This is part 3 of a 4-part series about supplier collaboration called Driving Innovation with Supplier Collaboration. This blog series explores the potential associated with open innovation in new product development.
The last couple of blogs have talked extensively about how a more open relationship with suppliers in the product design process can lead to improved innovations, saved costs, and more successful enterprise initiatives. However, before organizations can look to external partners for innovation opportunities, they must first improve internal collaboration. In fact, companies tend to overlook a critical component of successful supplier collaboration: their own procurement team.
Engineering typically has the primary responsibility for collaborating with suppliers during product design and manufacturing. Yet procurement makes the final decision in company investments, including suppliers. Complicating matters further, engineering and procurement teams rarely have complementary goals or even ideal collaboration processes. By improving internal relationships between these two teams, companies can ultimately create more competitive solutions with their suppliers.
Today’s Collaboration Problems Between Engineering and Procurement
In a typical new product development process, natural siloes tend to emerge between the engineering and procurement teams. This can create significant barriers to innovation – like the development of a new utility vehicle. Let’s put this example through a standard procurement process.
New innovations and market requirements lead to constantly changing products. Recent changes to engine specifications means that engineering needs to find a suitable transmission. A couple of different scenarios could play out:
- Option 1: Engineering will be able to use an off-the-shelf transmission. The team needs to work with procurement to ensure the right package size and performance requirements can be truly met.
- Option 2: Engineering will need to work with a supplier to develop a new transmission. This process can quickly become bogged down with iterative feasibility and development testing during product development, causing costly delays.
Both of these scenarios can derail a fast-paced development process, if the siloed mindset prevails. What could this mean? In terms of revenue, it can be significant. Let’s say development delays push the manufacturer nine months back in their market release. This causes the revenue stream to be pushed back, which in turn delays return on investment. Additionally, valuable resources are tied up instead of being deployed to the next development project.
Companies tend to overlook a critical component of successful supplier collaboration: their own procurement team.
Involving procurement during ideation and connecting the link between engineering and suppliers before design decisions are made can help skirt delays. Once procurement truly understands the big picture goals that engineering needs to accomplish, they can either better translate that to suppliers or find a supplier that can best provide innovative ideas during product design. That only happens when procurement and engineering work together. Ideally, these teams should collaborate to:
- Align internal and supplier development activities
- Initiate regular innovation meetings with suppliers and develop technology roadmaps
- Accelerate and improve the RFI/RFQ process
- Evaluate and select suppliers
- Test and develop prototypes
- Manage issues related to the supplier’s technical capabilities
3 Ways to Help Engineering and Procurement Collaborate
When thinking about supplier collaboration, the biggest challenge a company can face is to look internally first. In my experience, there are three areas to focus on.
1. Create complementary, not competitive, goals
When encouraging procurement and engineering teams to work together, the need to reach department metrics or goals can prove to be a roadblock to collaboration. Inevitably, the goals between procurement and engineering are misaligned if not competitive. Procurement is encouraged to meet certain cost and quality requirements, while engineering looks for suppliers who can provide greater innovations or ideas for improved products.
Involving procurement during ideation and connecting the link between engineering and suppliers before design decisions are made can help skirt delays.
The result? Internal competition that holds a company back from making true progress. Executive teams need to empower both procurement and engineering with aligned goals, metrics, and key performance indicators. If a company changes their internal culture to prioritize collaboration and innovation above the costs of certain components, truly competitive and cutting-edge products break through.
2. Engaging all stakeholders earlier.
A simple way to involve procurement is to engage them early in the design process. Consider the transmission example above. When procurement understands big picture requirements from the engineering team, they become more than just a gatekeeper. The door opens for procurement to serve as facilitator, coordinator, advisor, and information broker.
3. Implementing appropriate collaboration tools and systems.
One of the biggest challenges to internal collaboration is simply a lack of process and technologies that facilitate teamwork between procurement and engineering. Setting up a process from the start that engages procurement, engineering, and suppliers in tandem removes ambiguity, confusion, and misalignment. Emerging technologies are removing the barriers to internal and external collaboration, providing intuitive and seamless ways to engage different departments early on in the product design process.
Breaking Down the Barriers to Collaboration
Procurement’s role with suppliers serves a high-level strategic purpose to support the collaborative new product development process. One source states, “Purchasing does not necessarily need to be involved in solving daily, routine problems, but serves as a troubleshooter to solve problems related to the supplier’s strategy, the relationship with the supplier, and commitment issues.”
Emerging technologies are removing the barriers to internal and external collaboration, providing intuitive and seamless ways to engage different departments early on in the product design process.
When it comes to product design, both engineering and procurement have their own unique context, perspective, and network of supplier contacts that can influence the product. A comprehensive approach throughout the enterprise takes a company to the next level. With more cohesive internal collaboration, external collaboration with suppliers becomes much easier.