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Deciding how far to take collaboration with suppliers

Take a look at the following article, which summarises some of the key points on supply chain integration for new product development. It explains how an organisation can integrate with its suppliers to develop new products.

Monczka, R.M. et al. (1997) ‘Supplier integration into new product/process/service development’.

A key premise of the article is that inviting suppliers early into the new product development process can lead to better integration, sharing of ideas and risk. Integrating at later stages can improve the feasibility of ideas and potentially the testing of products and services. Integrating with suppliers for a long period can help build trust between the various parties and allow the understanding of each other’s capabilities.

Yet, more recent research suggests some downsides to integration (Villena et al., 2011). One reason for this is the potential complacency of suppliers. If they know they are locked in into a long term relationship with a customer, the incentive to innovate and become competitive reduces. Another reason is that such integration may limit the search space of the new product development team. When this is the case, the organisation may be looking for ideas within its existing supply base. Yet, as we have established so far, some of the better ideas and opportunities may be beyond this.

So, two important questions to answer are how much to integrate, and how does an organisation know that it has integrated too much?

Although research is not prescriptive about how and when to identify problems of integration; it does provide some useful recommendations. One is to frequently re-evaluate the benefits of the relationships with suppliers. This can help reveal whether the benefits gained from working with a smaller supplier base, in terms of innovation, are still there or not. Another is to ensure that there are mechanisms and processes in place that continuously explore the external environment for opportunities.

References

Monczka, R.M., Frayer, D.J., Ragatz, G.L., Handfield, R.B., and Trent, R.J. (1997) ‘Supplier integration into new product/process/service development’, 82nd Annual International Conference Proceedings, accessed 29 September 2016.

Villena, V.H., Revilla, E. and Choi, T.Y. (2011) ‘The dark side of buyer-supplier relationships: A social capital perspective’, Journal of Operations Management, Vol.29, pp. 561-576.

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