4.5 Summary on cases presented
5.1.1 Product innovativeness as involvement driver
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Chapter 5 ‐ Research Findings and discussion
This chapter is divided into three parts that have their rationale based on the conceptual model – Architecture as a variable, Buyer‐supplier relationship and NPD, and lastly the research finding relationship between “Architecture as a variable” and “Buyer‐supplier relationship and NPD”. I decided to add this third category as there is a visible overlap between the two categories as presented in the research framework.
Every part includes a number of research findings, which are based on the cases presented.
Every single research finding includes an description of the evidence from the case as well as an discussion.
The first part deals with findings connected with the architectural considerations, where the second part tackle on the issues connected with companies relationship management during the NPD. The final part is intersection of these two, it is the relationship between these two first.
5.1 Architecture as a variable
5.1.1 Product innovativeness as involvement driver
Innovativeness (product newness especially) is the main driver on when to involve suppliers.
The greater the change and risks, the earlier they will invite.
Evidence from the case
The only cases when suppliers would be regularly invited to pre‐concept phase of the new project development were in the ASUS case – for the consultations of design or technological of critical component that would influence the overall design possibilities.
Both ADVANSUS and Thermal Management Company usually invite suppliers during the concept stage – when they already have a good idea on what they want to bring to market but will need to consult on how the processes within different components interfere etc.
On the other side in case of innovative and revolutionary products, ADVANSUS as a supplier would often be invited very early as well – sometimes also during the pre‐concept stage – and they would rarely do the same with their suppliers. This is usually the case of projects that are
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aimed on the medium to long term goals – as these have longer development times and more technologically grey areas with only very few or even without any technological expertise.
Thermal Management Company does invite during the concept stage or later – their products do have high innovativeness, however this is caused by extreme figures in the time to market – and therefore there is less need for any early consultations.
SANAV, the company with the lowest innovativeness usually invite their suppliers once the overall design is strictly set and they are clear on any issues with the components they want to change – and how – after the testing.
These findings indicate, that the innovativeness of the product to develop has influence over when to introduce the project to the suppliers and subsequently invite them in the NPD.
Discussion
We can see that especially in cases of ASUS and ADVANSUS, there might be quite substantial dependence for knowledge (Fine and Whitney) that is possessed by the suppliers – parts of the component knowledge the suppliers don’t have, but need to know so they can coordinate with the other parts of the system. Their product are more complex and therefore they decide to sacrifice some of their knowledge in regard of their faster ability to integrate the components into the new product.
All three companies that were dealing with relative high to high innovativeness in their NPD mentioned, that they wanted some key insights on the component or process technology which they don`t know or possess – so they can lower the risk of setting wrong overall targets and thus development constraints and subsequent failure. The higher the risks, the earlier they would contact and present suitable suppliers with the problem.
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5.2 Buyer‐supplier relationship and NPD
5.2.1 Importance of relationship
Evidence from the Case
All Advansus, Asus as well as Thermal Management Company identified, that the relationship between them and their suppliers is important. All these three companies mention, that
anytime they already had a proven track of cooperation with their suppliers it is more likely that they would ask them for cooperation in the future as well.
At the same time, all of them would point out that the technology their suppliers posses is the main reason they would actually consider investments into the relationship building and it is for this reason they would build the relationship with their suppliers at the first place.
The technology the suppliers posses are the moving factor, that would determine whether or not the customer wants to have any kind of relationship with the supplier – as well as what kind of relationship. The technology is the major factor on how to rank the suppliers into different groups so that they can be selected and then invited into the new product development of an innovative project.
Both ASUS and ADVANSUS divide their suppliers based on the strategic importance of the technology their suppliers have. This is the starting point for further consideration of supplier selection – such as the innovative and development capabilities of their supplier in that particular technology necessary during the actual new product co‐development.
Thermal Management Company does not have any specific supplier roles, but still they would rank their suppliers based on their competency level when considering new project.
Discussion
These finding are in line with the literature reviewed. We clearly can identify that two of the companies studied (ASUS and ADVANSUS) employ the relationship models for their suppliers instead of the arms‐length. However, they don`t do so for every supplier – but only for those who are strategically vital to them and posses the technological expertise and reach. Even though we cannot identify clear role distinction as defined by Kamath and Liker, still we can see
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that the buyers differentiate between suppliers on a number of criteria and would estimate supplier`s specialty and fitness in every single case, rather than involving them in the New Product Development based only on the relationship. This approach more reminds Dyer`s strategic segmentation of suppliers – based on the relative importance of the output they sell.
In addition,
5.2.2 Architecture knowledge
Buyers don’t share architecture knowledge with suppliers, but they do expect their suppliers to understand their architecture knowledge or at last have basic understanding of it.
Evidence from the case
There was general lack of willingness to share the architectural knowledge between customers and suppliers among all companies studied. None of the companies ever mentioned any possibility of technology spillovers, not even in the cases of very complex and interconnected products, where this might actually be of benefit to the customers.
The reason was obvious – all the companies studied felt that their true value added dwells in their architecture, which differentiates them in the value chain from merely commodity providers ‐ and their ability to comprehend the set of different knowledge necessary to integrate all the very diverse components into one end product. In case they would need to share with the supplier – they would use different tools to make sure, that they don`t tell them more than necessary – for example provide them with architectural data necessary for the component only, or in case of more dynamic and innovative projects by introducing special gatekeepers, who would know how much can they share.
Said this, it is very interesting to observe – that all the companies studied do expect that their suppliers would try to do their own research on customer`s architectures ‐ to educate
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Discussion
The research confirms the findings of Takeishi, although only generally. The suppliers indeed need to understand buyer`s architectures in order to survive in the industry. The customers expect them to have a ready to go components or at least have solutions that can be employed fast and easy. Also, the customers often try to learn as much as possible about the
components – the innovation happens mostly in the component hardware and the customers only merely integrate these in new ways. The ways er how to accept this information differs, but ultimately lead to the same aim. Another reason why they try to understand the
component knowledge is long term control over their procurement as well as strategy. All of the four cases studied are subject to the dependency for capacity. In the case of moe innovative companies the reason is cost as well as the fact they would forego this knowledge to their ability to integrate. In the case of less complex cases, this is cost driven only. Therefore they want to have more options opened by the fact they still understand the knowledge and can have upper hand during the business relationship.
This finding also confirms the Takeishi`s presumption that suppliers should know more about architecture and vice versa. Although this is true in both cases, in the short to medium term it is much more crucial for suppliers to understand the architectural knowledge‐ as they need to react to the changing situation immediately. In the long term, the customers also need to understand the cultivate their component knowledge, else they risk that the constant
outsourcing will destroy their leaning capabilities so they won’t be able to effectively innovate any more.
There is not much long term alignment on information sharing between the companies, even though it would be helpful for both parties. Although they do understand that they should share more, nobody wants to open the communication channels as the first one (Takeishi, 1998). Also, often it is question of professional pride not to ask their counterpart for the solution, but rather do their own good engineering work and come up with the solution (ADVANSUS, Thermal Management Company). This presumption is negated in the case of Taiwan IT companies.
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5.2.3 Reasons to invite suppliers
Main reason to involve suppliers is technology distance between have‐want followed by optimization of components to work within architecture
Evidence from the case
ADVANUS and ASUS both identified, that the main reason why would they consider supplier involvement in NPD is the lack of some component they would like to use in a new product to be marketed. This new component to‐be might be crucial for the differentiation of the end product, but since there is no such a thing they would need to invite the supplier and introduce them into their future plans of what they want to create and see whether they can cooperate.
Secondary to this, all of the companies, including Theraltake and SANAV would introduce the supplier in order to improve the functionality of components in already existing product, so that they can market next generation with improved stats to gain some competitive advantage.
Discussion
The primary reason why the Japanese companies do involve suppliers – to reduce the development times and with more innovative features was not fully confirmed in the case of Taiwanese IT companies. The findings here are somewhat supportive with what was presented by Kamth and Liker or Bozdogan et al. – the companies would be looking for the innovative capacity of their suppliers, however won`t expect that they can help them to cut down the development time that significantly. Reason why the no one of the interviewed companies mentioned the time issue as important might be the already very short development times in the IT industry, and the fact that this is simply expected. The innovativeness factor, on the other side was posited – as most of the companies studied would contact suppliers for help when trying to introduce new product features or functions.
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satisfactory components, that would just pass their testing. It needs to be good enough, not the best of all possible.
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5.3 The relationship between “Architecture as variable” and “Buyer‐supplier relationship and NPD”
5.3.1 Complexity and supplier roles
Complexity has influence on the supplier roles creation as well as on relationship building.
Evidence from the case
It was only in the two companies – ASUS and ADVANSUS ‐ both with highly complex products, where we can clearly identify a need for detailed vendor management and different vendor role creation.
It is also the case of these two companies, where clear vendor selection factors and procedures were clearly defined as well as formalized.
In the case of ASUS, all the vendors are managed by the central procurement unit, where they differentiate between suppliers based on the 5 main criteria (Quality, Cost, Delivery,
Technology and Service) in two areas of components – strategic and nonstrategic. Also, they do mapping of their suppliers technologies – which is done by the R&D unit themselves – and the procurement would be working with these.
ADVASUS has the supplier list of roughly 100 suppliers, also mostly managed by procurement – but not solely as other units can provide input as well (such as quality, engineering etc.) and divide the suppliers onto different roles based on similar criteria as well as they keep track of development plans of their suppliers. The existence of the supplier list also means, that the companies on this list will be first called upon when necessary and given chance to provide with any technological solution.
SANAV and Thermal Management Company, on the other side, do not catalogue their suppliers any specific roles ‐ they do look for new suppliers anytime they develop new product. In case of Thermal Management Company this is done solely by the procurement unit and usually the
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Discussion
From the above we can see the correlation between the product complexity – the number of components and the matrix of their inter‐dependence – and a need to differentiate suppliers of the product components within a hierarchy to determine the relative importance of the
business relationship to the buying company.
With those most important – they would try to have a more close relationship, often based on less formalized tools such as contracts or deals etc – as they can clearly identify advantages of doing so instead of managing the whole huge mass of suppliers on the arms‐length basis – the suppliers are acting as the prolonged hand of the customer (Kamath and Liker).
On the other hand, suppliers with less complicated products tend to have no need to create any relationship with their suppliers – not even with those who posses the crucial technology necessary for their products. One of the reasons might be that the lower number of
components is more easily manageable on a daily basis, and therefore they can spend more time on each component within the system, finding another solutions or even substitutes that might be much more suitable and efficient. If the system is complex enough, the company would need an partner, who can free them of way too many concerns and considerations, they might not be able to cope with. In this way, the complexity is also an driver for the creation of supplier roles with different design responsibility.
5.3.2 Component knowledge
All companies have good understanding of the component markets and supplier pool.
Companies with less complex products would have deeper component knowledge, where the higher the complexity – the more they would trust their suppliers
Evidence from the case
All the companies studied will try to have good understanding of their suppliers and the markets their suppliers operate. Companies with more complex architectures (ASUS and ADVANSUS) would tend to work on catalogues of their suppliers and what processes and technologies these provide. ADVANSUS does have the vendor list, which is updated by new
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supplier technologies on regular basis by both engineers and procurement, where ASUS does have the special groups, who will specialize on screening markets for particular components.
This later approach is also similar with Thermal Management Company and SANAV, where single engineers would be given the responsibility to reach out and search for suitable suppliers before a new NPD begins.
Another trend is the level of component understanding – where the companies that have to deal with high complexity architectures would forego some of their component knowledge, so they can concentrate on the overall coordination and integration of the whole system. ASUS completely trust their suppliers will come with the solution they want – based just on very rough specs provided by ASUS and give them the complete freedom in how will they reach the goal. In ADVANSUS case, the suppliers have relative freedom to come up with an solution – where as long as the PM believes it will fit the architecture and operate in the way he wants than it is good enough.
SANAV and Thermal Management Company, on the other side had an excellent understanding of the components they were about to purchase. Thermal Management Company often even advice the suppliers on what exact changes they should do so they can enjoy the improved overall design so that the overall functionality increases, where SANAV gives clear and detailed specs of what they want and will not tolerate any deviation – as this does influence their planning effort.
5.3.2 Discussion
The reasons for this to occur might be twofold – once the complexity is lower, the buying company is not preoccupied with the integration process and might have greater opportunity to understand the components they employ. Also there is the fact, that the business model of these buyers is based on optimization of existing products rather than more radical innovation.
The second one is more prosaic‐ they both had the very recent history of moving up the ledder from OEM to ODM. Their buy or make decision is more than less affected by the cost issue – it is cheaper for them to purchase the component from third party than do it by themselves, but they still keep the knowledge so they can use it in the future if necessary. Their main
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often change components and their suppliers.
In the ADVANSUS and especially ASUS case, there is a strong dependence on knowledge – the companies already forsaken their component knowledge and need suppliers for their insights in technology – if they try to develop the product without this knowledge, the time frame spend on the research might be much longer.
5.3.3 Managerial alignment
Managerial alignment does follow the architecture of the product to be developed. Speed to market is constant, innovativeness variable.
Evidence from the case
It is the central R&D unit who is in charge of new product development projects together with procurement unit, who supports for business negotiation and closing business deals with
It is the central R&D unit who is in charge of new product development projects together with procurement unit, who supports for business negotiation and closing business deals with