Purchasing And Boundary Spanning IDIS 424 Spring 2004 Chapter 5 Purchasing And Boundary Spanning IDIS 424 Spring 2004

Buyer-Seller Improvement Teams Why include suppliers as part of a buyer’s improvement teams? Research reveals that most organizations recognize the potential benefit of closer inter-organizational relationships Research also reveals that teams that relied on supplier input and involvement (when the task warranted involvement) were more effective in their task, on average, than teams that did not involve suppliers

Buyer-Seller Improvement Teams Why include suppliers as part of a buyer’s improvement teams? Teams that include suppliers as participants report important outcomes-- Greater satisfaction concerning the quality of information exchange between the team and key suppliers Higher reliance on suppliers to support directly the team’s goals--supplier is a resource Fewer problems coordinating work activity between the team and key suppliers Greater effort put forth on team assignment

Buyer-Seller Improvement Teams Why include suppliers as part of a buyer’s improvement teams? Teams that include suppliers as participants report important outcomes-- Greater supplier contribution across many performance areas Providing cost reduction ideas Providing quality improvement ideas Supporting actions to improve material delivery Offering process technology suggestions Supporting material ordering cycle time reductions

Buyer-Seller Improvement Teams Key Issues: Who has ownership of the process? Which suppliers should we involve? Should involvement be ad hoc or continuous? How can we motivate suppliers to participate? How can we motivate internal participants? How do we overcome the barriers associated with using teams?

Six Important Questions That Every Cross Functional Team (CFT) Should Ask

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 1: Do we consider CFT planning Issues? Select a meaningful task Members should “buy-in” Members should have task knowledge time availability ability to work in a group a “big picture” perspective no hidden agendas Organizational resources should be available

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 2: Is top management practicing “subtle Control” over the CFT?

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 3: Do we recognize and award Overall team performance Individual member performance Are awards and recognition valuable

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 4: Has the CFT established effective Performance Goals Goals should be explicit Goals should focus on end results External pressure to establish goals usually results in setting difficult goals Teams, in general, tend to set more difficult goals

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 5: Are Key Suppliers and Customers part of the CFT?

Important Questions That Every Cross Functional Team (CFT) Should Ask Question # 6: Does the CFT Have the Ability to Self-diagnose the quality of its interaction and performance?

Key Drivers Cycle Time and Cost Reduction Customer Rapid Expectations Technological Change SUPPLIER INTEGRATION INTO NEW PRODUCT DEVELOPMENT Quality and Reliability Improvements Core Competency Focus Shortened Product Life Cycles Global Competition Corporate Downsizing

Product Development Process 1 2 3 4 5 Business/ Idea Technical Concept Engineering Prototype/ Full Scale Operations Generation Assessment Development and Design Ramp-Up (Preliminary) Possible Supplier Integration Points

Why Suppliers Aren’t Used in New Product Development “Not Invented Here” syndrome Supplier concern over proprietary cost information Buying company concern over proprietary cost information Time required to identify and integrate a supplier Buying company concern over proprietary technology Lack of processes for integrating suppliers

Increasing Supplier Responsibility SPECTRUM OF SUPPLIER INTEGRATION None “White Box” “Gray Box” “Black Box” No supplier involvement. Supplier “makes to print.” Informal supplier integration. Buyer “consults” with supplier on buyer’s design. Formalized supplier integration. Joint development activity between buyer and supplier. Design is primarily supplier driven, based on buyer’s performance specifications. Increasing Supplier Responsibility

SUPPLIER INTEGRATION PROCESS Establish internal core competencies & capabilities 1 2 3 Select supplier(s) & build relationships Align objectives & technology roadmaps 4 Establish new product requirements 5 Jointly establish clear metrics & targets 6 7 8 Share information openly & extensively Give supplier(s) an active role Monitor & learn from experience

METRICS AND TARGETS DEVELOPMENT EFFORT MUST BE TARGET-DRIVEN, WITH WELL-DEFINED AND AGREED-TO TARGETS Market-based targets Clearly defined performance metrics and targets Cost Development schedule Product performance (weight, size, speed, etc.) Supplier input/buy-in Critical with a less-familiar supplier

INFORMATION SHARING EFFECTIVE COMMUNICATION AND INFORMATION SHARING IS CRITICAL Confidentiality, non-disclosure agreements Trust development Direct function-to-function cross-company communication Open sharing of information Customer requirements information Cost information Technology roadmaps Linked information systems

INSTITUTIONAL LEARNING SUPPLIER INTEGRATION IS A DIFFICULT PROCESS THAT MAY NOT GO RIGHT THE FIRST TIME Post-project review/audit Include supplier in evaluation Sharing of lessons learned Continuous improvement orientation