2.1 Buyer‐supplier relationship and NPD
2.1.2. Time frame of supplier involvement
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2.1.2 – Time Frame of Supplier Involvement
One of the most important strategic decisions when considering the supplier`s involvement is – when to involve what suppliers?
Different literature suggest (Bozdogan et all, 1998; Ragatz et al,1997; Monczka et al, 1998) that supplier integration (1st tier supplier, or up‐front supplier) into the New product development as early as during concept exploration and definition phase can foster architectural innovation.
It was shown both through theoretical modeling as well as through empirical research, that the timing issue is truly critical ‐ and the earlier the suppliers are invited into the product development, the higher the chances that this product will be successful (Kamath and Liker, 1994; Bozdogan et al, 1998; Monczka et al, 1998; Clark and Fujimoto, 1991). Even though the customers possess and could obtain a huge amount of information regarding the components, they would have a great difficulties in accumulation of component know how – which is crucial for the new architecture development (Takeishi, 1998).
The leading companies can not possibly have expertise in every possible field they operate, and therefore there would be a lack of expertise in case they would chose a pure integral new product development. On contrary, as the consequence of years of outsourcing, customers usually don`t have any deeper knowledge of the components and the processes behind them.
Fine and Whitney (1996) describe this situation as Dependence for Knowledge – the company needs the item, but lacks the knowledge of how to do it by itself. This is in bright contrast with Dependency on capacity, when they have the knowledge and only lack capacity (time, space, machinery or even management attention) to do so internally. (Fine and Whitney, 1996).
Therefore, if involving the suppliers for the new product development, the buyers still can concentrate on development of their core competencies and don`t need to obtain deep level of information an work on the know – how development (to get the tacit knowledge as well) about every specific component – since they might benefit from their supplier`s component knowledge.
In general, there are two major factors to consider when evaluating about when the suppliers should be invited into the product development process (Monczka et al, 1998).
The rate of technology change
Level of supplier expertise in the given technology
In situations, when the component is under rather very turbulent and significant technology change and where there are high risks that the change in the component might impact the whole product (system), the integration of such supplier should be delayed in the product development cycle.
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However, if the supplier`s expertise is significant and they might be an source of important or even key insights during the product development – than they should be included early in the process.
The table below shows generic new product development process supplemented with a matrix for supplier integration. The five stages shown in the figure below (Idea Generation,
Business/Technical Assessment, Product/process/Service Concept Developmen, Engineering and Design, Prototype) often overlap, and usually there is some movement back and forward, as different ideas are created, tested, verified and either accepted or declined into the new product. Thus, this picture is a simplification of the main processes and merely visual
conceptualization of the whole and complicated process, which new product development is.
Source: Monczka et al, 1999
Figure 2: New Product Development Process
During the first stage the multidisciplinary teams (mostly consisting of product marketing, market intelligence, industrial design and physical design disciplines) would research the customer`s ideas and input on what might be the end product/service/process good for, how much should it cost and so forth. They will also take their technology road maps into
consideration and market forecasts. At this point, the potential technologies might be assessed as well, especially in the case if an existing supplier posses an exciting technology which might give a competitive advantage over the competition. Business/technical assessment is a tool, which the developers may use to identify technical solutions of the product as well as their
Idea generation:
Based on the voice of the customer
Business/
Technical Assessment (Preliminary)
Product/
Process Service Concept developme
Product/
Process Service Engineering and design
Prototype Build, Test, and Pilot?
Ramp up for operations
Possible Supplier Integration Points
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testing an verification of existing production systems. Once this done, the product is finalized and is moved into the full scale production.
While the first two stages of the of NPD are relatively inexpensive compared to the later phases, their significance is that they will decide and “lock in” as much as 80 percent of the total cost of the product. Since the decisions made early in the project development will impact the later engineering solutions and thus influence product quality, costs, cycle time etc, it is important for the firms to take into consideration as many product processes and technical expertise as possible early in the NPD, when changes will be quite inexpensive and easy to do. Later on, it becomes very difficult and expensive as well to make design changes. (Monczka et al, 1999, Bozdogan et al, 1998)
Earlier Later:
‐Supplier of complex items ‐Supplier of simpler items
‐Supplier of systems or subsystems ‐Supplier of single components
‐Supplier of critical items or tech ‐Supplier of less critical
item/technology
‐Strategic alliance supplier ‐Non‐allied supplier
‐“Black box” supplier ‐“White box” supplier
Source:Monczka et al, 1999. Pp 78
Figure 3: Integrate suppliers at different stages
Idea generation:
Business/
Technical Assessmen
Concept Develop ment
Engineering and design
Prototype and Ramp up
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2.1.3 Development Responsibility and Development scope
In this part the literature connected with the development scope and ways of suppliers are integrated into the NPD are presented. Every NPD project is different, and therefore also the managerial considerations should differ from project to project. It was suggested by the
literature not to employ the same approach every single time, but rather use specific guidelines to choose the best approach for that particular project.
2.1.3.1 Management alignment matrix
A number of research papers (Monczka et al, 1999, Dowashahi 1998 etc.) indicate, that in order to successfully integrate suppliers into the New Product Development, the suppliers must be tightly integrated into the product project so that the developing team can benefit from all the component knowledge possessed by the supplier.
They propose so called cross‐functional development teams that will create an counter balancing body towards every company`s own R&D team, working as an negotiating body between the all firms, trying to find the best solution for the project and thus lower the level of opportunism every company will try to raise. Also, they mention that in order for the project to be successful, a full time involvement of the top management is necessary. The top
management role is to litigate the risks – in situations the targets and goals are unsure and the developers might even start to question their work and goals, it is the top management role to provide with leadership support and vision to show the clear aim of the project so that the whole team won`t flatter.
This, however can be the case of very innovative projects, that involve high risks and not clear idea on the targets and goals of the project.
Would this however be the case for all of the projects where suppliers are involved? Would this be the best practice even in cases of products with lower complexity and lower innovativeness, where the speed of consultations with suppliers might not be that crucial and on the other hand would only bring another layer of technology consideration and confusion into the project?
Olson et al. (1995) argues that the degree of the innovativeness (or product newness) is an important moderator of the impact of different coordination structures on the development
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all the functional levels of the companies will be only for the ,ost important group of suppliers – who possess technology, innovative capacity or both.
In their study, Olson et al. (1995) base the major cooperation platforms on the typology of some heavyweights of the organizational theory – on the works of Nathanson and Mintzbeg.
Bureaucratic control/hierarchical activities is the most formalized and centralized as well as the least participative form of all the cooperation forms. All the mechanisms stay on the standard operation procedures and the oversight of high level manager who will coordinate all the activities across the functions. Most of the communication flow is vertically within the
department and the general manager serves as the primary communication link and arbiter of conflicts across functions.
Individual liaisons is a coordination structure, where individuals from one or more departments are assigned to communicate directly with their counterparts from other departments. This supplements some of the communication need from the bureaucracies – making the information flow a bit faster as well as less formalized form.
Temporary task forces is basically the institutionalized form of individual liaisons – of the repetitive interaction between these contact within the context of specific project. Since the task force members represent various functions and interact directly, this form of alignment is quite interactive, participative and much less formalized than those above. Still, high level managers would still retain authority to govern these task forces by assigning tasks, imposing directives and mediating disagreements among members.
Integrating manager is an additional management position superimposed on the functional structure – he will be responsible for coordinating the efforts of various functional departments but won`t have any the formal authority to impose the decision on those units. These managers are usually very strong in their negotiating skills – since they don’t have any other means how to make things happen!
Design teams bring together a set of functional specialists to work on specific new product development project. Such a team, however is rather independent and is more or less self‐
governing unit. The members have greater authority to choose their own leaders internally, instead of having leaders point out from outside their structures. They have free hands to choose their own procedures based on what they believe would be the most suitable way to the goal and would resolve any conflicts through discussions and consensual group process.
The relatively organic mechanisms such as design teams have some particular advantages for coordinating product development. The open minded atmosphere, participative decision making and consensual conflict resolution, where everyone has the right to point out possible
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problems to his/her part in real time can foster innovative ideas creation and proposition.
These might be discussed right away and either accepted or refused based on educated discussion. So the chances that such an team would come up with innovative and very new products, that would address adequate market niches or needs is quite high. Furthermore – since the discussions start early, critical issues, that might become problems later (e.g. during the manufacture phase) might be tackled right away and thus lower or negate their impact.
On the other hand – there are some disadvantages to this way of management alignment – in terms of costs and temporal efficiency. Creating a number of such a teams – where all would have the background necessary for their work as well as staffing them with highly skilled
specialist might drain necessary resources that might be better employed somewhere else. Also, the discussion based approach can be rather time consuming and less efficient than more centralized forms of management – which might be an issue when developing products with short development cycles.
In this way, considering the innovativeness as a variable, themore participative structures are likely to improve the effectiveness and timeliness of the development process when the product being developed is truly new and innovative. However, the model also predicts that more bureaucratic structures may produce better outcomes on less innovative projects, such as those involving line extensions or product improvements. (Olson et al. 1995)
2.3.3.2 Degree of knowledge Sharing
Fine and Whitney (1996) believe, that the assemblers (buying companies) should rely on their suppliers for tasks only, but not for critical knowledge. If the companies follow such a strategy, they could live with outsourcing without fear, that the suppliers will gain more negotiation power during the purchasing of components. Also this is the way they can mitigate the risk of being surpassed by more potent suppliers, who will over the time overpass the former customers position and replace their position.
Another risk might be the possibility of losing the control over the technology so it will spill over to the buyer`s direct competitors through the supplier network so the design will lose some of
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their knowledge areas necessary in order to co‐create the product, knowledge partitioning implies that different organizations have control over different knowledge spaces and also over different tasks (Takeishi, 2002). The bottom line is that knowledge is not always homogenous and there is nothing like one same knowledge, that can be applied onto differing areas. On the other side, knowledge might be separated into independent parcels containing mutually contradictory information within the same area. We can say, that every company is an
independent entity, with specific set of knowledge that will determine its modus operandi and thus the way they create value.
However, typically any one company does employ suppliers in development of products, and therefore the total knowledge necessary for the artifact creation won`t be present in one company only, but to get the complete picture we would have to cross the boundaries of companies if we want to gather all the necessary knowledge necessary to create the end product.
This is often the case – companies would try to reach out for more knowledge necessary to develop the products.
This is the rationale for Takeishi`s (1998) observation, that companies should go and try to gather some more of the useful knowledge beyond their boundaries – both sides need to acquire knowledge of their partner`s products, be it components providers or suppliers. In other words – the firms should know more than they make in order to stay competitive and there should be an overlap in knowledge between the supplier and customer when new technologies are to be developed.
This also means, that they will have to develop common language to open the channels of knowledge sharing. There is strong uncertainty in every new product development on goals as well as processes that would lead to these goals, the companies must communicate openly with their counterparts in order to mitigate these.
Takeishi (1998) suggests that it is particularly important for customers (buyers) to have a higher level of component‐specific knowledge when the project involves new technology. In general the assembler’s capacity to integrate all the components into one system might be increased by their greater knowledge of components, particularly when the project involves the task uncertainty with development of new technologies.
The same logic applies to suppliers – higher level of architecture knowledge by suppliers should increase the likelihood that they will be more ready for the problem solving necessary when faced with new project development requirement by the architecture integrator and thus being seen as an best suited supplier to provide with the right problem solution. Takeishi (1998) writes:
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“Building up architectural knowledge about the component was recognized as a critical success factor for suppliers to win design competition”
2.2 On Modularity
This section deals with the general concept of modularity so to provide the reader with solid background information on the research. Even though theory of modularity is fairly simple, I spend quite a lot of space to cover this topic thoroughly, so that the reader can get a deep understanding of all the challenges in modular product development. The basic modular theory is introduced followed with the major challenges to modularity – the architectural innovation and the modularity trap.
2.2.1 Theories related to Modularity
Modularity can be seen as a general concept, which help us understand systems and their organization. According to Schling (2000) modularity is an abstract term (a continuum) which describes the degree, to which system`s components can be separated and recombined.
Therefore all systems are characterized by some degree of coupling between components, and only very few systems have components which are completely inseparable and cannot be
recombined. This is the reason we can say that almost all systems are, to some degree, modular.
Simon(1995) in his pioneering research shows examples of modularity from very wide specter of situations and postulate, that modularity might be found in almost all entities around us – social, biological or technological. Simon use the familiar example of biological organism to introduce the very basic concept of modular system and its ability of decomposition ‐ “which is composed of organs, which are composed of cells, which contain organelles, which are
composed of molecules and so on.
Simon use the term “hierarchically nested systems” – meaning that at any unit of analysis, the entity is a system of components and each of the components is, in turn is a system of finer components, until we reach a point, where the components are “elementary particles” or until
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question is, whether the systems can be put back together and still be functional in the same manner, as before – and is it necessary for them to be re‐configured in the same, original way to keep working? This is where we can differentiate between the high and low levels of modularity (Sanchez, 1995).
High level of modularity are those systems, whose components might be disaggregated and recombined into new configurations – and possible substituting many new components into the configuration of the system with minimal or none loss of functionality. These components are relatively independent on each other, and the only dependence is to the overall system – the architecture of the system.
Still, there always will be some configurations, which would be more powerful – the
components in that particular combination would overall provide better system output than other configurations. This optimization is a crucial concern during the design of modular artifact.
The designer must take into consideration the possible advantages (trade offs) of fully modular and decomposable product, or product with lower modularity, however having possibly higher efficiency. Schling (2000) describes such phenomena as “synergistic specificity”. These are situations, when through the combination of components we can achieve functionality unobtainable through combinations of more independent components (components with higher modularity). Such an architecture functions will be unchallenged by more modular systems, however later changes into these architectures are very difficult to do, as the components are more tightly organized and more deep interconnected.(Schling, 2000).
Baldwin and Clarke (2000) define modular systems as systems, which are composed of units (or modules) that are designed independently but still function as an integrated whole.
Modularity means building complex products or process from smaller subsystems, that can be designed independently yet function together as whole. They do n comprehensive research of
Modularity means building complex products or process from smaller subsystems, that can be designed independently yet function together as whole. They do n comprehensive research of