Success Factors for Integrating Suppliers into New Product Development

Faster, better, cheaper—these marching orders summarize the challenge facing new product development (NPD). In other words, NPD teams must find the means for speeding time to market while also improving product quality and reducing product costs. Cross‐functional teams have proved effective for meeting these challenges, and such teams may extend beyond company boundaries to include key materials suppliers. Effective integration of suppliers into NPD can yield such benefits as reduced cost and improved quality of purchased materials, reduced product development time, and improved access to and application of technology. As Gary Ragatz, Robert Handfield, and Thomas Scannell point out, however, those benefits do not automatically accrue to any NPD team that includes representatives from a supplier's company. In a study of 60 member companies from the Michigan State University Global Procurement and Supply Chain Electronic Benchmarking Network, they explore the management practices and the environmental factors that relate most closely to successful integration of suppliers into the NPD process. The study identifies supplier membership on the NPD project team as the greatest differentiator between most and least successful integration efforts. Although the respondents reported only moderate use of shared education and training, the study cites this management factor as another significant differentiator between most and least successful efforts. Respondents listed direct, cross‐functional, intercompany communication as the most widely used technique for integrating suppliers into NPD. To integrate suppliers into NPD, a company must overcome such barriers as resistance to sharing proprietary information, and the not‐invented‐here syndrome. The results of this study suggest that overcoming such barriers depends on relationship structuring—that is, shared education and training, formal trust development processes, formalized risk/reward sharing agreements, joint agreement on performance measurements, top management commitment from both companies, and confidence in the supplier's capabilities. Overcoming these barriers also depends on assett sharing, including intellectual assets such as customer requirements, technology information, and cross‐functional communication; physical assets such as linked information systems, technology, and shared plant and equipment; and human assets such as supplier participation on the project team and co‐location of personnel.