4/14/04
The Role of Purchasing in the New Product
Development Process
Part I
Compiled
by:
Erik Kruse, SCRC |
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Market
globalization and the rapid advancement of technologies
require that companies differentiate themselves
with innovative products and services to create
competitive advantage. Increasingly, manufacturers
face shortened product life cycles and increased
pressure to shorten their time to market. These
factors, in conjunction with the reality that
companies are increasing their reliance on outsourcing
(1), necessitate that organizations involve suppliers
in the new product development process.
According to Handfield, et al, the “effective
integration of suppliers into the product value
/ supply chain will be a key factor for manufacturers
in achieving the improvements necessary to remain
competitive (2).” Moreover, because purchasing
specialists are usually a key liaison between
the supplier and the buyer, an investigation of
their role in the new product development process
is worthwhile. That is exactly what some academic
experts in the field of supply chain have started
to do. In this article - the first of a two-part
series - the role of purchasing in the new product
development process is explored.
New Product Development
First, a general definition of the new product
development process is in order. New product development
(NPD) refers to all efforts focused on creating
a new product, process or service. The five generic
phases of a NPD process are as follows (2):
| • |
Idea
generation: voice of the customer |
| • |
Business
/ technical assessment (preliminary) |
| • |
Product
/ process service concept development |
| • |
Product
/ process service engineering and design |
| • |
Prototype
build, test and pilot / ramp-up for operations |
Concept and design “lock in” as much as
80 percent of the total cost of a project (2). For
this reason, it is crucial for firms to bring in
as much product, process and technical expertise
as possible early in the NPD process. The supplier
often possesses much of this critical expertise.
Purchasing specialists are frequently tasked with
facilitating the transfer of supplier expertise
(3).
So how can organizations get purchasing more involved?
Researchers have identified two factors that appear
to aid the involvement of purchasing in the NPD
process: personnel and organization.
The Personnel Factor
The competencies and skills of purchasers are important
determinants of successful NPD process contribution.
Organizations should have personnel with the right
education, skills, and experience. Researchers found
that important competencies and skills include (4):
| • |
Type
of previous experience |
| • |
Type
and level of training/education |
| • |
Degree
of technical expertise |
| • |
Degree
of proactiveness |
| • |
Capabilities
as perceived by others (credibility) |
It
is worthwhile to note that the above list bears
a resemblance to an inventory of the most desired
personnel attributes documented during a round table
meeting at NC State on July 16, 2002. The meeting
was funded by the Center for Advanced Purchasing
Studies (CAPS), and its objective was to identify
the training and education requirements of supply
chain managers of the future. Supply chain managers
from multiple industries acknowledged the following
attributes as being very important:
| • |
The ability to cope with the increasingly
strategic role of the supply chain function |
| • |
Sound
technical understanding |
| • |
Skills
in project management |
| • |
Finance and cost accounting |
| • |
An
understanding of cross-cultural issues in
business |
| • |
The
ability to work in teams |
| • |
Written
and verbal communication, presentation and
problem-solving skills. |
The Organization Factor
Wynstra, et al, suggest that it is important for
organizations to harbor an internal group that is
able to support the communication and coordination
required in NPD. The authors noted two particularly
important aspects of organization: horizontal complexity
and specialization within a department (4).
Horizontal
complexity refers to the number of different units
or groups with specific tasks within a department.
For example, because operational purchasers are
usually occupied with daily purchasing tasks,
they find it difficult to devote time to developmental
purchasing activities. Hence, researchers suggest
that utilizing a purchasing department consisting
of both an operational unit and a developmental
unit may increase the overall ability of the department
to perform initial, or product development-related,
tasks (4).
The departmental specialization aspect of organization
refers to the degree and principle of specialization
within the department (4). Researchers note that
when purchasers are narrowly specialized in a
specific range of products or technologies, similar
to the way development engineers are specialized,
they may be better able to become involved in
product development projects. The departmental
specialization aspect of organization and the
aforementioned personnel factor, then, appear
to be linked to one another. Company examples
will be presented in Part II.
References:
(1) Wynstra,
F. Weggeman, M. van Weele, A. (January, 2003).
Exploring purchasing integration in product development.
Industrial Marketing Management.
(2) Handfield, R., Ragatz, G., Petersen, K., Monczka,
R. (1999). Involving suppliers in new product
development. California Management Review.
(3) Lakemond,
N. Echtelt, F, and Wynstra, F. (Fall, 2001). A
configuration typology for involving purchasing
specialists in product development. The Journal
of Supply Chain Management.
(4) Wynstra, F. Axelsson, B., and Van Weele, A.
(2000). Driving and enabling factors for purchasing
involvement in product development. European Journal
of Purchasing and Supply Management.
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