Risky Business or Competitive Power? Supplier Involvement in Japanese Product Design

Notwithstanding the alleged risks of outsourcing design work, leading manufacturers in the Japanese automotive industry collaborate closely with their key suppliers. Despite widespread recognition of the effectiveness of these close-knit supplier networks, however, little research exists on the factors that affect the purchase of design work from suppliers. S. Nazli Wasti and Jeffrey K. Liker fill this gap by exploring the factors that affect Japanese automotive firms' purchase of design work from their component suppliers. Using data from a survey of 122 Japanese automotive component suppliers, their study addresses two key questions. First, what factors lead Japanese buyers to involve some suppliers heavily in design while giving others relatively little control over design decisions? And second, does the Japanese practice of involving suppliers in design offer performance benefits? The study focuses on first-tier suppliers of parts, assemblies, and complete subsystems (e.g., audio, fuel and emissions, heating and air conditioning). The study does not include suppliers of raw materials and chemicals, assembly and processing equipment, indirect materials, tooling and dies, computers and software, or engineering and business consulting services. The study breaks down the broad concept of supplier involvement in design work into three measurable elements: the extent to which the supplier influences decision-making during the early stages of product development; the amount of control the buyer retains over the design; and the frequency of design-related communication between the buyer and the supplier. Factors that have a positive effect on the level of supplier involvement among the companies studied include technological uncertainty of the component and the supplier's in-house technical capabilities. For companies in the study, the level of competition in the supplier market has a negative effect on the degree of supplier involvement in design. The responses indicate that supplier involvement offers performance benefits for both the supplier and the buyer. For the supplier firms studied, increased involvement in the design process permits greater focus on design for manufacturability (DFM). And of course, supplier-generated design improvements clearly benefit the buyers, allowing these firms to capitalize on the experience and the insight that their suppliers have regarding the parts that they supply.     

Mobilizing suppliers when starting up a new business venture

Prior research has shown that new ventures can complement their capabilities and extend their limited internal resources by drawing on suppliers. Yet, our knowledge of the supplier mobilization process in new ventures is limited. In this paper, we take a relational perspective on the mobilizing process, which entails investigating the scope for mobilizing suppliers in new ventures and new ventures' attractiveness to suppliers. Drawing on three new venture cases, we posit that for new ventures the scope for mobilizing suppliers: 1) ranges from the use of suppliers for the procurement of well-defined existing inputs to the co-development of various resources and capabilities with suppliers; 2) varies across ventures, reflecting the new venture's distance to market; and 3) depends on the supplier's assessment of the new venture's attractiveness as a customer. We also argue that the attractiveness of new ventures as customers to the suppliers is based on elements that differ from those found in studies of ongoing businesses, and include: 1) stimuli to innovate and develop new competencies, 2) reputational benefits and prestige, and 3) personal satisfaction.     

Black Box Engineering: Redefining the Role of Product Specifications

Original equipment manufacturers (OEMs) in numerous industries recognize the benefits of involving their suppliers in the product design process. Specifications play a central role in guiding that supplier-OEM relationship. For so-called “black-box” parts, the OEM specifies overall requirements for product function and performance, cost targets, and development lead time, and then communicates this information to suppliers, who perform detailed engineering and testing. Black-box engineering marks a fundamental change in the buyer-supplier relationship, and companies that use or plan to adopt this practice must understand the factors that contribute to its successful implementation. Using survey responses from more than 300 suppliers to a European automobile OEM, Christer Karlsson, Rajesh Nellore, and Klas Soderquist identify the problems those suppliers face in the specification process. To provide insight into the context and the causes of those problems, they also describe the results of case studies conducted in the OEM and two suppliers. In this way, they attempt to identify critical factors that can help to improve the specifications process both internally at an OEM and between the OEM and its suppliers. The respondents identified numerous problems that they face in the specifications process. Based on feedback from product development managers and design staff members in the case study companies, those problems are categorized as follows: technical content and the level of detail in requirements, changes of specifications, cost, interpretation and understanding, and supplier participation in the specification process. Black-box engineering redefines the role of specifications. Instead of a fixed document that dictates to the supplier, the specification becomes an open medium for communicating functional and performance requirements and necessary technical adjustments. In other words, black-box products require a highly interactive design process. Product development managers for suppliers and OEMs must understand that they cannot avoid changes in specifications during black-box engineering projects. Rather than view such changes as wastes of time and effort, they should approach the black-box engineering process as a learning opportunity. By working with several parallel sets of functional solutions, which they can validate with the customer before developing detailed dimensional definitions, suppliers can limit the amount of time they lose as a result of changes in specifications.     

Optimally locating in-house logistics areas to facilitate JIT-supply of mixed-model assembly lines

In modern-day production systems, ever-rising product variety poses a great challenge for the internal logistics systems used to feed mixed-model assembly lines with the required parts. As an answer to this challenge many manufacturers especially from automobile industries have identified the supermarket-concept as a promising part feeding strategy to enable flexible small-lot deliveries at low cost. In this context, supermarkets are decentralized in-house logistics areas in the direct vicinity of the final assembly line, which serve as intermediary stores for parts. Small tow trains are loaded with material in a supermarket and deliver parts Just-in-Time to the stations lying on their fixed route. This paper discusses the general pros and cons of the supermarket-concept and treats the decision problem of determining the optimal number and placement of supermarkets on the shop floor. A mathematical model is proposed, an exact dynamic programming algorithm presented, and the validity of the proposed approach for practical purposes as well as the trade-off resulting from fixed installation and maintenance cost is investigated in a comprehensive computational study.     

基于Pro/E的机械零部件三维动态序列装配技术研究

三维动态序列装配技术在机械产品和工程设计行业的设计、制造、检测、展示、学习、资金节约、功效提高等方面具有非常重要的意义,其制作具有一定的技术复杂性和技巧性,目前许多三维CAD软件有此功能,但很少有此方面的具体介绍,为了给机械及工程技术人员提供一些有益的借鉴,以某高楼外墙清洗机吸盘部件三维动态序列装配动画的制作为例,针对Pro/E三维机械设计软件的动态序列装配技术进行了详细介绍,给出了整个制作流程。     

NGOs and the creation of value in supply chains

Research Summary: Firms and nongovernmental organizations (NGOs) often collaborate to establish new supply chains. With a formal model, we analyze how NGOs can alleviate market failures and improve supplier economic inclusion while strategically interacting with firms. We account for the specific goals of the NGO and the need to induce collaboration between firms and their suppliers. The analysis reveals a “valley of frustration,” when NGO efforts benefit all actors but only marginally the firm. We also show that more powerful firms might prefer to internalize NGO functions, while firms with lower bargaining power and higher investment requirements are better off collaborating with NGOs. Finally, we study NGOs-firms matching patterns and find that firms with higher bargaining power match with NGOs holding stronger capabilities. Managerial Summary: This article analyzes interactions between firms and nongovernmental organizations (NGOs) aiming to improve the economic inclusion of suppliers or to promote the adoption of specific (e.g., sustainable) practices. For firm executives, this study shows the constraints and benefits associated with working with NGOs, the conditions under which integration of NGO functions is preferable as well as the types of NGOs that offer better prospects for a successful collaboration. For NGO executives, it highlights the need to provide enough economic incentives to firms and suppliers alike to ensure their collaboration and the trade-offs associated with this constraint, in particular, if NGO capabilities are limited. Overall, the study provides a comprehensive understanding of how NGO activities can influence value creation in a vertical value chain.     

An efficient hybrid genetic algorithm for the multi-product multi-period inventory routing problem

The inventory routing problem (IRP) addressed in this study is a many-to-one distribution network consisting of an assembly plant and many distinct suppliers where each supplies a distinct product. We consider a finite horizon, multi-periods, multi-suppliers and multi-products where a fleet of capacitated homogeneous vehicles, housed at a depot, transport products from the suppliers to meet the demand specified by the assembly plant in each period. The demand for each product is deterministic and time varying. A mathematical formulation of the problem is given and CPLEX 9.1 is run for a finite amount of time to obtain lower and upper bounds. A hybrid genetic algorithm, which is based on the allocation first route second strategy and which considers both the inventory and the transportation costs, is proposed. In addition to a new set of crossover and mutation operators, we also introduce two new chromosome representations. Several medium and small sized problems are also constructed and added to the existing data sets to show the effectiveness of the proposed approach.     

Diversification strategies,business cycles and economic performance

Two major diversification strategies of firms are examined: diversification into related businesses and diversification into unrelated businesses. The first strategy attempts to exploit operating synergies. In the second, the firm attempts to gain financial benefits from its ability to increase leverage due to a greater stability of cash flows. The study utilizes a large sample affirms to assess empirically the benefits and costs of these two diversification strategies by developing a new measure of diversification across business cycles and economic sectors. This new measure is compared with Berry—Herfindahl type measures of total diversification and recent measures of diversification into related businesses. The results indicate that pure financial diversification is associated with (a) more stable cash flows, i.e. lower operating risk; (b) increased levels of leverage; and (c) lower profitability. These observations are in accord with the theory. We also reaffirm that firms which diversify into related businesses have, on the average, higher profitability than non-diversified firms, although these results are not always statistically significant.     

供应商技术研发决策行为的演化博弈分析——基于技术外部性的视角

供应商在面向多制造商时研发共性技术还是研发专用技术？以此问题为基点，本文运用演化博弈论，在共性技术外部性、外部性引发价格战及政府干预治理情形下对供应商技术研发决策行为进行分析。研究发现：共性技术外部性的存在使得博弈演化稳定于由选择不同技术研发策略的供应商共存的均衡；在外部性引发价格战情形下，当外部性较强时，零部件降价幅度越大，供应商越倾向于选择研发专用技术，反之，当外部性较弱时供应商越倾向于选择研发共性技术；当考虑外部干预治理时，政府价格干预效果依该行为所引致的市场额外需求降低状况，而政府补偿干预有效引导着供应商选择共性技术研发策略。     

Exploring the concept of asymmetry: A typology for analysing customer-supplier relationships

In seeking to understand relationships between smaller suppliers and larger customers, there is a growing interest in examining the characteristics of asymmetry in relationships. However, there is a paucity of research that looks at the consequences of size asymmetry for smaller suppliers. Building on IMP (Industrial Marketing and Purchasing Group) research, this paper presents a typology for analysing the consequences of size asymmetry in customer-supplier relationships from the smaller supplier's perspective. The paper reports on the findings from a study involving a total of 48 interviews and eight in-depth case studies of suppliers in the UK textile industry involved in relationships with larger customers. The findings from the study show that the consequences of size asymmetry may vary widely across different relationship characteristics, with both positive and negative outcomes for suppliers. The implications of these findings are that suppliers may take advantage of the positive and constructive consequences of size asymmetry to capitalise on developing their current relationships with customers. In addition, by focusing on the positive consequences of size asymmetry, suppliers may develop the confidence and assurance to develop constructive and more balanced new customer relationships. The paper concludes by identifying the managerial implications for the development of opportunities and customer relationship options for suppliers in asymmetric relationships and proposes that it is important for suppliers to have an assessment instrument to identify the extent of asymmetry or symmetry across their customer relationships.     

Decomposing the effect of supplier development on relationship benefits: The role of relational capital

Buyers invest considerably in developing their suppliers, yet the performance effects of such investments are not universal. Drawing on social capital theory, this research investigates whether the relationship between supplier development and relationship benefits may be facilitated by the generation of relational capital. The authors examine mediating and moderating roles of relational capital in the relationship between two aspects of supplier development (capability development, supplier governance) and two dimensions of relationship benefits (supplier benefits, buyer benefits), using survey data collected from 185 suppliers of a large manufacturing firm. Investment in supplier development does not automatically result in benefits for the supplier or reciprocated benefits for the buyer. Rather, relational capital “bridges” supplier development and relationship benefits. Without relational capital, benefits from capability development do not accrue, and the impact of a supplier governance regime can be even detrimental. In conditions of high relational capital, capability development results in lower perceived buyer benefits. The results can help managers ensure that the benefits from their supplier development efforts fully materialize.     

A Model of Supplier Integration into New Product Development*

In many industries, firms are looking for ways to cut concept‐to‐customer development time, to improve quality, and to reduce the cost of new products. One approach shown to be successful in Japanese organizations involves the integration of material suppliers early in the new product development cycle. This involvement may range from simple consultation with suppliers on design ideas to making suppliers fully responsible for the design of components or systems they will supply. While prior research shows the benefit of using this approach, execution remains a problem. The processes for identifying and integrating suppliers into the new product development (NPD) process in North American organizations are not understood well. This problem is compounded by the fact that design team members often are reluctant to listen to the technology and cost ideas made by suppliers in new product development efforts. We suggest a model of the key activities required for successful supplier integration into NPD projects, based on case studies with 17 Japanese and American manufacturing organizations. The model is validated using data from a survey of purchasing executives in global corporations with at least one successful and one unsuccessful supplier integration experience. The results suggest that (1) increased knowledge of a supplier is more likely to result in greater information sharing and involvement of the supplier in the product development process; (2) sharing of technology information results in higher levels of supplier involvement and improved outcomes; (3) supplier involvement on teams generally results in a higher achievement of NPD team goals; (4) in cases when technology uncertainty is present, suppliers and buyers are more likely to share information on NPD teams; and (5) the problems associated with technology uncertainty can be mitigated by greater use of technology sharing and direct supplier participation on new product development teams. A supplier's participation as a true member of a new product development team seems to result in the highest level of benefits, especially in cases when a technology is in its formative stages.     

Robust supply base management: Determining the optimal number of suppliers utilized by contractors

The importance of robust supply base management under demand uncertainty requires an understanding of the benefits associated with a contractor having an optimal number of suppliers. The key benefit is a reduction in a contractor's total cost of supply base management. However, few supplier-optimizing models incorporate the perspectives of both demand uncertainty and supply base management costs. The objective of this paper is twofold: (1) to investigate the dynamics between demand uncertainty and coordination; and (2) to develop a model that determines the optimal number of suppliers that a contractor should maintain in its supply base to become more flexible and maximize its profits.     

Exploring the impact of a supplier portal on the buyer-supplier relationship. The case of Ferrari Auto

This article concentrates on the relationship between companies and their suppliers with a specific focus on the impact that information and communication technologies (ICTs) have on industrial (business to business) purchasing processes. After reviewing the extant literature, we classify the potential impact of ICTs on the buyer-supplier interactions into three main categories, i.e. impact on buyer-supplier relationship, impact on purchase process efficiency and impact on logistics process performance. Whilst scholars generally agree on the impact ICTs may have on buyer-supplier exchanges, they have not investigated concurrently all of these three impacts to understand their comparative relevance and the context in which this comparative relevance may change. In order to redress this gap in the literature our research study focuses on a particular form of ICT solution - supplier portals - and takes a supplier (rather than buyer) perspective. We explore empirical evidence from a single customer-multiple supplier case study, that of the Ferrari Auto supplier portal. Our study leads us to contend that suppliers view such portals as offering far more significant benefits to their relationship with customers than to the improvements in purchase process efficiency or to the performance of buyer-supplier logistics processes. We conclude with a short discussion of the main managerial implications and suggestions for future research.     

Indian textile suppliers' sustainability evaluation using the grey approach

Textile supply chains consist of multinational garment retailers (customers), garment manufacturers (suppliers), and ancillary suppliers (suppliers to manufacturers). This paper evaluates suppliers' within the Indian textile and clothing industry (both garment manufacturers and ancillary suppliers) using sustainability criteria. Examining a sample of sixty-three suppliers and six sustainability criteria (i.e. discrimination, abuse of human right, child labor, long working hours, unfair competition, and pollution), we categorize suppliers into the three categories of ‘good performer’, moderate performer’, and ‘performance not up to expectation’. Since all the criteria are potentially subjective, we have employed the grey approach for analysis. The results indicate that the criterion of long working hours is a critical one for both categories of suppliers; in the case of garment manufacturers, we found that pollution and unfair competition were the most important criteria. In addition, employing child labor was found to be a critical criterion in the case of ancillary suppliers.     

What industrial marketers need to know now about ISO 9000 certification: A review, update, and integration with marketing

The ISO certification process has been in existence for 14 years. During that time, hundreds of thousands of suppliers of mainly industrial products and services have become ISO 9000 registered. However, the adoption rate of ISO 9000 certifications in US industry has lagged that of other developed countries. This is now changing; the number of new ISO 9000 certifications being obtained annually in the US is currently higher than most other countries in the world. Concurrently, the ISO 9000 certification series recently underwent a major revision, and much has been learned about the ISO 9000 certification process over the last 14 years. Therefore, industrial marketers who have taken a wait and see approach or have decided that the process is irrelevant to their businesses may need to reconsider this decision. To assist in this process, this article reviews the former and current ISO 9000 certification process, discusses the criticisms of the program, provides information regarding costs and benefits of certification, and offers suggestions for effectively integrating certification with the marketing program.     

External Venturing and Discontinuous Strategic Renewal: An Options Perspective

This study examines the relationship between a firm's venturing activities and its undertaking of strategic renewal. The study was motivated by some important gaps in the corporate entrepreneurship literature on venturing and renewal. The extant literature has not focused on the different types and dimensions of firms' renewal activities. In particular, discontinuous renewal involving shifts in firms' core businesses is not well understood. Moreover, the conditions that drive firms to undertake strategic renewal have not been examined. For example, it is not known how venturing increases or reduces the benefits of undertaking renewal. This study focuses on a discontinuous form of renewal involving major changes in firms' core businesses and examines firms' external venturing activities that complement their internal development. We examine corporate venture capital (CVC) investments, which are direct minority equity investments made by established companies in privately held ventures. Discontinuous renewal is conceptualized as resulting from a set of related, and often sequential, managerial decisions. The first managerial decision is to initiate growth in a business that is relatively newer or smaller for the organization. The second decision is to move away, or even withdraw completely, from the current core business that enabled prior growth and prosperity for the firm and served as its primary revenue earner. Employing a real options perspective, we argue that CVC investments create growth options in new and existing businesses but do not result in firms' withdrawal from existing businesses. Therefore, we expect CVC activity to be negatively associated with the likelihood of a firm undertaking discontinuous renewal. We also propose that the benefits of withdrawing from existing businesses are even lower, and the costs even higher, for firms in dynamic industries and for firms that possess strong internal capabilities. The predictions of the study are tested using longitudinal data on 477 firms from the 1990 Fortune 500 list for the period 1990–2000. We find support for all our predicted hypotheses. These results help address important limitations in the corporate entrepreneurship literature. The study also contributes to the real options and organizational capabilities literatures.     

Diffusion and Performance of Modular Production in the U.S. Apparel Industry

This article examines the determinants of the diffusion of team production systems (modular assembly) and the impact of these systems on firm performance relative to traditional assembly systems in the apparel industry. The article draws on an extensive survey providing detailed information on a wide range of manufacturing practices and retail relationships in the U.S. apparel industry. We find that recent diffusion of modular practices is driven primarily by the product market. We also show that modular systems affect business-unit performance (particularly operating profits) where they are combined with complementary investments in information systems linking apparel suppliers with retail customers.     

Value for value—The dynamics of supplier value in collaborative new product development

Suppliers are recognized as an important source of innovation. Research into supplier involvement in new product development has shown that benefits can potentially be reaped by customers. However, a relatively unexplored precondition is the willingness of suppliers to invest in their customers’ innovative efforts. In this exploratory, theory-extending research, we investigate the value that a supplier can experience from being involved in high tech firms’ new product development. We find that value comes in three forms for suppliers: (1) financial payment for sales volumes and product development services, (2) technological knowledge and product designs, and the (3) reputation of doing business with leading-edge firms Additionally, we place this in a dynamic, long-term perspective, and find indications for a positive or negative feedback effect, depending on the emphasis the buyer puts on collaborative innovation with the supplier and the extent to which suppliers can use competences, knowledge and reputation resulting from the collaboration in subsequent business development activities. The positive effect results in added value for both parties in the dyad, and the negative effect leads to the opposite.     

Suppliers capability and price analysis chart

To remain competitive in customer-oriented economics, the major parties in the supply chain should be integrated and managed effectively to respond to customer needs. Thus, the efficiency of the entire supply chain is a main concern, and is determined by the members of that supply chain. Partner selection thus becomes one of the key steps in supply chain construction. Given buyer–supplier information asymmetry, obtaining complete information from suppliers is difficult, since some supplier attributes cannot be definitely and quantitatively measured. This study establishes a suppliers capability and price analysis chart (SCPAC) focused on the case where the specification limits are symmetric about the target for evaluating supplier performance which applies the process incapability index C_pp introduced by Greenwich and Jahr-Schaffrath (International Journal of Quality & Reliability Management 12 (1995) 58) to measure supplier quality performance and the price index I_p is proposed here to display the difference between budget and component price. Practitioners can instantly and visually obtain information based on the locations of suppliers and price indices on SCPAC. SCPAC also provides clear directions for quality improvement, such as process accuracy and precision. SCPAC thus is an effective and efficient method for evaluating suppliers, which can simplify supplier evaluation, facilitate their effective visual selection, and provide insights into the process situation of suppliers who can become technological innovation partners.