Innovation and Conflicts in New Product Development Processes
Purchasing is about building relationships both internally and externally. One of the closest relationships is the internal relationship with Engineering & Design, assess this relationship from an operational perspective and identify the conflicts that can occur especially during the new product development process.
What is purchasing?
There is no clear definition of a Purchaser, (Farrington, 2006) Believe purchasing can be viewed from several perspectives. Their study on purchasing placed the role in categories.
- Purchasing as a function.
- Purchasing as a process.
- Purchasing as a link in the supply chain.
- Purchasing as a link in the value chain.
- Purchasing as a discipline.
- Purchasing as a profession.
- Purchasing as a relationship.
They have taken the classic definition of Purchasing: To buy materials of the right quality, in the right quantity, from the right source, delivered to the right place, at the right time at the right price and turned it on its head. They devise managers must develop relationships with suppliers, key or otherwise. The purchasing department must not be isolated, and develop the different roles of purchasing, depending on the viewpoint of the role of the Purchaser.
Their view of purchasing as a relationship, which may be internal and external short or long term.
- Internal relationships are with other links in the supply chain, such as initiators of a purchase and the users of the goods procured. Increasingly, internal relationships are cross functional and based on teamwork.
- Externally, relationships with suppliers, may represent a continuum from arm’s length to supplier’s alliances. Many organisations now rely on suppliers to design develop and manufacture items that they would previously have produced themselves. (Farrington, 2006)
Design and Engineering have an entangled history. Past Renaissance masters such as Michelangelo had the ability to alternate between the roles of artist and engineer. In modern day, there is sometimes a division of roles. Identifying the conflicts that can occur especially during the new product development process is critical. Engineers by nature focus primarily on product form, fit and function. Designers can be focused on the aesthetics. While Operations focus on the day to day. Below is a text box representing the involvement of engineer’s designer and operation departments with a new product development.
|New Idea/Product||Evaluation of product and Specs||Feasibility|
|Beauty||Form/ Function||MRP: Materials Requirements Planning|
|Importance||Cost||MPS: Master Production Schedule|
|Significance||Materials compliance||Bill of Materials|
|S&OP: Sales and Operations Planning||S&OP: Sales and Operations Planning|
|DRP: Distribution Requirements Planning|
|Production Activity Controls|
|Reliability||Returns/ Reverse logistics|
|Customer satisfaction||Customer satisfaction||Customer satisfaction|
Approach’s to deflecting conflict
While researching question one, the emphasis on various models on new product development was witnessed. The different approach’s such as integrated, staged, hierarchy, or overlapping, and how each model can differ from each other. Given that speed and flexibility on bringing a new product to market is a given as a strategy advantage. The overlapping approach at a glance may work best given greater visibility and input to all departments at the new product stage. (Ken-ichi Imai, 1985)
Enterprise Resource Planning Systems (ERP)
The Supply chain is a network of organisations procuring or producing a materials, that can transformed into products, for the sale to customers. It would make sense that companies would need better coordination of the business processes to speed information, product, and capital. Which needs to flows up and down a supply chain to reduce time, and inventory costs. In the past software was not compatible with other software, making it a nightmare for departments to commicate with each other. (Bozarth Handfield, 2006) . Technology has greatly improved in the last 20 years, thanks to globalization.
ERP is an integrated software with a central database that receives, stores, and shares data with all of the business departments, such as finance and accounting, human resources, Information is an essential part of managing operations and supply chains.
- More efficient operations (better coordination between departments)
- Improved decision making (data is available to everyone everywhere)
- ERP purchasing or forecasting, master scheduling or project planning
The more visible the information, the more designers, engineers and operational managers can cement the relationship, by being better informed on their own decision making process. The better the information the better decision. (Bozarth Handfield, 2006)
“But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we’ve been thinking about a problem.” [Steve Jobs]
How would you establish a creative environment within a firm and how can Purchasing leverage innovation within the firm?
A: How would you establish a creative environment within a firm?
It’s pretty well documented that Google has a unique culture. It’s not the classic corporate culture. In fact, just by looking at pictures inside the Google building, we can see that it looks more like an adult playground and not a place of employment.
Establishing a creative environment within a firm, would for me depend on the firm? And the type of leadership, it creates promotes or hires. It is a difficult question to answer, considering there are so many variables. The variable being personnel, we all don’t want or need the same thing.
If the firm is open and favors diversity among its employees. And if the firm supports a creative positive working environment with its employees, then innovation may flow.
Also considering male and female employees view things differently, and depending on where they are within their own life cycle. Matters that were important a few years ago, may not be that important anymore. Once the most important agenda was going out on the town with friends on a Saturday night, now it could going to watch your children’s rugby match.
Employees in certain sectors thanks to technology could work from home, then commuting long distances to and from work. They may be more productive as there are less distractions, less stressful environment, plus no geographic limitations.
Certain employees may not be suited to the big colourful fluffy pillows and herbal tea in the chill out room, they may need more structure. Consider also human interaction might not be what they need, being alone without distraction in an environment that suits their needs. Jonas Salk claimed he wasn’t able to solve the dilemma of polio until he left his underground lab and went to clear his head in a monastery in Assisi in Italy. (Badger, 2012)
For the author creating a creative environment within a firm, it is about the work life balance, the fact the people are always on, always connected via mobile phone or email. (O’Connor, 2015) It can be hard to find the time to do an activity, you enjoy doing. Even taken timeout to clear your head like Jonas Salk, can be difficult.
Fitness and health play their part too. Companies are now hiring wellness coach’s to speak to their employees on health and fitness. Probably the most famous in Ireland is Karl Henry fresh from is role on Operation transformation. Operation Transformation is an Irish health and fitness TV program. Karl teaches companies employees about their health and wellbeing, plus cookery demonstrations. They also lecture on various topics such as stress management and mindfulness (Henry, 2015)
The idea is not new since the 1950’s, Asian workers exercise every morning before work, creating a limber body and mind. (Breitlow, 2013) Soldiers march on and off parade every morning and afternoon, practicing foot drill to get them in sync, working in unison for the day’s activities. So while working at home might not be practicable for every firm. And colourful beanbags in the lobby doesn’t stimulate you, then maybe a work life balance might be what the firm needs.
B: How can Purchasing leverage innovation within the firm?
Traditionally companies try to squeeze the lowest price possible out of suppliers. They instead should be embraced.Being perceived as an innovator enhances corporate reputation and business performance.
Academic research provides evidence that a reputation for innovation leads to various business and reputational benefits such as:
- customer loyalty
- improved favourability
- propensity to pay premium prices
- and perhaps most importantly: customer excitement (Dacin, 2010)
It is clear that companies perceived as most innovative enjoy a significant reputation advantage over their competitors. Listed below Fortune’s Most Admired list 2015 measures companies on nine different attributes.
- Quality of Products/Services Offered
- Management Quality.
- Long term investment.
- Financial position.
- Ability to Attract, Develop, and Retain Talent.
- Community Responsibility.
- Wise Use of Corporate Assets.
- Effectiveness in Conducting a Global Business.
The task is certainly easier for a technology company, the high-tech industry has generated many innovations. Four out of the top ten for innovation listed below, are tech based global based companies, with Apple remaining as number one for the last two years. (Fortune, 2015)
1. Apple (8.77)
2. Google (8.71)
3. Walt Disney (8.62)
4. Amazon.com (8.54)
5. Nike (8.44)
6. Netflix (8.41)
7. Nordstrom (7.90)
8. Starbucks (7.75)
9. Ingersoll-Rand (7.68)
10. NextEra Energy (7.66)
As the role of purchasing varies depending on the specific product category, purchasing’s possibilities and inclination to support and stimulate innovation in the supplier’s products is also expected to vary. For routine or non-critical products, companies may not actively seek innovation from suppliers. These suppliers are normally not involved in product development, but may still develop products based on their own specifications. (Farrington, 2006)
Purchasing plays an important role in the supplier interface. Much can be done to reap the benefits of reduction in purchasing by following a simple principle – listen and involve the supplier in your strategy. Sounds simple, but in practice this requires a change in mind-set. The criticality implies a need to obtain sufficient information about what is, and what is not, possible with regard to different solutions for technical problems. The solution often involves connecting pieces that requires a great deal of integration.
Sometimes the buyers are involved as co-developers. For these products, the buyer usually has little bargaining power, which makes it necessary to have collaborative agreements with suppliers. More can be gained by turning the supplier into a Strategic partner in innovation rather than trying to force cost-cutting on materials and labour. An even more enlightened approach is to invest in R&D through the supplier. (David T Rosell, 2011)
Most companies seek to increase profits by focusing on expanding market share and their customer base. Ryanair, the Irish carrier, has posted annual profits of several hundred million euros in a dismal airline climate not by doing what customers want per se, but rather by paying close attention to the supply side of its business.
For companies knowing how to develop a collaborative relationship is the fastest and easiest approach to improving innovation. (Nie, 2011)
In your opinion, is quality an extra cost to the firm? Expand upon your opinion using relevant material to support your argument.
Is quality an extra cost to the firm?
Yes, quality is an extra cost to a firm. Quality is viewed as a competitive advantage, therefore it needs to be managed. Customers want quality that is appropriate to the price that they are prepared to pay and the level of competition in the market. (Dictionary, 2015)
Key aspects of quality for the customer include:
- Good design – looks and style.
- Good functionality – it does the job fittingly.
- Reliable – acceptable level of breakdowns or failure.
- Durable – lasts as long as it should.
- Good after sales service.
- Value for money.
The same can be said for vendor management. In today’s environment, it would be nearly impossible to find a company that doesn’t contract with a vendor. Supplier quality is a serious consideration of the overall product quality and costs, the overall quality performance, which helps supply chain managers to select right sources of supplies with due attention of time, price and delivery.
Prior to the introduction of Total Quality Management (TQM), the common perception was that higher quality requires higher costs, either by buying better materials or machines or by hiring more labour (Feigenbaum, 2004) It was first described by Armand V. Feigenbaum. The process improvement, quality costs or cost of quality is a means to quantify the total cost of quality-related efforts and deficiencies. The central theme of quality improvement is that larger investments in prevention drive even larger savings in quality-related failures and appraisal efforts.
Many Quality improvement tools today are used due to a high demand for large volumes of high value products and services using cheaper materials in production during the Second World War. Present systems such as Kaizen, Total quality management (TQM), Quality circles and Six Sigma have shown the power and effects a team-base improvement system can have on production. Process capability design is at the forefront when using Six Sigma (Bozarth Handfield, 2006).
Quality Performance Metrics
Companies operate a performance metrics, which use KPI’s for measuring and can cover three main areas Site Performance, Outbound Supply Chain and the Inbound Supply Chain.
- Within the company the key focus area of Productivity, Quality, Delivery, Cost, Safety and Hours are monitored.
- With the Outbound Supply Chain the Metrics/KPI’s performance is measured by monitoring, Quality, cost and schedule/Net requirements attainment and fill rate, average Backorder and back order Target etc.
- The Inbound Chain Metrics/KPI’s performance is measured using a global sourcing scorecard which gives suppliers a total service score, a total quality score and an overall score.
Companies are continually analysing the opportunities for improving quality. The superior reliability of many Japanese products has sparked considerable deliberation among managers. By streamlining suppliers, standardising product and pricing, looking at global v regional sourcing and by redesigning or using alternative specifications. As stated in the opening paragraph. Quality is seen a competitive advantage the concept of quality has changed radically from meeting customer requirements or expectations to exceeding them.(Bozarth Handfield, 2006)
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