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Supplier Integration Approaches

The possible forms of supplier integration can be framed within the context of the "generic" new product development process shown in Figure 6–1.4 The new product development process is a series of interdependent, often overlapping stages during which a new product (or process or service) is brought 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 evaluated for business and technical feasibility, the initial design is established, prototyping and testing are done, the design is finalized, and preparations for full-scale operations (tooling, layout, personnel, equipment, etc.) are completed. During this process, issues relating to cost, performance, timing, quality, and others, which result in tradeoffs and changes in the design are addressed. The design may be modified numerous times before it is finalized.

Figure 6-1Figure 6–1 New Product Development Process

In the first stage (idea generation), designers and marketing personnel consider the need for the product, and typically tap potential customers for ideas and input on what such a product/process/service might do, how much it might cost, etc. Potential technologies also may 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 the third stage, the product/process/service concept is effectively conceived, with performance specifications "frozen." In the case of product development, a preliminary prototype model may be created to define the concept. Next, the actual development process begins: designers from both the supplying and buying organizations create design specifications. Tools such as Quality Function Deployment (QFD) may be used to develop technical specifications that address customer requirements. They create a working prototype that enables testing and verification of existing production systems. Finally, the product enters full-scale production.

Outside suppliers provide materials and services that comprise a majority of the cost of many new products. In addition, suppliers may provide innovative product or process technologies critical to the development effort. The supplier may have better information or greater expertise regarding these technologies than the buying company design personnel. Supplier input and/or active involvement of suppliers may be sought at any point in the development process.

While the concept and design engineering phases of new product development incur a relatively small portion of the total product development costs, these two activities often 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 development process continues, making design changes becomes increasingly difficult and costly (see Figure 6–2). It is crucial then, for firms to bring to bear as much product, process, and technical expertise as possible early in the development process. In addition, companies whose development plans are well aligned with those of their key suppliers can shorten overall development time.

Figure 6-2Figure 6–2 Design Flexibility and Cost of Design Changes

The degree of supplier integration in new product development can range from having no supplier involvement to a "Black Box" approach, where the supplier provides its own design without the involvement of the buying organization. In between are the "White Box" and the "Gray Box" stages. A "White Box" occurs when the supplier is brought in on an ad hoc basis, and acts as a consultant to the buyer's new product development team. This is largely an informal meeting, occurring only as needed. The "Gray Box" approach is more formal: joint development activities such as joint design, prototype manufacture, and testing occurs between the buyer and supplier. In the "Black Box" approach, the supplier is formally empowered to design the component based on the buyer's performance specifications. In this type of approach, a high degree of trust typically exists between buyer and supplier, as the buyer relies on the supplier to design and manufacture an entire subassembly or module that will "fit" into their primary new product or service.

BMW's Global Integration in New Product Development5

BMW is initiating a project to improve the CAx collaborative processes it shares with its global suppliers. CAx refers to any type of computer-aided design (CAD), engineering, or manufacturing data used to develop and produce vehicle parts, process tools, or equipment. This data includes the following: 3-D digital models, geometric and process quality data, 2-D drawings, or product management system data. Collaborative engineering, as defined at BMW, is simply working simultaneously on synchronous CAx data with suppliers. Virtual simulation and a digital mock-up process also help shorten the development timeline and reduce material use in prototyping. These models have been developed extensively in Germany, and BMW is implementing this technology on a global basis with its key suppliers. Because co-location is not possible given the wide array of technology centers within the supply base, using digital technology will enable BMW's entire supply base to be "on the same page" throughout the new product creation and development stages, on a real-time basis, regardless of location.

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