Kenneth J. Petersen

Involving Suppliers in New Product Development

Organizations have been quick to realize that involving suppliers in new product/process/service development efforts has the potential for significant results. Numerous studies 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. However, not all efforts are successful. Supplier integration is most successful when driven by a formalized process that considers supplier capabilities, level of complexity of the technology, and degree of risk. Leading companies conduct a formal in-depth supplier evaluation and risk assessment prior to supplier involvement on the project team.

A Model of Supplier Integration into New Product Development

In many industries, firms are looking for ways to cut concept-to-customer development time, to improve quality, and to reduce the cost of new products. One approach shown to be successful in Japanese organizations involves the integration of material suppliers early in the new product development cycle. This involvement may range from simple consultation with suppliers on design ideas to making suppliers fully responsible for the design of components or systems they will supply. While prior research shows the benefit of using this approach, execution remains a problem. The processes for identifying and integrating suppliers into the new product development (NPD) process in North American organizations are not understood well. This problem is compounded by the fact that design team members often are reluctant to listen to the technology and cost ideas made by suppliers in new product development efforts. We suggest a model of the key activities required for successful supplier integration into NPD projects, based on case studies with 17 Japanese and American manufacturing organizations. The model is validated using data from a survey of purchasing executives in global corporations with at least one successful and one unsuccessful supplier integration experience. The results suggest that (1) increased knowledge of a supplier is more likely to result in greater information sharing and involvement of the supplier in the product development process; (2) sharing of technology information results in higher levels of supplier involvement and improved outcomes; (3) supplier involvement on teams generally results in a higher achievement of NPD team goals; (4) in cases when technology uncertainty is present, suppliers and buyers are more likely to share information on NPD teams; and (5) the problems associated with technology uncertainty can be mitigated by greater use of technology sharing and direct supplier participation on new product development teams. A supplier’s participation as a true member of a new product development team seems to result in the highest level of benefits, especially in cases when a technology is in its formative stages.