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Poole College of Management 
Supply Chain Resource Cooperative

The Role of Purchasing in the New Product Development Process – Part II

April 22, 2004

As was discussed in Part I, it is important for organizations to integrate suppliers into the new product development (NPD) process (1). Because purchasing specialists are a key liaison between the supplier and the buyer, their involvement in the new product development process is key for companies who want to shorten their time to market and reduce costs. There are various ways in which companies involve purchasing in the NPD process. Only recently have researchers begun to work on finding an optimal structure for a given NPD situation (2).

For example, Wynstra, Lakemond, and Echtelt developed a configuration typology for this involvement. Six different configurations were identified (2):

  1. Engineers contact purchasing specialists external to the project team on an ad hoc basis.
  2. Purchasing specialists are integrated in to the project team on a part-time basis and work closely with an engineer regarding specific parts/materials/technologies
  3. Purchasing specialists are integrated into the project team on a full-time basis (dedicated) and work closely with engineers regarding specific parts/materials/technologies.
  4. A purchasing coordinator is added to the project team and takes care of coordinating purchasers external to the project team.
  5. A purchasing coordinator is added to the project team in combination with purchasing specialists integrated in the project team on a part-time basis.
  1. A purchasing coordinator is added to the project team in combination with purchasing specialists integrated in the project team on a full-time basis.

Researchers have suggested that project size and project complexity can be identified as driving factors influencing the appropriateness of the purchaser involvement configurations. Wynstra wrote that “configurations A thru C provide different opportunities for more in-depth and dedicated project involvement of purchasing specialists. For example, C will probably be chosen over A in situations where the individual project provides sufficient work for a single specialist to be involved full-time (e.g. in a project with many different parts using one technology) (2).”

“Configurations D thru F allow for a higher degree of coordination,” the researchers wrote. “D is likely to be chosen over A in projects where many different components, technologies, or suppliers are being used. Project complexity is expected to drive the need for purchasing coordinators. When a project has a long duration (other things being equal), a purchasing project coordinator seems more appropriate (2).”

The researchers performed five case studies in different companies operating in different industries. Here are two examples: BT Industries and FEI.

BT Industries (2)
BT is a Swedish manufacturer of materials handling equipment. For NPD projects, they assigned one purchaser to work as a purchasing coordinator. The purchasing coordinator’s involvement in the projects varied depending on the degree of involvement of the supplier. In some cases, the purchaser acted as an intermediary between suppliers, product and production engineers, and was involved in activities such as supplier selection, supplier monitoring, sending design to the supplier, and receiving and inspecting prototypes. In another project the purchaser worked together with an engineer to manage the work of the supplier, while the supplier performed the actual development activities.

In all scenarios, the coordinator was supported by operational purchasers in the purchasing department. The researchers quoted the following statement from the purchasing coordinator: “I am not an expert on motors or electronics, so I discuss this with my colleague purchasers and ask them which suppliers we have to contact. They will get the responsibility anyway, later when a new machine is released on the market. My colleague can help me to find new suppliers and give his opinion about certain suppliers.”

Since the purchasing coordinator worked with specialized operational purchasers on an ad hoc basis, Wynstra associated BT with configuration D.

FEI (2)
FEI, which is active in the field of microscopy, is a joint venture between Phillips Electron Optics and FEI Company. FEI did not have extensive experience with involving suppliers in product development. According to Wynstra, “purchasing was a ‘young’ discipline in the company and not yet regarded as a strategic area. Also, purchasing involvement in product development projects was still in its infancy.” As a result, the project manager and the product engineers managed the contacts with the suppliers.

Purchasing became involved on the initiative of the project managers or the product engineers only when problems occurred. Furthermore, the involvement was mostly limited to commercial issues. According to the researchers, this was found to be problematic because it was difficult for the purchasing department to negotiate with suppliers that were already “locked in” in the development process. In addition, it was found that suppliers often interacted with different FEI employees from different levels in the organization. For instance, the researchers noted one project where FEI counted as many as 45 FEI employees that had been in touch with one supplier. Difficulties also stemmed from FEI’s lack of a structured assessment and selection process.

For these reasons, the purchasing department demanded that it be involved in the product development process. However, since the involvement of purchasing in the NPD process was indirect and on an ad hoc basis, the researchers associated FEI with configuration A.

While Wynstra could not pinpoint any hard and fast rules for matching an optimal configuration to a given situation, their analysis did indicate that “high project complexity and large project size is associated with a higher need for a more permanent execution and a stronger coordination of purchasing activities.” Conversely, they found that relatively smaller project size and lower project complexity permits the use of indirect, ad hoc purchaser involvement.

References:

(1) Handfield, R., Ragatz, G., Petersen, K., Monczka, R. (1999). Involving suppliers in new product development. California Management Review.

(2) 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.