appropriate targets can be set. This must
No
occur on a global basis, scouring the world for the best suppliers. (As shown in
Table 2, geographical proximity is one of the least important factors influencing
the choice of supplier for integration).
Many companies attempt to manage and obtain the best technologies for
application by developing a “bookshelf” of current and emerging technologies
and suppliers of those technologies. These companies monitor the development
of new technologies and, for those that appear to have promising applications,
manage their introduction in new product applications so as to balance the ben-
efits of “first mover” status with the risks of the technology. The objective is to
Do
maintain a selection of promising and accessible technologies and suppliers on

the bookshelf, ready for use when the company wants to apply them in a new
product application. The company must understand, influence, and possibly

t
os
FIGURE 4. Managing Product and Technology Development
Timing of Development Efforts and Technology

Application in New Products Must Be Aligned
rP
Planned Planned
New Product New Product
High Introduction 1 Introduction 2
(Market Readiness)
Level of Maturity
yo
New
Technology A
New New New New

Technology B Technology C Technology D Technology E
op
Low
Time
manage the development time of technologies so that they will be available

tC
when needed (see Figure 4).

At a U.S. electronics company we studied, the company’s most successful
supplier integration project was initiated by an engineer in the buying company.
The engineer thought he saw synergies in the capabilities of his company and
a supplier and began talking informally with a counterpart in the supplier
company. This led to a high-level meeting between executives from the two
companies. At this meeting, supplier executives shared technology plans and
No
roadmaps, and they identified common research streams in a very broad cate-
gory of materials. An executive consensus was reached regarding what the buy-
ing company wanted to work on to support the next product or product family.
A “top four” list of projects was targeted directly to future product needs (both
short-term and long-term.) This relationship has now become institutionalized,
with the two companies meeting periodically to share their roadmaps and
update the top-four project list.
Another Japanese computer company shares technology roadmaps with
Do
specific suppliers, based on non-disclosure agreements that are part of a broad

general agreement with the supplier. Suppliers also share their technology
roadmaps. Both parties may change their designs based on future roadmap

t
os
directions. A chip supplier may include specific features for unique customers
in what may become a future standard chip design. Only trusted suppliers who
currently supply significant volumes are provided with general information on
future products.
rP
A different type of roadmap sharing is done by a Japanese electronics
company which isn’t sure where needed technology developments are most
likely to occur. In select cases, internal development groups will share early
information about future technology roadmaps with just about any global sup-
plier who will listen in an attempt to ensure that the required technology will
eventually be available. For instance, in one commodity, the manager has estab-
lished a technology map with performance curves and expected target dates.
The target area (known as the “sweet spot”) is shared with multiple suppliers.
yo
Suppliers are told that if they can’t hit the “sweet spot” by the target date, they
won’t get the business. This concept is somewhat different to conventional early
involvement wisdom. Because of the volatility of this industry, the company
does not have the time or the need to form alliances and go through an early
involvement program. Rather, the strategy is to make sure the technology is
available by openly sharing technology roadmaps with any qualified supplier
who will listen and moving the business around to take advantage of perfor-
mance at the target price.
op
Assessing the Rate of Technological Change
Assuming that the buying company can establish that the supplier’s tech-
nology roadmap is aligned with its own, another important factor to consider
is the rate of change in product technology. The current rate of technological
tC
change is challenging many companies’ capabilities, and they are seeking the
help of suppliers with the development and application of critical but non-core
technologies in their new products. For instance, the life cycle of some products
such as computers is less than three months. One computer manufacturer in the
U.S. mentioned that this is the single most important reason for integrating sup-
pliers. Because of the need to quickly bring new products to market, this manu-
facturer actually skips the prototype stage and goes directly from development
No
to full production.
Although supplier integration is a useful tool for managing the quick pace
of technological change, it also represents a double-edged sword. If a particular
technology is changing rapidly, then involving the supplier early has potential
pitfalls. The buying company may become “locked into” a particular design or
technology, release the product, and discover that the technology has now
become obsolete or has been replaced by a technology with improved perfor-
mance characteristics.
Do
Across all of the companies, a large majority of the cases reported dealt
with suppliers who were integrated into the development project starting in one
of the first three stages of development (see Table 3).

t
os
TABLE 3. Breakdown of Sample Integration Efforts by Stage at which
Supplier Was First Integrated
Number (Percent)
Stage of Responses
rP
One: Idea generation 28 (23.1%)
Two: Preliminary business/technical assessment 27 (22.3%)
Three: Product/process/service concept development 45 (37.2%)
Four: Product/process/service development, engineering, design
and/or creation 18 (14.9%)
Five: Prototype development build, test and pilot/ramp up for operations 3 (2.5%)
yo
Overall, there are two major factors that should be considered in deciding
when to integrate the supplier into the product development process: the rate
of change of the technology and the level of supplier expertise in the given tech-
nology. If the technology is undergoing a significant amount of technological
change, it should be delayed in the product development cycle. Second, if a sup-
plier’s design expertise is significant and their technology experts can provide
op
key insights that are instrumental to crafting the new product, they should be
included early on in the process (see Figure 5).
Our field studies suggest that certain types of suppliers are more likely
to be integrated earlier. At a Japanese computer manufacturer, for instance, the
extent of interaction that takes place between product development engineers
and suppliers appears to depend on the volatility of the commodity technology.
tC
Suppliers of critical nonstandard commodities are involved much earlier in the

product development initiative. These suppliers are involved in face-to-face dis-
cussions with engineers on a regular basis. On the other hand, suppliers of non-
critical, standard items are not integrated until the final stages of the
development cycle, and communication appears to occur more in the form of
computerization (i.e., CAD is used with non-critical items such as PCBs, key-
boards, and chassis). In general, face-to-face discussions are quicker and infor-
No
mation can be exchanged more effectively. However, because suppliers are

located within a day’s travel to the operating divisions, co-location is often
unnecessary.
At another U.S. electronics manufacturer, the level of involvement of
the supplier may vary. To get a good quote, the supplier must be brought in
early and sit in on the customer negotiation meeting. A supplier could be both
an internal or an external party (i.e., fabricate both parts and processes.) The
company typically relies on suppliers for their process technology, not their
Do
product technology (i.e., they are involved in bringing in new processes that are
not internal areas of expertise.) This was done because suppliers often under-
stand the total design earlier and how they can influence the design. In this case,

t
os
FIGURE 5. Integrate Suppliers at Different Stages
Business/ Enginerering
Idea Concept Prototype/ Full Scale
Technical and
rP
Generation Development Ramp-Up Operation
Assessment Design
Earlier Later
• Suppliers of complex items • Suppliers of simpler items

• Suppliers of systems or subsystems • Suppliers of single components
yo
• Suppliers of critical items or technologies • Suppliers of less critical items or technologies
• Strategic alliance suppliers • Non-allied suppliers
• “Black box” suppliers • “White box” suppliers
the functional specifications are defined and they work with the company to
jointly ensure they are met.
op
One of the companies studied uses supplier-provided technologies exten-
sively in its new products and has established an “Advanced Technology Group”
that is charged with managing the development and adoption of new technolo-
gies for the company’s products. The Advanced Technology Group monitors the
supply market for new technologies and also takes a proactive role in developing
technologies called for by the company’s product line teams. This company has
tC
also implemented what it calls a “window of technology” process to help

improve its access to new or developing technologies. The process provides a
single point of contact in the company for a supplier who wants to propose
a new technology or new product idea to the company. The supplier’s idea gets
a fair hearing, but the information is handled confidentially by the Advanced
Technology Group, so the idea is protected. If the company is interested in the
idea, it may commit to specific volume with the supplier or may work with the
supplier to develop the technology further.
No
Another U.S. electronics company has an on-going partnership with a

supplier for development of new technologies that leverages the core competen-
cies of each firm. Periodic meetings are held to discuss ideas for advanced tech-
nology development projects and to jointly select a set of future projects to
pursue, based on such things as applications potential and resources required.
The companies try to have a set number of projects underway at all times. At
least one project is under way in each of three categories: “blue-sky” technolo-
gies, rapidly emerging technologies, and “maturing” technologies. As one project
Do
is completed—or terminated—the firms select a replacement from the queue.

t
os
In sharing roadmaps, it must be recognized that supplier involvement in
new product development can have impacts, both positive and negative on tech-
nology risk/uncertainty:
Positive
rP
▪ The supplier may have greater experience or expertise with the technol-
ogy and, as a result, may have better information about where the tech-
nology can be successfully applied.
▪ Some (or all) of the technological risk may be taken on by the supplier.
▪ The buying firm may have some ability to influence the direction of the
supplier’s R&D efforts in order to match developing technologies with the
yo
buying firm’s technology strategy.
▪ If a closer relationship between the buying company and the supplier
develops as a result of supplier involvement, the supplier may be more
willing to share information about its new/emerging technologies with
the buying company.
Negative
op
▪ Involvement with a supplier may have a tendency to lock the buying
company in to the supplier and its technologies. This makes initial selec-
tion of the supplier a more critical issue, as the buying company needs to
anticipate whether the supplier will remain a technology leader.
▪ A supplier with “inside track” may not have as much incentive to inno-
vate, slowing the pace of technological advancement. The buying com-
tC
pany must find a way to make sure it is getting the supplier’s best efforts.
One company has found that second tier raw material suppliers are often
the technology leaders in its industry, rather than the first tier suppliers who
process the raw material. Thus, the company is trying to get raw material suppli-
ers involved in it development process. Often, to achieve this involvement, the
company must make early commitment of its business. This is a risky proposi-
tion because some of the technologies are changing rapidly.
No
One U.S. company we studied uses a coding system to describe the matu-
rity level of various technologies it is using or considering. Each is designated as
a green, amber, or red dot technology:
▪ Green dots—well-known technologies that are internally developed and
perfected
▪ Amber dots—not well known
▪ Red dots—brand new technology (high failure rates)
The company avoids using red dot technologies in new products, and tries to
Do
minimize the use of amber dot technologies.

t
os
TABLE 4. Overall Performance Improvements Achieved Through Supplier Integrationa
Performance Dimension Median % Improvement Rangeb
Purchased Material Cost (n=71)c 15.0% 2.6%–50.0%
rP
Purchased Material Quality (n=52) 20.0% 2.0%–50.0%
Development Time (n=65) 20.0% 5.0%–50.0%
Development Cost (n=54) 15.0% –1.0%–50.0%
Functionality/Features/Technology (n=53) 10.0% 5.0%–50.0%
Product Manufacturing Cost (n=49) 10.0% 0.0%–30.0%
a. Compared to similar projects in which a supplier was not integrated.
yo
b. 80% of the companies’ responses fall in this range — top and bottom 10% omitted.
c. Not all companies reported results on all dimensions.
Conclusions and Future Plans for Supplier Integration

The companies in our sample have a median of 6 years of experience
integrating suppliers into new product development. They indicated that they
expect to increase their use of supplier integration in the future and that they
op
expect to involve suppliers earlier in the development process than they do now.
Respondents were asked to characterize the success of the specific supplier inte-
gration effort as well as the success of the overall development project in which
the supplier was involved. On average, the respondents considered both the
supplier integration effort and the overall development project to have been
fairly successful.
tC
Results of the survey show that the responding companies achieved sig-
nificant improvements in project results when suppliers participated, compared
to similar new product development projects in which suppliers were not
involved (see Table 4). These results reveal the potential benefits from involving
suppliers in new product development efforts and demonstrate an important
competitive advantage for companies that can manage this integration
successfully.
No
Although this is not surprising, the results also indicated companies’ level
of satisfaction with their supplier integration efforts was quite varied. Not all
companies reported a high degree of satisfaction with the results of their supplier integra-
tion efforts. Moreover, only 20% of the respondents agreed with the statement:
“We are currently satisfied with the results of our supplier integration efforts.”
Over 45% percent disagreed with the above statement. Despite these mixed
results, respondents are committed to supplier integration and their expectations
for the future are that supplier integration will continue to be important. This is
Do
indicated by the fact that over 70% of respondents agreed with the statement:
“Expectations about the results to be achieved from supplier integration with
increase significantly.” Together, these results seem to indicate that many com-
panies realize the importance of supplier integration but have not yet discovered

t
os
the means to successfully implement it. In some cases, they have not yet under-
stood the root cause of “what went wrong” with their efforts.
This study clearly illustrates how a critical success factor in supplier inte-
gration projects is the level of knowledge regarding the supplier’s capabilities.
rP
Not only must the project team understand the supplier’s ability to meet cost,
quality, and ramp-up goals, but they must also assess their technology roadmap,
their level of design expertise, and the volatility of change within the particular
technology being integrated. In this regard, the purchasing function will play an
increasingly important role. We asked the respondents about their business
unit’s efforts to identify, develop, and maintain a “technologically capable” sup-
ply base for competitive advantage. By this we mean suppliers who have the
technologies currently needed by the business unit for new products and who can
yo
be expected to have the emerging technologies that the business unit will need
in the future. This is an area in which purchasing can play a major role. An indi-
cation of how important purchasing’s knowledge of the supply base will be in
the future is that 95.1% of the respondents said that developing and maintain-
ing a technologically capable supply base is critically important to their business
unit’s competitive success. Only 43.9 % of the respondents said that they cur-
rently have a more technologically capable supply base than their competitors
op
The latter result is clearly a cause for concern. Clearly, organizations have
not paid enough attention to technology trends and may be overlooking a signif-
icant element of supplier performance. In order to capture this information,
purchasing managers will need to work closely with product development teams
to create new supplier evaluation frameworks that go beyond the traditional
dimensions of price, quality, delivery, and service.
tC
As these strategies unfold, the role of purchasing managers will change

dramatically. Purchasing managers must become dedicated “commodity experts”
and develop specialized knowledge of product family characteristics and trends.
A greater focus will also be placed on relationship management and negotiation
skills, particularly with regard to future technology development. Managers
must have the ability to communicate effectively and will need to develop pre-
sentation and team leadership skills. Finally, managers will need to work more
No
closely with design and technology experts in order to communicate to these

parties the potential design contributions of leading-edge suppliers. Because of
the complex nature of supplier integration strategies, a new breed of relationship
manager will evolve, requiring a very different set of skills than in the past.
Notes
1. B. Asanuma, “Manufacturer-Supplier Relationships in Japan and the Concept of
Relation-Specific Skill,” Journal of the Japanese and International Economies, 3
Do
(1989): 1-30; J.H. Dyer, “Specialized Supplier Networks as a Source of Competi-

tive Advantage: Evidence from the Auto Industry,” Strategic Management Journal,
17/4 (April 1996): 271-292.

t
os
2. In the remainder of this article, the term “new product development” will refer to
all efforts focused on creating either a new product, process, or service.
3. James Bennet, “Detroit Struggles to Learn Another Lesson from Japan,” The New
York Times, June 19, 1994, p. F5.
4. Rajan R. Kamath and Jeffrey K. Liker, “A Second Look at Japanese Product Devel-
rP
opment,” Harvard Business Review, 72/6 (November/December 1994):155-170.
5. D. Littler, F. Leverick, and M. Bruce, “Factors Affecting the Process of Collabora-
tive Product Development: A Study of UK Manufacturers of Information and
Communications Technology Products,” The Journal of Product Innovation Manage-
ment, 12/1 (January 1995): 16-23.
6. E.W. Larson and D.H. Gobeli, “Organizing for Development Projects,” Journal of
Product Innovation Management, 5/3 (September 1988): 180-190.
7. R.M. Monczka and R.J. Trent, Purchasing and Sourcing Strategy: Trends and Implica-
tions (Tempe, AZ: Center for Advanced Purchasing Studies, 1995).
yo
8. P.G. Smith and D.G. Reinertsen, Developing Products in Half the Time (New York, NY:
Van Nostrand, 1991).
9. J.L. Hartley, J.R. Meredith, D. McCutcheon, and R.R. Kamath, “Suppliers’ Contri-
butions to Product Development: An Exploratory Study,” IEEE Transactions on
Engineering Management, 44/3 (August 1997): 258-267.
10. Kim B. Clark, “Project Scope and Project Performance: The Effect of Parts Strategy
and Supplier Involvement on Product Development,” Management Science, 35/10
(October 1989): 1247-1263.
11. Kim B. Clark and Takahiro Fujimoto, Product Development Performance (Boston,
op
MA: Harvard University Press, 1991).
12. S. Helper, “Strategy and Irreversibility in Supplier Relations: The Case of the U.S.
Automobile Industry,” Business History Review, 65/4 (Winter 1991): 781-824;
Asanuma, op. cit.; Dyer, op. cit.
13. J.K. Liker, R.R. Kamath, S.N. Wasti, and M. Nagamachi, “Supplier Involvement in
Automotive Component Design: Are There Really Large U.S. Japan Differences?”
Research Policy, 25/1 (January 1996): 59-89.
tC
14. J.H. Dyer and W.G. Ouchi, “Japanese-Style Partnerships: Giving Companies a
Competitive Edge,” Sloan Management Review, 35/1 (Fall 1993): 51-63.
15. Rosabeth Moss Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard
Business Review, 72/4 (July/August 1994): 96-108.
16. Bernard N. Slade, Compressing the Product Development Cycle: From Research to Market-
place (New York, NY: American Management Association, 1993).
17. G. Susman and J. Dean, Development of a Model for Predicting Design for Manufactura-
bility Effectiveness (New York, NY: Oxford University Press, 1992).
18. M.B. Miles and A.M. Huberman, Qualitative Data Analysis: A Sourcebook of New
No
Methods (Newbury Park, CA: Sage Publications, 1994).

19. Of the remaining 228 fax response forms that indicated they would not
participate:
▪ 37 indicated that they do not participate in mail surveys
▪ 43 indicated that they do not integrate suppliers into new product/process/
service development
▪ 24 indicated that they could not respond due to confidentiality issues
▪ 102 indicated that they lacked sufficient resources to complete the survey
▪ 22 indicated that they did not perceive any value-added in participating
Given the nature of these responses, non-response bias does not appear to be
Do
a factor in the pooled sample of final responses we received. That is, the sample
appears to be representative of companies who are actually implementing
supplier integration strategies.

Management

Uploaded by

Copyright:

Available Formats

Management

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Management

Uploaded by

Copyright:

Available Formats

CMR161

© 1999 by The Regents of

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

ithin the last decade, the rapid rate of technological change,

technology, and time-to-market of new products. Effective integration of suppli-

suppliers in new product/process/service development efforts has the potential

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 59

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

concluded that frequent inter-company communication, building trust, estab-

uct development.7 Smith and Reinertsen reached a similar conclusion, suggest-

60 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

▪ Is the supplier’s technology roadmap aligned with our roadmap?

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 61

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

Possible Supplier Integration Points

fied numerous times before it is finalized.

technical specifications that specifically address customer requirements. In the

62 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

The NSF/MSU Supplier Integration Research Project

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 63

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

“Supplier integration into new product/process/service development suggests that

model of supplier integration shown in Figure 2. This model was developed

64 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

Product Development Team Corporate Commodity Team

Acceptable History / Prior Experience /

Risk Assessment: Is supplier able to meet

Integrate Supplier; Integrate Supplier in

Return to Fully Integrate Supplier Integrate Supplier

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 65

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

Identifying Desired Supplier Capabilities and Potential Suppliers

technology roadmap in the next ten to twenty years.

outsourcing technology strategy and communicate it to the divisions, who

66 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

Components: Subsystems: High level of

• Supplier design expertise • Cost

Design and Development Manufacture

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 67

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

core technology. For example, a major electronics components manufacturer

into new product development, process integration represents a truly unique

reproducing the requirements.

68 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

Supplier Risk Assessment

▪ Targets—Is the supplier capable of hitting affordable targets regarding cost,

expertise and physical facilities to develop an adequate design, manufac-

CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999 69

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

transferring knowledge from a variety of sources, including customer require-

upside flexibility requirements amounting to:

Supplier selection is based primarily on the supplier’s capability to design and

70 CALIFORNIA MANAGEMENT REVIEW VOL. 42, NO. 1 FALL 1999

Copying or posting is an infringement of copyright. [email protected] or 617-783-7860.

a. 1=“Totally Unimportant” to 7=“Very Important”