The Edge Factor - June 2016

 

Author: Jitendra Nayak Supported by: Sahil Kapoor, Mayank Kumar

 

Supplier collaboration - Is it imperative to launch new products faster?

Supplier collaboration: is it imperative to launch new products faster?

About 75% to 80% of the products did not launch on time in the automobile industry every year. This not only affects the OEMs reputation, it will also have a compounding financial impact on the stakeholders in the value chain. Currently, on an average new product development lead-time varies from 24 to 36 months. As per AMR research, if a new product can be brought to market 50% faster, the overall cost can be reduced by 20% to 30%. One of the important factors to launch new product faster is Supplier collaboration, which affects the new product development lead-time.

With the Continuous growth in the auto sector, consumer expectations are changing more frequently and product lifecycles are getting shorter. So, auto companies are eager to launch new products more frequently. Thus, it reduces the payback period for earlier investments, as old products are phased out. Automakers want suppliers to make the necessary investments in new tool and technology and at the same time, suppliers need long-term security. Thus, it becomes inevitable for automakers to collaborate with suppliers, so that both will make the profit in long run.

Some of the key areas for supplier collaboration are product design, sharing of information timely, program management, outsourcing of modules, warranty of components etc.

Collaborative product design and development includes design for manufacturing inputs from suppliers, which will help in reduction of new product development lead-time. Volkswagen Group has nominated the first 44 suppliers, who will be collaborating with the group on a new common strategic level under the joint FAST (“Future Automotive Supply Tracks”). This will implement technical innovations even faster to launch the new products. By involving supplier in early phase of new product design and sharing best practices, it increased design efficiency. In fact, early supplier involvement facilitated to shorten product launch time and increase engineering quality.

The other important parameter for supplier collaboration is outsourcing of modules. OEM’s can outsource modules, where supplier assume responsibility to design, build and fully functioning of the module. The OEM sets the meta-design rules that are used to guide the suppliers in the product design and development. This has shifted the responsibility for product design and coordination to the suppliers. One of the leading automobile manufacturers in India has outsourced complete door assembly to tier-1 supplier instead of individual components of a door which intern helped to reduce new product development time by 2 months.

There are many reasons that companies have not been successful in closely working with the supplier. Too often, they are satisfied with the mediocre results gained through their current supplier management programs. Sometimes it is the lack of a disciplined process and an experienced partner to help them get started.

CGN had helped one of the leading premium Two Wheeler Manufacturer to introduce a new product in India. CGN had worked closely with the supplier for developing and handover of 44 parts to the supply chain team at India manufacturing facility after getting the PPAP approved and settling open commercials. It helped Two Wheeler manufacturer to launch new product within target date.

To be successful in launching new product faster, the OEM needs to collaborate with supplier in the early stages of product development, share information timely and share best practice with supplier.

REFERENCES:

https://hbr.org/2014/04/how-ge-applies-lean-startup-practices/
https://hbr.org/2011/04/why-most-product-launches-fail
http://www.autonews.com/
http://www.cargroup.org/?module=Publications&event=View&pubID=25
https://hbr.org/2004/12/building-deep-supplier-relationships

Read this article at: http://www.cosyninc.com/pdf/Auto.pdf

 

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