Supplier Integration in New Product Development - Procurement Approach

Involving suppliers in new product development of a company has been under study for almost 30 years. However, different opinions, on what makes it successful, exist. Key factors to success have been recognized in many different papers but not all of them agree with each other. This thesis tried to gather these key factors and summarize the theory of the subject. Purpose was to create a theoretical framework of the requirements and success factors of supplier integration, and find out how well suited the case company was for that framework. Supplier integration has been recognized as the “best practice” in new product development. It means involving a supplier in company’s new product development early in the development process in order to get competitive advantage from supplier’s expertise in its own technology area. Eventually, it is collaboration of two companies in a situation in which both can gain advantage. Succeeding in it is difficult due to diverging interests of the parties in the beginning. Well established supplier integration should improve quality and design lead time of a product, and reduce the costs of the product. This thesis created a theoretical framework of the key factors to success in supplier integration. Research part examined the current state of the case company’s new product development and compared it to the created framework. Research included a survey and an interview to the personnel of the case company. The state of the case company was not ideal when compared to the key factors of the theoretical framework. Outcome was that the case company should set up a clear new product development process for a single purchased item and implement strict process discipline to conform personnel to it. Also, departmental interface between purchasing and engineering needs persons to coordinate projects and improve communication. As a method for better supplier integration, the case company should learn to give a should cost calculation to engineering and supplier, and let them cooperate as long as the given should cost will not be exceeded