S u p p l i e r I n t e g r a ti o n i n t o N e w P r o d u c t

D e v e l o p m e n t : C o o r d i n a ti n g P r o d u c t , P r o c e s s ,
and Supply Chain Design

Kenneth J. Petersen, Robert B. Handfield, Gary L. Ragatz

SLIDE 1
 -[ 1 ]-

Introduction
In line with the need to incorporate various rela
Creation ted operations into the supply chain, early and
considerable participation of supplier leads to a
of faster development process.

successfu 1. Define specific ESI strategiesCritical decisions made in thedesign

product
Objectives
l new
Design
used in enhancing product and
development stage include product features,
for Quality manufacturing (by supplier, technical and business assessment toward firm
packaging, logistical channel, sourcing materials
Design for Manufacturing
financial success and product design performance)
and process technology.
product 2. Evaluate how either the stage“But
Design for Supply Chain
at which suppliers
without areimpact
real early integrated or
in sourcing,
almostnew
responsibility level given into buyer’s no implication given to theproject
product development resulting
might
design
moderated the relationship in obj. 1 of supply chain.”
Thus
What vital components required in building and managing the company
,relationship with suppliers?
2
Does it have substantial financial benefit for the substantial investment of time
SLIDE 2
and resources it needs?
 -[ 2 ]-

Theoritical Foundations and

AssumptionConceptual Model
that supplier integration is a social process

Detailed
Supplier
Assessme
Firm
nt
Financial
H1 H4a Performan
Project ce
Technical H2 Team
Assessme Effectivene
nt ss
H3
H4b

Design
Business Performan
Assessme ce
nt
THEORITICAL MODEL

SLIDE 3
 -[ 2 ]-

Hypothesis 1: detailed supplier

Main objective: To alignassessment
the needs of the purchasing company with the
capacity of the supplier, both from a technical point of view and from a
cultural / behavioral point of view.

The extent of agreement that The extent to which the

the correct supplier was a c business culture of the suppliers
appointed supported the business culture
of the purchaser
(1) Degree of smoother function by the team
Project Degree in creating (2) better and (3) faster decisions
The extent to which the
Team (4) Enhanced
capacities of the supplier
matched the capacities of(5)
b team general agreement
d
theThe capacity to make
The extent to which an effective way
is used
overall by theteam
project purchaser
goalstomore
select

Effectivenes realistic purchaser and incorporate the supplier

s
H1. The selection of the “right” supplier for integration is positively
linked to enhanced effectiveness of the
4 new product development
team. SLIDE 4
 -[ 2 ]-

Hypothesis 2: Hypothesis 3:
technical business
Main objective: Maintain a ready-to-use range
assessment assessment
Comprehension and agreement on intended benefits
of innovative and obtainable technologies and in regard to effort in supplier integration as well as
suppliers in a bookshelf. cost, quality, scheduling, role and responsibilities.
The extent of (a) Performance
supplier measure The extent of
engagement in supplier’s (a) Measures
developing the involvement in
(b) Targets
technical: setting up the
business (b) Targets
(c) The extent of how technical performance
performance
targets are explicitly specified and agreed by
(c) The extent of how business performance
both buyer and supplier
targets are explicitly specified and agreed by
H2. Joint buyer-supplier effort on both buyer and supplier
technical goals and target setting is
H3. Joint buyer-supplier effort on
positively linked to enhanced
business performance goals and
effectiveness of the new product
target setting is positively linked to
development team
enhanced effectiveness of the new
product development team
5
SLIDE 5
 -[ 2 ]-

Hypothesis 4: Hypothesis 5:
performance moderated model-
outcomes
Firm Financial Performance stage
Research found: of integration
The extent that the project able to 1. Enhanced performance when integration with
a. Increased sales
supplier is in early process under higher
b. Increased profit
technology uncertainty
c. Increased return on investment
2.
H5.Disadvantages
Relationshipofin being transfixed
H1-H4 are to one
supplier by the stage supplier is
moderated
Design Performance integrated into the new product
The extent that the project give a design development process
that
a. -was easier
b. Less costly
Hypothesis 6:
c. Better for procured item
d. Better for finished product/service
moderated model-level
H4. Enhanced effectiveness of new product of responsibility
H6. Relationship in H1-H4 are
development team is positively linked with moderated by the level of
enhanced form financial performance and, or responsibilities assumed by the
design performance supplier in the new product
development process
6
SLIDE 6
Hypothesis 5

NEW PRODUCT DEVELOPMENT

Business/ PProduct/proce
ROCESS Product / Prototype
Idea generation: Technical ss /service process/servic build, test and Fu l l s c a l e
Voice of the customer Assessment concept e engineering Pilot/ Ramp-up productio
(Preliminary) development and design for operations
n

Possible Supplier Integration Points

Hypothesis 6
SPECTRUM OF SUPPLIER
RESPONSIBILITY
None “White Box” “Gray Box”
Formalized “Black Box”
Design is
Informal supplier supplier
No supplier primarily supplier
integration. Buyer integration. Joint
involvement. driven, based on
“consults” with development
Supplier “makes buyer’s
supplier on activity between
to print” performance
buyer’s design buyer and
specification
supplier
Increasing Supplier Responsibility
SLIDE 7
 -[ 3 ]-

Methodology

Method Result
Sample taken from purchasing/sourcing managers and executives
134 responses
Data collection and fully checked for validity

Wave analysis is used to contrast early and late responders and

context and
sample
134 responses from aerospace,
automotive, chemicals, computers and
electronics, consumer product,
industrial equipment, medical, process
industries, telecommunication, and
government services
simple paired sample t-test (equal variances) between 20 first and
No significant difference
in both.
20 last response.
No significant different
t-Test between companies’ sales to benchmark of 500 largest (sales)
(representative to large
companies
firms)
Outlier test: Mahalanobis difference test and a modified Cook’s No significant outliers
statistics detected

SLIDE 8
 -[ 4 ]-

Statistical Analysis
Cronbach’s a
reliability test  data 1st multiple regression: to regress project Analysis
Statistical team effectiveness on detailed
reliability is sufficient supplier, technical and business assessment.

Statistical Statistical
2nd multiple regression: to regress
effectiveness.
Analysis
firm financial performance on project team

Analysis
Full-model regression
3rd multiple regression: to regress
Statistical
design performance
Analysis on project team

Re-run effectiveness.

Include a set of condition depicting relationship between supplier’s integration

stage and each independent variables
Include a set of condition depicting relationship between supplier’s level of
responsibility and each independent variables

SLIDE 9
 -[ 5 ]-

Result
Detailed
Supplier
Assessment
.281(p<.01) Firm Financial
.275(p<.01)
H4a Performance
DSA1, DSA2, DSA3, DSA4
H1

H2 Project Team FFP1, FFP2, FFP3

Technical
Effectiveness
Assessment .212(p<.05)

TA1, TA2, TA3 Design

H3 PTE1, PTE2,
H4b Performance
ns PTE3, PTE4, PTE5
.451(p<.01)

Business DP1, DP2, DP3, DP4

Assessment

BA1, BA2, BA3 FULL MODEL

S L I D E 10
 -[ 5 ]-

Result (Cont.)
Detailed
Supplier
Assessment Firm Financial
.275(p<.01) .281(p<.01)
H4a Performance
DSA1, DSA2, DSA3, DSA4
H1
Project
Technical H2 Team FFP1, FFP2, FFP3
Assessment .300(p<.01) Effectivene
ss
TA1, TA2, TA3
H3 Design Moderated
PTE1, PTE2,
ns PTE3, PTE4,
H4b Performance model stage of
.371(p<.01)
PTE5 integration
Business DP1, DP2, DP3, DP4
Assessment H5
.195(p<.05)

BA1, BA2, BA3

Stage of
Integration

M O D E R AT E D M O D E L ( 1 )
S L I D E 11
 -[ 5 ]-

Result (Cont.)
Detailed
Supplier
Assessment
.281(p<.01) Firm Financial
.262(p<.01)
H4a Performance
DSA1, DSA2, DSA3, DSA4
H1

H2 Project Team
Technical FFP1, FFP2, FFP3
Effectivenes
Assessment ns s

TA1, TA2, TA3 Design

H3 PTE1, PTE2, Moderated model
H4b Performance
ns PTE3, PTE4, PTE5 level of
.196(p<.01)
responsibility
Business DP1, DP2, DP3, DP4
Assessment H6
.987(p<.01)
.933(p<.05)
BA1, BA2, BA3
Stage of
Integration

M O D E R AT E D M O D E L ( 2 ) S L I D E 12
 -[
Discussion and Hypotheses
1 2
Thoroughly analysing potential supplier by
evaluation on the right capabilities and culture
to work was positively linked with effective
decision making by the projected team during
NPD. This remains true for any stage where
the supplier integrate as well as the level of
responsibility given to supplier.
3 H4a and H4b is supported and thus effective
Partial support given to H3, H3 is positively
supported only toward grey box integration but
negative impact on black box integration.
The finding in H4a and H4b conclude
there are interrelation between
supply chain design (supplier
selection) decisions and product
design (design performance).
5 ]-
H2 is strongly supported with whatever stage of
integration may the supplier in. Though it is
vary for the level of responsibility given.
Greater responsibility given to supplier is
critical to the effectiveness project team
decision making (black box)
4
decision making give better design as well as
better financial performance. Earlier supplier
integration is better and give stronger relation
between team effectiveness and product
design.
Moderating impact from supplier
integration to project team
effectiveness result, show that early
decision is better and contribute to
quality of resulting design S L I D E 13
 -[ 5 ]-

Conclusion
1 In selecting supplier, it is important to assess supplier’s capabilities and culture
1
regardless on what stage of supplier integration will be and level of responsibility.
Joint agreement in appropriate technical metrics and target between
2
2 supplier and buyer are key component in project team effectiveness
especially when high level of responsibility given to supplier. Though input
on business metrics and objective are less imperative but still give
positive effect during grey box integration.
3
3 Careful selection supplier contribute in better decision making to project
team and thus result in better design and better financial performance.

 Specific case of supplier integration asked to the informants, were known form
Limitation 
one purchasing/sourcing manager
Some questions used in the survey were first developed in this research
 Theoretical model may not applicable to all type of industries.

S L I D E 14