Purchasing involvement in technologically uncertain new product development projects: Challenges and implications

This paper explores an emerging field of research within purchasing that concerns the changing role of purchasing when companies embark on technologically uncertain NPD projects. Where existing research has examined the role of purchasing in facilitating early supplier involvement in new product development, little research has been done to date on how purchasing's role might change when facing technologically uncertain NPD that require new capabilities and new technology. Based on an in-depth case study of a technologically uncertain NPD project in the passenger ship rescue equipment industry, the paper sheds light on how supplier involvement in NPD projects with a high degree of technological uncertainty impacts on a company's sourcing strategies and the challenges this poses for purchasing.Based on the case study findings, we propose a) that early purchasing involvement in technologically uncertain NPD projects requires a mature purchasing organization that possesses competences to interact effectively with R&D and b) that involving a new supplier from a different industry in NPD projects characterized by technological uncertainty requires a leap of faith from both innovating firm and supplier. The paper contributes to research in early supplier involvement in new product development, in particular the thin branch within this body of literature that now focuses on early purchasing involvement.     

Editorial: Purchasing and innovation: Past,present and future of the field of research

This paper introduces the special topic forum (STF) on purchasing and innovation. Presenting the findings from a systematic literature review, we take stock of the current state of the field, delineating themes, theories and methods, and identifying key trends over time. Our study shows a take-off in research on purchasing and innovation during the last decade. This has predominantly focused on private sector manufacturing firms although a recent expansion into public sector research is evident. Large-scale surveys and case studies are still the dominant research methods where the unit of analysis is typically the ‘firm’ or ‘project’. The findings also show how in the past the field was driven by questions on how purchasing can facilitate different types of innovation projects, seeking to derive practical implications, and rarely making explicit statements regarding theories applied; this still characterises much of the research but we find an increasing focus on theory development. We also see a shift in the type of technological innovation being investigated: past studies tended to focus on the role of purchasing in new product development (NPD) projects, which reflected a relatively low degree of technological uncertainty, but we see a trend towards innovation projects facing technological uncertainty. Research shows how this requires new ways of sourcing innovations and therefore new ways for purchasing to facilitate innovation sourcing. On the basis of the review, we offer our guidance for future research avenues to 1) carry out more research on procurement of innovation in the public sector; 2) consider new theories and research methods, and 3) go beyond firm-level or dyadic analysis to research networks and ecosystems. We conclude by introducing the papers in the STF.     

Cooperating and competing in supply networks: Making sense of a triadic sourcing strategy

This paper introduces the concept of a “triadic sourcing strategy”. Triadic sourcing is a way for buying companies to nurture and benefit from cooperation and competition between two suppliers with partially overlapping capabilities. In contrast to hybrid sourcing strategies outlined in the literature-parallel and network sourcing—the distinctive feature of triadic sourcing is that the buyer actively creates interdependencies between two suppliers. To illustrate this principle and the characteristics of triadic sourcing, Volvo Cars’ use of two suppliers of seats is described. The paper asserts that triadic sourcing is a dynamic sourcing strategy that contributes to efficiency and innovation for the buyer and the two suppliers, together forming a triad that is subject to firm interdependence and network embeddedness.     

Co-alignment of supplier quality management practices and cognitive maps – A neo-configurational perspective

Much of the previous research on the ‘purchasing practice–performance link’ rests on the notion of “net effects,” which assumes that specific practices independently of each other impact outcomes. This study challenges this core tenet by adopting a neo-configurational perspective, exploring how different combinations of factors (called “configurations”) affect outcomes. Another limitation of extant studies on the ‘purchasing practice–performance link’ is the narrow focus on practices; more recent behavioral supply management research finds the behavior of managers to be critically influenced by cognitive maps—the lenses through which managers perceive, simplify, and interpret the world. Focusing on supplier quality as a core aspect of the broader ‘purchasing practice–performance link’, this study explores how configurations of different supplier quality management (SQM) practices and SQM-related cognitive maps help firms to manage supplier quality. It uses fuzzy-set qualitative comparative analysis (fsQCA) to identify SQM configurations and a cognitive-linguistic approach for the computerized text analysis of purchasing managers’ cognitive maps in the context of Western companies sourcing from Chinese suppliers. The configurational fsQCA analysis identifies four different configurations associated with overcoming barriers to SQM in emerging markets. SQM-related cognitive maps prove to be a critical component in these four configurations.     

The “ugly twins”: Failed low-wage-country sourcing projects and their expensive replacements

International sourcing and sourcing from low-wage countries remain topics of high priority for firms in industrialized countries. Lower factor costs, particularly in low-wage countries, have led to high expectations of savings from both managers and academics. All too often, scientific and particularly practitioner publications present international sourcing as a conditio sine qua non for becoming a (more) successful company. However, research has shown that these extensive savings do not materialize automatically, particularly when sourcing customer-specific items, such as automotive components. This paper analyzes the operational and financial implications and real effects of cost-oriented sourcing from China, based on the specific example of a European automotive OEM. Furthermore, it sheds light on the ambivalent and often overrated savings impact of sourcing from low-wage countries. Our analysis of a comprehensive set of secondary data from a company data warehouse reveals that more than three quarters of the analyzed China-sourcing projects do not reap the expected benefits. Moreover, each failed low-wage-country sourcing project has its so-called “ugly twin”, the need to resort back to suppliers from high-wage countries at a higher cost. Implications for managerial practice include the suggestion to employ extended calculation methods, entailing influence factors other than from procurement, particularly for low-wage-country sourcing. Furthermore, we recommend creating an awareness of potentially biased decision-making among purchasing personnel who follow standard industry recipes.     

Low cost country sourcing and its effects on the total cost of ownership structure for a medical devices manufacturer

In this paper, we describe a total cost of ownership (TCO) method as an activity-based costing (ABC) application along the value chain to measure and analyse the costs of international sourcing activities. We further describe the method's implementation for a manufacturer of high-tech medical devices. For this case study, we analyse the effects of shifting purchasing volume from traditional procurement market suppliers to low cost country suppliers on the cost structure of purchasing projects. We find that particularly costs at component and supplier level gain importance over traditionally dominating unit level costs. Furthermore, we identify low cost country sourcing as a decision with extensive impact on value chain entities other than purchasing. Finally, a considerable part of costs in low cost country sourcing accrue at the beginning of a purchasing project due to problems stemming from unsatisfactory initial quality, language barriers and intercultural communication.     

The effect of controversial global sourcing practices on the ethical judgments and intentions of U.S. consumers

Global sourcing has led to lower cost and more effective supply chains for many companies. However, when the cost-driven practices of many suppliers in these chains come to light there is often considerable debate over the ethics of these practices. This research uses the well-known Hunt–Vitell framework as the theoretical foundation for a structural equation model of the deontological and teleological evaluations used by consumers when making ethical judgments of a firm's controversial cost-driven global sourcing practices. Data from a large-scale U.S. consumer survey show the importance of deontological and teleological evaluations in forming consumers’ ethical judgments of global sourcing practices, and establish a strong relationship between ethical judgment and the intention of consumers to alter consumption of a firm's products. Extensions to the framework and demographic analyses for age, gender, and income provide insights as to how perceptions of these practices affect consumer evaluations of a company involved in global sourcing and how consumers actualize their resultant intentions.     

Project management for new product development

This article examines the intersection of the project management body of knowledge with new product development (NPD). The area under examination is the development of consumer products that have a significant engineering production content. It is concluded that the project management method, with its structured task definition and software tools, is generally useful for managing NPD projects. However, in some areas, project management incompletely meets the needs of NPD. Specifically, NPD is characterized by complex interrelated activities and large uncertainties about precisely which solution path will be taken, such that the full scope of the project can often not be anticipated beforehand. The article identifies that more research is required to validate the stage‐gate and lean project management methods. Whereas cost is the primary focus in project management, with NPD there is a need to consider both cost and income (from product sales) in making strategic decisions. Communication and human resource management are important factors in NPD success, but existing project management perspectives have little to say about the social and behavioral aspects, such as organizational culture, team dynamics, and leadership styles, especially not for NPD. Current project management practices are very much based on “output control” (targets, appraisal, rewards, management by objectives), which the human resource management literature identifies as inhibiting innovation. There is also likely to exist an intersection, as yet poorly understood, between project management and knowledge management, particularly for innovation processes such as NPD. For practitioners, the main message is that the project management method provides a basic, but imperfect, tool for managing NPD. The relevance for researchers is that gaps have been identified in the project management method as it is currently applied to NPD. Several places are identified where further research is required to (a) better understand the causality between factors (e.g., human resource management) and project success and (b) adapt project management methods to better serve the NPD process.     

Organizing IT purchases: Evidence from a global study

Information technology (IT) purchasing is covering an increasing part of companies’ expenditure. Scholars mainly investigated IT purchasing in terms of make or buy drivers from an IT perspective. Similarly, companies have been focusing on make or buy decisions and specifications definition in relation to technological characteristics. This often resulted in failures related to the goods/services purchased due to e.g. lack of negotiation skills, contracting, and suppliers’ relationship management. Accordingly, IT purchasing might require new structures and processes management.The purpose of the paper is to investigate what are the possible configurations for IT purchasing, and how these configurations are characterized in terms of purchasing process (i.e., strategic purchasing, sourcing and supply) and organization (i.e., roles involved, level of centralization, and span of control). Furthermore, the paper asks how IT relevance and purchasing maturity might affect these configurations. Through 12 case studies of leading international companies, four main configurations of the organization and the purchasing process for IT purchasing were identified, namely neutral (no specific approach is in place), IT oriented (the IT department takes the lead over the purchasing department), purchasing oriented (the purchasing department manages the whole IT sourcing process) and IT strategic (IT and purchasing departments jointly manage the IT purchasing process). The choice of the configuration is driven by IT strategic importance (low for neutral and purchasing oriented) and purchasing maturity of the company (low for neutral and IT oriented).     

Making Innovation Happen in a Megaproject: London's Crossrail Suburban Railway System

Isolated pockets of innovation can be found in projects—such as the novel solution used to redesign the Velodrome roof during the London 2012 Olympics—but there have been few, if any, systematic efforts to manage innovation in a megaproject. This paper presents the initial findings of an ongoing three‐year (2012–2014) action research project between Crossrail and researchers at Imperial College London and University College London. Action research is well suited to a setting where an intervention is required to diagnose and solve an organizational problem and produce scientific findings (Miles & Huberman, 1994; Van de Ven, 2007). Undertaken in collaboration with practitioners, the aim of action research is to transform the research setting through a process of critical inquiry and action. Our engagement with Crossrail aimed to formulate and implement an innovation strategy to improve the performance and outcomes of the project. We identified four stages—or windows of opportunity—to intervene to generate, discover, and implement innovation in a megaproject: (1) the bridging window during the front‐end when ideas, learning, and practices from other projects and industries can be used to create an innovative project process, organization, and governance structure; (2) the engaging window, when tendering and contractual processes can be used by the client to encourage contractors and suppliers to develop novel ideas and innovative solutions; (3) the leveraging window, when all the parties involved—clients, delivery partners, and suppliers—are mobilized to develop novel ideas, new technologies, and organizational practices to improve performance; and (4) the exchanging window at the back‐end, when ideas and resources for innovation can be (re)combined with those of other projects in the wider innovation ecosystem to improve performance. The first two stages had largely occurred when we became involved in the Crossrail project in 2012. Our intervention addressed the final two stages, when we assisted in the development and implementation of an innovation strategy. Core to this strategy was a coordinated mobilization of the innovative capabilities across the project supply chain. Though, to be successful, this approach had to be open enough to span organizational boundaries beyond the supply chain, reaching into the broader ecosystem. The four windows provide a valuable new heuristic for organizing innovation in megaprojects, pointing to areas where project managers can craft targeted innovation interventions and compare their efforts with those of others.     

Collaboration practices, strategic capabilities and performance in Japanese and American product development: Do they differ?

Do New Product Development (NPD) collaboration practices differ across national subsets and, if so, does this make a difference to overall NPD performance? To address these questions, we studied the NPD programs of both Japanese and American firms and explored whether there are differences between the use of internal and external collaboration and strategic innovation practices. We further examined whether this had any significant effects on overall program performance. We found that the American firms we surveyed used collaboration practices significantly more often than the Japanese firms. However, when taking all factors into consideration, only strategic innovation capabilities were significantly linked with both overall performance and nationality. Thus, the use of collaboration without developing innovation capabilities is not enough for performance effects.     

Looking beyond the focal industry and existing technologies for radical innovations

The “radicalness” of an innovation is often contingent upon access to distinct technologies which arise from sourcing innovation outside a firms' focal industry (exterior sourcing). We posit that exterior sourcing leads to technology distinctness and that the presence of technology distinctness significantly affects the relationship between exterior sourcing and radicalness. In addition, we assert that high technology distinctness results in a stronger association with radicalness irrespective of the levels of exterior sourcing. Further, at lower levels of exterior sourcing, technology distinctness will have a stronger relationship with radicalness than at higher levels of exterior sourcing. We also argue that high technology distinctness and low exterior sourcing will have the strongest relationship with radicalness. We used patent filings from 1996 through 2009 from the IT industry from within the S&P-500 database to test our assertions. The empirical evidence validated our affirmations. Our findings suggest that to maximize the chance of radical innovations, firms must obtain highly distinct technologies from minimum possible contacts outside their focal industry. We conclude the paper by summarizing the key findings, discussing implications for theory and practice, and suggesting avenues for future research.     

Improving sourcing decisions in NPD projects: Monetary quantification of points of difference

During new product development (NPD), firms make critical design and sourcing decisions that determine the new product's cost, performance, competitive position, and profitability. The purchase price of materials and components for the new product provides only part of the picture for design and sourcing decisions. All-encompassing analyses of cost and performance, such as total cost of ownership, are extraordinarily difficult to implement because they are demanding in terms of time, data and cooperation. We study monetary quantification of points of difference, which enables an NPD team to base its decisions instead on more focused, strategically-pertinent analyses of costs and performance. We propose a substantive model of its antecedents and consequences. We then test this model with data from matched samples of 144 project leaders and 144 cost analysts who participated in the same NPD projects. Using structural equation modeling, we also test hypothesized differences in perspectives between project leaders and cost analysts. Results demonstrate the pivotal role of monetary quantification of points of difference among the sourcing alternatives being considered, especially for cost analysts. Results also demonstrate that Decision Justification to senior management drives the NPD team's decision-making process. Finally, monetary quantification of points of difference leads to Uncertainty Reduction, which is found to be the primary antecedent of the judged success of applying analysis of cost and performance.     

Supplier involvement in new product development and innovation: Taking stock and looking to the future

This paper provides a comprehensive and critical review and synthesis of the current state of empirical research into supplier involvement in new product development (NPD). The paper begins by defining supplier involvement in NPD and evaluating the rationale for supplier involvement in NPD. This suggests that early and extensive supplier involvement in NPD projects has the potential to improve NPD effectiveness and efficiency, however, existing research remains fragmented and empirical findings to date show conflicting results. The paper takes stock of the research on supplier involvement in NPD, tracing the origins of the literature to the late 1980s, and evaluating the development of the field up to the present day. From this broad base of empirical research the analysis identifies a set of factors affecting the success of supplier involvement projects. The paper concludes with a discussion of two emerging themes: (1) supplier relationship development and adaptation; (2) supply network involvement in product innovation.     

The purchasing department's leadership role in developing and maintaining a preferred customer status

Developing and maintaining a preferred customer status is one of the main objectives of organizations that want to obtain a better access to supplier's information, resources, and innovation. This paper addresses the extent and the nature of the purchasing department's leadership role in the process of developing and maintaining a preferred customer status. A qualitative exploratory approach based on eleven cases has been used in order to take into consideration the context specific to the buyer-supplier relationship in a preferred customer scenario.Our study shows that the purchasing department performs four main categories of roles: (1) identifies and selects the best supplier, (2) structures and segments the supply base, (3) builds close relationships with selected suppliers and (4) develops working relationships, using an effective communication. Each of these roles is related to three key components of the purchasing department's capabilities: boundary, relational, and coordination. These four categories of roles illustrate supply's ability to recognize and understand the specifics of the preferred customer situation. Based on our analysis, the purchasing department should be viewed as extending an organization's resource base, making the organization more competitive.Our analysis also shows that the purchasing managers' leadership is critical for the development and the coordination of activities with selected suppliers, as well as proper communication with them. Specifically, the purchasing manager's transformational leadership generates more internal user and supplier involvement through the creation and articulation of a common vision, by establishing shared goals with other organizational units, and by focusing on activities that benefit the organization; this allows to move from initiative-driven efforts to an “institutionalized preferred customer status management” in the organization.     

The impact of digitalization on the future of the PSM function managing purchasing and innovation in new product development – Evidence from a Delphi study

Bringing innovative products to markets is essential for companies, especially in competitive environments. One of the driving forces for successful new product development (NPD) is the inclusion of the functions that form part of the process such as purchasing and supply management (PSM). While extensive research has been conducted on the role of procurement in promoting innovation, insufficient research on the future of the PSM function in NPD has been conducted. This study addresses this gap, considering increasing digitalization and its effect on the future PSM function managing purchasing and innovation. To explore the future of PSM in NPD, a Delphi survey with 91 experts from industry, academia, and politics or associations was performed. The results reveal that digitalization will influence the PSM function in NPD across different time horizons and forms depending on the subject area. While in many areas, an interplay between digital technologies and human PSM professionals is expected, in certain domains the PSM function is likely to lose added value compared to digital technologies. Furthermore, digitalization is expected to be a potential enabler of a stronger key innovation role for PSM in NPD but to also introduce new requirements such as data science capabilities.     

Supplier development and cost management in Southeast Asia—Results from a field study

This paper is about supplier development when international companies have production sites in Southeast Asia and look for opportunities to switch from international suppliers to local suppliers. We conducted a field study involving site visits to companies in Thailand and Vietnam, and interviews at corporate supply chain departments. Some key observations are: cost management was a dominant motive for taking local supplier development initiatives. Furthermore, local sourcing and local supplier development were important for international companies to improve access to local customer markets. Firms deliberately assessed whether a particular supplier would likely be able to improve sufficiently to warrant investing in supplier development, which typically involved a combination of initiatives, requiring the international firm to take considerable efforts. Local sourcing strategies and priorities for supplier development initiatives tended to focus on items with low supply risk and low volume. These findings are discussed based on transaction cost economics, and we suggest that firms use several ways to reduce the risk of transaction-specific investments in supplier development initiatives.     

Some immediate - but negative - effects of openness on product development performance

This paper charts an unnoticed theme in the current debate on open innovation, namely the foundational question whether increasing openness is beneficial? The paper approaches this question by conceptualising the degree of ‘openness’ and analyses the importance of increasing degrees of openness for NPD performance. Inter-organizational relationships in New Product Development lay the foundation for operationalising openness because these represent important sources of ideas and knowledge in purposive inbound open innovation. This exploratory paper finds that on immediate NPD performance measures the single firm strategy is performing better than the collaborative strategy. However, we also find that the use of internal and external relationships is highly correlated and that these interact with each other. Finally, with increasing degrees of openness the product development projects are slower than the norm in the industry, slower than what is usual for the firm’s projects and had higher cost than the norm in the industry and the firm’s usual projects. These results offer a more critical perspective on openness and NPD performance than the literature on the open innovation paradigm suggests. The paper discusses these results and offers some challenges for management and research of open innovation.     

Validating a model for assessing the association among green innovation,project success and firm benefit

Conceptualizing green innovation in the new product development (NPD) context is still rudimentary. The primary objective of this study is to empirically investigate the association among green innovation, NPD success, and firm benefit. This study empirically investigated a sample of NPD projects in the Taiwanese high-tech industry. The structural equation modeling approach was used to validate the research model. In testing the moderation effect, a multiple-group analysis was used. The findings indicate that green innovation contributes significantly to NPD success and firm benefit. Specifically, green innovation has a positive effect on NPD success and then on firm benefit. The results also show that industry sector has a moderating effect on the relationship between green innovation and NPD success.     

How does PLM technology support knowledge transfer and translation in new product development? Transparency and boundary spanners in an international context

Information Technology is often viewed as imposing too much standardization and limiting flexibility in New Product Development (NPD). This paper aims at understanding how the use of Product Lifecycle Management Technology (PLM) contributes to knowledge sharing in an international NPD environment. The research is based on a longitudinal case study of a consumer goods industry group and involved development teams in Europe and local suppliers in China. Knowledge transfer and translation were observed through the reduction of communication glitches among members and increased NPD work with Chinese suppliers. The results of the case study indicate that (1), with an important codification effort, the use of PLM technology resulted in higher data and network transparency and enhanced knowledge transfer; (2) PLM served as a particularly useful tool for knowledge translation especially for boundary spanners in their work relationships. While PLM can be considered the main mechanism for knowledge transfer in this context, the case suggests that knowledge translation requires a boundary spanner intervention and that, with the use of PLM, they reinforce each other. Particularly noteworthy was a positive shift in the boundary spanners' roles from the project leader to the outsourcing engineer. In turn, this unintended consequence reinforced their credibility and the legitimacy of the use of the system with the Chinese suppliers.