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Companies must recognize that supplier involvement in new product development can have both positive and negative impacts on technology risk and uncertainty. Organizations need to capitalize on the positive aspects of supplier involvement recognizing:

  • The supplier may have greater experience or expertise with the technology and, as a result, may have better information about where the technology 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 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. The buying organization may also provide various types of supplier development assistance to help motivate this information exchange.

However, organizations also need to recognize that:

  • Involvement with a supplier may tend to lock the buying company into the supplier's technologies. This makes initial selection 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 an "inside track" may not have as much incentive to innovate, slowing the pace of technological advancement. The buying company must find ways to ensure it is getting the supplier's best efforts.

In the next chapter, we discuss another benefit of supplier integration that is evident: significant reductions in cost across the value system.

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