11.

3 Supplier Integration into New Product Development

● Traditionally suppliers have been selected after design of

product or components
● However, firms often realize tremendous benefits from
involving suppliers in the design process.
● Benefits include:
○ a decline in purchased material costs
○ an increase in purchased material quality
○ a decline in development time and cost
○ an increase in final product technology levels.
 The Spectrum of Supplier Integration
01. None
• Supplier is not involved in
design.
• Materials/subassemblies
supplied as per customer
specifications/design
03. Grey Box
• Formal supplier integration
• Collaborative teams between
buyer’s and supplier’s
engineers
• Joint development
02. White Box
• Informal level of integration
• Buyer “consults” with the
supplier informally when
designing products and
specifications
• No formal collaboration
04. Black Box
• Buyer gives the supplier a
set of interface
requirements
• Supplier independently
designs and develops the
required component
 Appropriate Level Depends on the Situation

Process Steps to follow:

Determine internal core

01 competencies

Determine current and

02
future new product
developments

Identify external

03
development and
manufacturing needs.
Appropriate Level Depends on the Situation (2)

Grey Box White Box

If separation is If buyer has some design
not possible expertise but wants to ensure
that supplier can adequately
manufacture the component

Black Box
If future products have components
that require expertise that the firm
does not possess, and development
of these components can be
separated from other phases of
product development, then taking
Keys to Supplier Integration
● Making the relationship a success:
○ Select suppliers and build relationships with them
○ Align objectives with selected suppliers

● Which suppliers can be integrated?

○ Capability to participate in the design process
○ Willingness to participate in the design process
○ Ability to reach agreements on intellectual property and
confidentiality issues.
○ Ability to commit sufficient personnel and time to the
process.
○ Co-locating personnel if appropriate
○ Sufficient resources to commit to the supplier integration
process.
 11.4 Mass Customization

Evolved from the two prevailing Mass production Craft production

manufacturing paradigms of the
 Efficient production of a large  Involves highly skilled and
20th century
quantity of a small variety of goods flexible workers
• Craft production  High priority on automating and  Motivated by desire to create
and mass measuring tasks unique product/services
production  Mechanistic organization with rigid  Flexible and continually
controls changing organization
Absence of Trade-Offs

• Two types of inherent trade-offs between

Mass Production and Craft Production
• Low-cost, low-variety
• Higher-cost, higher-variety

• Mass customization
• Delivery of a wide variety of customized goods or
services quickly and efficiently at low cost
• Capture the advantages of both Mass Production
and Craft Production
• Gives firms important competitive advantages
• Helps to drive new business models
 Key Attributes
To Making Mass Customization Work

Instantaneous
• Modules and processes
must be linked together
very quickly
• Allows rapid response to
various customer demands.
Costless
• Linkages must add little if
any cost to the processes
• Allows mass customization
to be a low-cost
alternative.

Seamless Frictionless
Linkages and individual • Networks or collections of
modules should be invisible to modules must be formed
the customer with little overhead.
• Communication must work
instantly
Mass Customization and SCM

• Advance SCM approaches and techniques are

essential if mass customization is to be successfully
implemented
• IT that is critical for effective SCM is also critical for
coordinating different modules in the dynamic
network
• Concepts like strategic partnerships and supplier
integration essential for the success of mass
customization.
• Postponement can play a key role in implementing
mass customization
 SUMMARY

• Design for logistics concepts

• Efficient packaging and storage
• Designing product so that certain manufacturing steps
can be completed in parallel
• Standardization
• Integrating suppliers into the product design
and development process
• Advanced supply chain management helps to
facilitate mass customization