Managing the buyer-supplier interface for on-time performance in product development

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JOURNALOF OPERATIONS MANAGEMENT

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ELSEVIER

Journal of Operations Management 15 (1997) 57-70

Managing the buyer-supplier interface for on-time performance in product development J a n e t L. H a r t l e y a,*, B . J . Z i r g e r b, R a j a n R. K a m a t h " Department of Management, Bowling Green State Unicersio', Bowling Green, OH 43403, USA h Department of Management, Unicersi~' of Cincinnati, Cincinnati, OH 45221, USA

Received 11 February 1995; accepted 29 January 1996

Abstract

Reducing the time required to develop new products has become an important factor of competition in many industries. This paper empirically tests whether management of the buyer-supplier interface affects supplier-related delays and, in turn, if these delays slow the overall project. Product development engineers and engineering managers in 79 assembly industry firms were surveyed to gather the data for this study. Results of analysis of covariance show that working with a supplier that has strong technical capabilities reduces supplier-related delays. However, the benefits of commonly cited interface management techniques such as early supplier involvement, increasing the supplier's responsibility for design, and greater buyer-supplier communication were not confirmed. A significant relationship was found between supplier-related delays and overall project delays• The priority that the buyer's top management places on the project and the degree of technical change were also significantly related to overall project delays. Keywords: Empirical research; Product development; Purchasing

1. Introduction In recent years, the time it takes to bring new products to market has become an increasingly important factor of competition in many industries. A legendary example is how Honda motorcycles used fast product development and product proliferation to fend off Yamaha in the early 1980s (Stalk, 1988). Firms in other industries, such as automobiles (Clark, 1989), machine tools (Nulty, 1990), and consumer electronics (Sanderson, 1992), have attributed corn* Corresponding author. Tel.: (419) 372-8645.

petitive successes, at least in part, to fast product development. Although authors have cautioned that competing via fast product development is not a panacea and that there are risks associated with acceleration (Crawford, 1992; Stalk and Webber, 1993), strategically applied, fast product development can be an effective competitive weapon. There is a lengthy list of techniques purported to reduce the time required to develop new products (see e.g. Bower and Hout, 1988; Stalk, 1988; Stalk and Hout, 1990; Cordero, 1991; Mabert et al., 1992; Brown and Karagozoglu, 1993; Zirger and Hartley, 1994). Our research focuses on a subset of these

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J.L. Hartley et a l . / Journal of Operations Management 15 (1997) 57-70

techniques, primarily those that are used to manage the buyer-supplier interface. A Wall Street Journal article suggested that firms such as Whirlpool, McDonnell Douglas, and Chrysler are getting their products to market faster and at a lower cost by changing the way they manage the interface between their organization and their supplier's organization (Templin and Cole, 1994). In this paper, we explore the relationship between use of some commonly cited buyer-supplier interface management techniques and product development time performance. Specifically, the relationship between management of the buyer-supplier interface and the percentage of the supplier's activities that were completed on time were empirically tested. A second objective of this research was to confirm, as suggested by King and Penlesky (1992), that delays in a supplier's activities can increase the time required to complete a customer's product development project overall. Whether there was a relationship between product development time performance and end product quality was also explored. Supplier management is an important, but often undervalued, product development activity. In many industries, 50% or more of direct product costs are attributed to purchased materials. For example, much of the value added to automobiles has shifted upstream in the value chain from final assembly to supplier-provided subassemblies and parts (Blenkhorn and Noori, 1990). Monczka et al. (1993) concluded that in product development there was a trend toward greater reliance on suppliers in the "valueadded areas of design and engineering support" (p. 43). Even though a new product's cost, quality, and performance are affected by suppliers, researchers have just begun to explore, in depth, management of the buyer-supplier interface during product development. Based on data gathered in the European Manufacturing Futures Survey, De Meyer and Van Hooland (1990) concluded that fast product developers placed more emphasis than slow developers on suppliers' lead time reductions and improvements in component quality. Furthermore, researchers (King and Penlesky, 1992) have found that supplier-related activities are often on the critical path of a customer's development project, so delays of a supplier's activities can delay its customer's project.

2. Research models

A firm's product development cycle time can be affected by at least three factors: (a) structure and processes that are internal to the firm's organization, (b) structure and processes that are internal to its suppliers' organizations, and (c) structure and processes that are used to manage buyer-supplier interfaces (Fig. 1). Because recent empirical studies (e.g. Eisenhardt and Tabrizi, 1995; Meyer and Utterback, 1995; Zirger and Hartley, 1996) have focused on techniques used by firms to reduce their internal development time, factors (a) and (b), we focused on structures and processes used to manage the buyersupplier interface. A two-phase approach was used to develop the research model. First, the literature was reviewed to identify the boundary-spanning techniques used by buyers to manage the interface with their suppliers during product development. Published research in the automotive industry (e.g. Clark, 1989; Clark and Fujimoto, 1991; Cusumano and Takeishi, 1991; Helper, 1991; Kamath and Liker, 1994) was very helpful in establishing a preliminary list of possible interface variables. To establish a more robust and generalizable model we conducted face-to-face interviews with product engineers and purchasing managers in consumer electronics, industrial machinery, pumps, and consumer durables industries. In these industries, typically, projects are less complex in terms of the number of components designed, the number of suppliers managed, and the average development project duration than development projects in the auto industry. The relationship between timely completion of a supplier's development activities and the buyer's development time performance is represented by a

Suppller's 1 /1 1~ I Buyer's Internal | / I l \ / Internal Product V interface ~ l Product Development~Management ,/1 Development Structure & I \ l [// I Structure & Processes ~ N Y t Processes Fig. 1. Determinants of product development time.

J.L. Hartley et aL / Journal of Operations Management 15 (1997) 57-70 Buyer-Supplier Interface Management Variables TImlng of suppller's involvement

I suppller's Percent of activities

Suppller's design responsibility

vl completed on-time

-Buyer-suppliercommunication

upplier's

technical capabilities uration of the buyer-supplier elationship egree of component change

Ii

1

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development process. A buyer's product development time is hypothesized to be influenced by suppliers' activities completed on time, top management's priority toward the development project, and the degree of technical change the new product requires. To maintain a more parsimonious model, processes and structures internal to the buyer's and supplier's organizations were not included. In the next section, we explain the research hypotheses that were developed and tested in this research. 2. I. Buyer-supplier interface management L~ariables

Control Variables

Fig. 2. Research model: percentage of supplier's activities completed on time.

two-stage model. The first stage, shown in Fig. 2, depicts the relationship between management of the buyer-supplier interface and the percentage of supplier's activities completed on time. The interface management variables that are hypothesized to influence a supplier's time performance include timing of the supplier's involvement, the extent of the supplier's design responsibility, and communication between the supplier and buyer. Three control variables were also included in the model as moderators of supplier's time performance. These variables are the supplier's technical capabilities, the duration of the buyer-supplier relationship, and the degree of component change. The second stage of the model (Fig. 3) shows the relationship between the supplier's time performance and the on-time performance of the buyer's product

Top management priority

/Project's

overall delay

Degree of technical change

Fig. 3. Research model: project's overall delay.

Researchers have suggested that the process used to manage the buyer-supplier interface affects product development time performance (Clark, 1989; Kamath and Liker, 1994; Zirger and Hartley, 1994). Three facets of this process are commonly cited: (a) the timing of the supplier's involvement, (b) the supplier's design responsibility, and (c) communication between the buyer and the supplier (see Fig. 2). 2. I. 1. Timing of the supplier's im, oIL,ement The significant reductions in development time attained by Japanese auto makers in the 1980s have been attributed, in part, to involving suppliers at an early stage in the project (Clark, 1989). However, two empirical studies of product development in the electronics industry failed to show that early supplier involvement reduced the buyer's overall development time (Eisenhardt and Tabrizi, 1995; Zirger and Hartley, 1996). Moreover, Eisenhardt and Tabrizi (1995) found mixed and contradictory support for early supplier involvement in their worldwide sample of computer firms. Both of these studies measured the impact of early supplier involvement directly on the buyer's time performance rather than on the supplier's time performance. Because the buyer's overall time performance is affected by numerous internal and external factors, the effect of timing of involvement may have been overshadowed by larger variable effects. However, the supplier's time performance should be more sensitive to the timing of involvement. We hypothesize that early supplier involvement in its customer's product development project reduces the number of supplier's activities that are delayed. Supplier's time perfbrmance will be improved for

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several reasons. Suppliers can begin designing tooling early in the project, and, more importantly, schedule time for tooling production. Tooling production for molded or stamped components is often the source of product development delays (King and Penlesky, 1992): If involved early, a supplier's manufacturing process constraints can be considered when the buyer makes preliminary design decisions. For instance, small changes in a fabricated part can reduce the change needed in the supplier's equipment, layout, or setup process, thus reducing supplier-related delays. Likewise, reducing the number of parts in assembled components simplifies process design for the supplier and reduces the potential for delays. We propose the following: Hi: Earlier involvement of a supplier in its customer's product development project increases the percentage of supplier activities that are completed on time. 2.1.2. Supplier's design responsibility

Custom components can be designed by the buyer, the supplier, or both, as a joint effort (Asanuma, 1989; Clark, 1989; Clark and Fujimoto, 1991; Cusumano and Takeishi, 1991; Helper, 1991). The buyer decides whether to outsource component design to its suppliers or whether to handle design in-house. Traditionally, US buying firms designed custom components in-house and then transferred detailed specifications to suppliers for manufacturing. Studies of Japanese firms have highlighted the more active role of key suppliers in their customers' product design efforts (Asanuma, 1989; Clark, 1989; Clark and Fujimoto, 1991; Cusumano and Takeishi, 1991; Funk, 1993). 'Partner suppliers' design and produce their own complete subsystems based on functional requirements provided by their customers (Kamath and Liker, 1994). Alternatively, suppliers of simple parts usually produce these parts to meet the detailed specifications provided by their customers. We hypothesize that increasing the supplier's responsibility for component design can improve the supplier's on-time performance. This performance is improved for several reasons. Competent suppliers are usually specialists in their area, and have focused knowledge in the design of the specific parts they

supply. Therefore, a supplier is better positioned than its customer to design the component in a way that reduces the number of tooling, equipment, or layout changes that are required in the supplier's manufacturing plant. Furthermore, because buyers must do more up-front planning to provide suppliers with functional requirements, they are less likely to change these requirements during the design cycle. Thus, we propose: H 2 : Increasing the amount of responsibility given to a supplier during design increases the percentage of supplier's activities that are completed on time. 2.1.3. Communication between the buyer and supplier

One view of product development is that of a 'communication web' (Brown and Eisenhardt, 1995, p. 353) in which information is gathered from multiple sources, analyzed, interpreted, and acted upon. High levels of communication both within the project team and externally with stakeholders are related to R&D project success (see e.g. Rubenstein et al., 1976; Allen, 1977; Ancona and Caldwell, 1990). Based on their review of product development research, Brown and Eisenhardt (1995) concluded that "frequent and appropriately structured task communication (both internal and external) leads to more comprehensive and varied information flow to the team members and, thus, to higher performing development processes" (p. 358). Studies of the effect of buyer-supplier communication on product development success have found mixed results. Several empirical studies have failed to confirm a relationship between communication with suppliers and product development or software development success (e.g. Katz and Tushman, 1979; Hauptman, 1986). However, case studies of Japanese product development practices have highlighted the benefits of face-to-face buyer-supplier communication during product development (Blenkhorn and Noori, 1990; Funk, 1993; Kamath and Liker, 1994). To increase the timeliness and amount of communication, large Japanese suppliers assign 'guest' design engineers to work side by side with their customer's engineers at their customer's facility during product development (Blenkhorn and Noori, 1990; Funk, 1993; Kamath and Liker, 1994).

J.L. Hartley et al. / Journal of Operations Management15 (1997) 57- 70

In this research, we hypothesize that greater communication between the buyer and supplier during product development will improve the supplier's time performance. Communication between a buyer and supplier during product development can facilitate coordination of activities. Frequent communication between the buyer and supplier during product development ensures that information is shared on a real-time basis, thus allowing the supplier as well as the buyer to respond more quickly to the inevitable changes that occur during product development. The supplier can be more responsive to the customer's changes in design, priority, and project direction, and therefore avoid being the bottleneck in the customer's project. Communication also should improve the quality of the development process. During product development, communication between a buyer and supplier can reduce uncertainty (Galbraith, 1973; Tushman and Nadler, 1978) and equivocality (Daft and Lengel, 1986). One area of uncertainty has to do with the technical approach that the product development team chooses to follow. Communication between the buyer and supplier allows them to jointly consider more alternatives for product and process design than if each organization works in isolation. The consideration of more alternatives can accelerate the development process by allowing companies to address the strengths and weaknesses of all the viable options (Eisenhardt, 1989), thus reducing delays that come from following a dead-end path. It is important to note that although there may be an upper bound beyond which increasing the amount of information shared slows the development process, we expect that few buyer-supplier relationships actually approach this limit. Communication between the buyer and supplier can reduce ambiguity and facilitate interpretation of data so that a shared understanding is developed quickly. According to Daft and Lengel (1986) faceto-face communication is the most effective medium to use to reduce ambiguity because it transfers information through multiple cues, allows for immediate feedback, and personalization. The number of cues, timing of feedback, and capability for personalization are the attributes for classifying communication media according to 'richness' (Daft and Lengel, 1986). According to this classification, face-to-face

61

communication is the richest, followed by telephone conversations, and then written communication. Frequent communication using a rich medium allows the buyer and supplier to develop a common interpretation of information and thus reduces delays because of mistakes and misunderstandings. Therefore we present two hypotheses: H 3: Greater use of face-to-face communication with a supplier during product det, elopment increases the percentage of supplier's actirities that are completed on time. H4: Greater use of phone calls with a supplier during product deL'eIopment increases the percentage of supplier's actit, ities that are completed on time.

During product development, there are times when written communication is the appropriate medium to use. Tushman and Nadler (1978) suggested that to be effective, the information processing capability should match the information needs. Written communication is capable of transferring large amounts of information when ambiguity is low (Daft and Lengel, 1986). For example, detailed product specifications and drawings are in a written format because of the high level of technical detail that must be communicated. Typically, written communication also is used to transmit formal approvals and requests for changes from the buyer to the supplier. However, because of the speed of fax, memos may be used for more informal communication too. Our interviews with purchasing managers suggested that sending memos by fax was used as a substitute for phone calls. Despite the fact that sending memos by mail is not the fastest mode of communication, we expected more frequent communication, even by mail, to be related to a higher percentage of on-time completion of the supplier's activities, Therel~re, we propose that greater use of memos by fax and mail is related to the number of the supplier's activities that are completed on time. l-Is: Greater use of memos between ~ buyer and supplier sent by fax during product del:elopment increases the percentage of supplier's acticities that are completed on time.

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J.L. Hartley et al./ Journal of Operations Management15 (1997) 57-70

H6 : Greater use of memos between a buyer and supplier sent by mail during product development increases the percentage of supplier's activities that are completed on time. 2.2. Control variables

Three control variables that may moderate the effect of the buyer-supplier interface management variables on the supplier's time performance were measured. These variables are: (a) duration of the buyer-supplier relationship, (b) degree of component change, and (c) supplier's technical capabilities. 2.2.1. Duration of the buyer-supplier relationship A history of working together helps the supplier to understand its customer's requirements and product development process, and should enable the supplier to contribute to its customer's project more effectively (Dyer and Ouchi, 1993; Kamath and Liker, 1994). Understanding a customer's needs helps a supplier avoid time-consuming product or process redesign. Based on prior experience, suppliers can begin earlier to design improvements and anticipate where potential bottlenecks may occur. Furthermore, Asanuma (1989) suggested that through experience a supplier builds customer-specific capabilities that enable that supplier to meet its customer's needs more effectively. Therefore, we hypothesized that greater prior experience between the buyer and supplier increases a supplier's on-time performance. Potential differences in the duration of a buyersupplier relationship may also affect use of buyersupplier interface management techniques. After a history of working together, the timing of a supplier' s involvement may not be as critical, because both the buyer and the supplier have a better initial understanding of their products and processes. However, for new relationships, early involvement and greater communication are more important as both parties learn about one another. Thus, prior experience between the buyer and supplier moderates the relationships among the supplier-buyer interface management variables and the supplier's on-time performance. 2.2.2. Degree of component change The amount of change required in a supplier's component is another factor that may affect the

timely completion of a supplier's activities. A high degree of change introduces uncertainty into a project. With a standard or a slightly modified component, a supplier can build upon previous experience and thus avoid unforeseen technical problems that can occur when designing totally new components. The degree of component change may influence how buyer-supplier interface management techniques affect the percentage of the supplier's activities that are completed on time. For instance, early involvement of the supplier is likely to be more effective in reducing delays when the supplier's component requires a major redesign rather than a minor change. The degree of component change may also moderate the effect of the supplier' s responsibility for design and buyer-supplier communication on a supplier's time performance. If more redesign is required, the choice of who does the design may be more critical to success of the project. Greater communication between buyer and supplier also is required when component change is greater. 2.2.3. Supplier's technical capabilities Technical capabilities can affect a supplier's ability to contribute to the buyer's product development process. Kamath and Liker (1994) suggested that technical competence allowed Japanese automotive suppliers to meet the tight product development deadlines set by their customers. Based on his study of Japanese and US automobile product development, Clark (1989, p. 1261) suggested that engineering capabilities in the supplier's firms and "the ability of the auto firms to both nurture and capitalize on that capability" contributed to the Japanese lead-time advantage. Therefore, we expect that greater supplier technical competence increases supplier's on-time performance. The effects of involving a supplier early on and increasing a supplier's responsibility for design are expected to be amplified by technical capabilities. Outsourcing design responsibility to a technically capable supplier could accelerate the design process, but if a supplier is weak technically, major delays could be encountered because of design errors that necessitate repeating the process. The effect of communication on supplier-related delays may also be influenced by the supplier's technical capabilities. If a supplier understands its customer's requirements

ZL Hartley et al. / Journal of OperationsManagement15 (1997)57-70 but is not able to meet the requirements, no tangible benefit will be attained for the buyer. More capable suppliers may actually need less communication because they need less technical assistance from their customers. 2.3. Project's overall time performance

The second stage of this research (Fig. 3) was to determine if delays in a supplier's activities delay the customer's product development project's overall completion date. In a study of 42 development projects in a large industrial products firm, King and Penlesky (1992) found that supplier delays affected project time. Specifically, delays in vendor communication and vendor-provided tooling caused projects to be late. The current research extends their findings across multiple industries and to multiple firms within these industries. Increasing the percentage ofsupplier's activities that are completed on time decreases delays to the buyer's project overall.

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successfully to rapidly develop and introduce new products (Gomory, 1989; Clark and Fujimoto, 1991; Sanderson, 1992; Funk, 1993). In a study of development products within one firm, Griffin (1993) found a significant positive relationship between degree of product change and project duration. Incremental innovation, in which only minor technical changes are made, reduces technical and market uncertainty as well as project complexity, compared to radical product change (Zirger and Hartley, 1994). Because incremental product changes build upon a firm's existing knowledge, experience, and capabilities, the development process can proceed quickly with few problems. Radical product change requires gathering new information and this process is likely to be time consuming. Thus, we propose: H 9: Increasing the degree of technical change of the overall product increases delays to the buyer's project overall.

H 7:

Two other variables that address the characteristics of the project were measured: (a) the priority placed on the project by the buyer's top management and (b) the degree of technical change made relative to the buying firm's earlier product models. According to Stalk and Hout (1990), time must be a key performance measure if product development projects are to be completed quickly. Case studies by Rosenthal and Tatikonda (1993) found that projects completed on time had explicit time goals and that top management had placed a high priority on achieving those goals. We propose that projects with a higher level of priority within the buyer's organization will be more likely to meet the overall project schedule. Hs : Increasing the level of priority placed on the project by the buyer's top management decreases delays to the buyer's project overall.

The degree of technical change of a product relative to a firm's previous product models also is expected to affect the development time required. Studies of Japanese firms have emphasized the 'incremental innovation' approach that has been used

3. Methods 3.1. Sample

The firms surveyed spanned a range of assembly industries (Standard Industrial Classification 35 and 38), including industrial equipment, machine tools, pumps, conveyors, computers, computer equipment, and analytical instruments. The firms studied were small to medium in size, with 95% of these firms reporting $500 million or less in annual gross sales. The development projects studied averaged 14.5 months from the date of funding approval to completion. The duration of projects studied ranged from 2 to 47 months. The sample group in this study was obtained by phone calls to potential firms to confirm they had recently developed a project with supplier involvement. Product design engineers or engineering managers in 160 firms agreed to participate in the survey, and 79 surveys were returned for a response rate of 49%. During the initial phone calls it was confirmed that the respondent had personally worked with a supplier during a specific product development project within the past two years. Each respondent was asked to focus on this project and specific supplier as he or she completed the questionnaire. The buyer's

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J.L. Hartley et al./ Journal of Operations Management 15 (1997) 57-70

design engineers were targeted as respondents because pilot study interviews suggested that design engineers influence the selection of suppliers that will be used, at least for new products, and they have first-hand knowledge of the supplier's involvement in design. All of the projects had been completed within two years of receipt of the survey, and 82% were completed within one year or less. 3.2. Survey instrument and measures

Although some items in this study built upon previous research, such as the timing of a supplier's involvement, supplier's design responsibility, and degree of product technical change (Clark and Fujimoto, 1991; Cusumano and Takeishi, 1991, Zirger and Hartley, 1996), many of the measurement scales were new because existing scales were not available. In designing the questionnaire, we minimized the number of multiple measurement items for each construct to ensure that the questionnaire could be completed in 20 minutes or less. Two of the measurement scales, supplier's technical capabilities and degree of technical change were based on the average of two items each. Cronbach's alpha for supplier's technical capabilities was 0.74; for degree of technical change it was 0.59. Given the nature of the b u y e r - s u p p l i e r interface management variables, categorical rather than continuous measurement items were used. After further refinement based on review by colleagues, the questionnaire was pilot tested. Ten members of a local chapter of the American Society of Mechanical Engineers (ASME) who worked with suppliers during product development participated in the pilot test. Some of the survey questions were modified to increase content validity based on the results of pilot testing. 3.3. Statistical methods

Ideally, a structural modeling approach would have been used to test the research hypotheses (the null hypotheses summarized in Table 1). However, this approach could not be used because a combination of both categorical and continuous items was used to measure the independent variables. Structural modeling techniques require that all variables have a continuous distribution. Because the buyer-supplier

Table 1 Summary of research hypotheses: null hypotheses Stage I null hypotheses H~ Earlierinvolvementof a supplier in its customer's product development project is either not related to or decreases the percentage of supplier activitiesthat are completed on time H2 Increasingthe amountof responsibilitygiven to a supplier during design is either not related to or decreases the percentage of supplier's activities that are completed on time H3 Greateruse of face-to-face communicationwith a supplier during product development is either not related to or decreases the percentage of supplier's activities that are completed on time Ha Greateruse of phone calls with the supplierduring product development is either not related to or decreases the percentage of supplier's activities that are completed on time H5 Greateruse of memos between a buyer and a supplier sent by fax during product development is either not related to or decreases the percentage of supplier's activities that are completed on time H6 Greateruse of memos between a buyer and a supplier sent by mail during product development is either not related to or decreases the percentage of supplier's activities that are completed on time Stage 2 null hypotheses H7 Increasingthe percentage of supplier's activities that are completed on time is either not related to or increases delays to the buyer's project overall Hs Increasingthe level of priority placed on the project by the buyer's top management is either not related to or increases delays to the buyer's project overall H9 Increasingthe degree of technical change to the overall product is either not related to or decreases delays to the buyer's project overall

interface management measurement items were categorical, and the measurement items used for the control variables and percentage of supplier's activities completed on time were continuous, analysis of covariance was used to test hypotheses H~ through H 6. Analysis of covariance (ANCOVA) reduces systematic bias introduced by independent variables that cannot be controlled for in the sampling procedure (Stevens, 1992). The categorical variable group means for the dependent variable are adjusted in the analysis to reduce the influence of differences on the control variable (covariate). For a variable to be used as a covariate it must be significantly linearly related with the dependent variable (Stevens, 1992).

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Table 2 Correlation matrix Independent variables

Mean

S.d.

1 2 3 4 5 6

Supplier's activities completed on time 83.0% 22.5% Length of the supply relationship (years) 2.03 1.15 Degree of component change 46.6% 40.6% Supplier's technical capabilities ~ 5.10 1.37 Project's overall delay (months) 1.81 1.17 Degree of technical change (overall 1.47 0.45 product) h 7 Top management priority ~ 5.01 1.20 8 End product quality ~ 4.53 1.28

1 2

3

4

5

6

7

8

-

0.05 0.09 -

0.38 * * * 0.19 0.16 -

-0.19 -0.04 0.06 - 0.22

0.11 -0.25 0.05 0.03 0.08 -

0.03 -0.21 -0.14 - 0.01 -0.36 * * * 0.35 * *

0.14 0.14 0.18 0.20 -0.18 0.13

- 0.05

0.07

a 7-point Liken scale (1 = low, 7 = high). b Sum of two scales, each scale standardized to 1 (0 = low, 1 = high). ** p_
In this study, three variables (duration o f the b u y e r - s u p p l i e r relationship, degree o f c o m p o n e n t change, and s u p p l i e r ' s technical capabilities) were c o n s i d e r e d as potential control variables and therefore, as potential covariates. A correlation analysis shows that only one o f these variables, supplier's technical capabilities, was significantly correlated ( r = 0.38, p < 0.001) with the p e r c e n t a g e o f supp l i e r ' s activities c o m p l e t e d on time (Table 2). Therefore, o n l y this control variable, supplier technical capabilities, is appropriate for use as a covariate. M e a s u r e m e n t items with a continuous distribution were used for the p e r c e n t a g e o f the s u p p l i e r ' s activities c o m p l e t e d on time, the priority p l a c e d on the project by the b u y e r ' s top m a n a g e m e n t , the d e g r e e o f technical c h a n g e o f the overall product, and the time p e r f o r m a n c e o f the b u y e r ' s d e v e l o p m e n t project.

S t e p w i s e linear regression was used to test the rem a i n i n g research hypotheses ( H 7 through Hg).

4. Results In general, the suppliers we studied p e r f o r m e d well with respect to c o m p l e t i o n o f their activities on schedule, with 29% o f the suppliers h a v i n g c o m pleted 100% o f their activities by the due date. The m e d i a n value for the supplier's activities was 85% o n - t i m e completion. A l t h o u g h 60% o f the overall projects were c o m p l e t e d by the due date, 28% o f the projects were five months late (or more). T h e r e were no statistically significant correlations b e t w e e n end product quality and supplier's activities c o m p l e t e d on time ( r = 0 . 1 4 ) and end product quality and overall project delay ( r = - 0.18). Therefore, in our

Table 3 Group definitions, frequency distributions and means for percentage of supplier's activities completed on time Buyer-supplier interface management variables

Group I

Group 2

Group 3

Timing of supplier's involvement (stage)

• • • •

20% (81.9%) 82% (81.6%) 13% (83.4%) 55% (81.0%)

Model building/ detailed design 38% (84.3%) Buyer designed 42% (84.4%) More than weekly but less than monthly 32% (81.8%) 9% (91.1%) 17% (85%) 17% (87.7%)

Prototype building or later

• Frequency (mean) Supplier's design responsibility • Frequency (mean) Type of communication: frequency (mean)

Idea generation/ project planning 37% (84.5%) Standard component 21% (78.5%) At least weekly

Face-to-face Phone calls Memos by mail Memos via fax

25% (81.6%) Joint or supplier design 37% (85.9%) Monthly or less often 48% (85.6%) 9% (95.2%) 70% (83.4%) 28% (86.5%)

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sample, product quality was not sacrificed to achieve faster product development. The buyer-supplier interface management variables groups are defined in Table 3. Timing of supplier's involvement was categorized into three groups: (a) involvement during idea generation or during the buyer's project planning stage, (b) involvement during the model building or detailed design stages of the project, and (c) involvement during prototype building or later project stages. The frequency distributions (Table 3) show that in 37% of the projects studied, the suppliers were involved in their customer's projects early, during idea generation or project planning. However, in 25% of the projects, the suppliers were not involved until prototype building or later project stages. Three groups were also used for the supplier's design responsibility. Group 1 was for standard components in which component design was not needed, group 2 encompassed projects in which the buyer did the design, and group 3 included either joint buyersupplier design or supplier design efforts. The most common design practice was for the buyer to design the component and then transfer detailed specifications to the supplier for production (42%). However, in 37% of the projects, suppliers were responsible for either joint design or independent design of their components. The communication variables were grouped by frequency of occurrence: (1) at least weekly, (2) more than weekly but less than monthly, and (3) monthly or less frequently. Phone calls and fax were the most frequently used modes of communication during product development. At least weekly phone conversations with suppliers were cited by 82% of respondents, and 55% cited at least weekly written communication via fax. Mail was the least frequently used mode of communication, with 70% of the respondents citing its use monthly or less often. Testing of hypotheses H I through H 6 using ANCOVA revealed that only one of the buyer-supplier interface management variables, frequency of phone calls, was significantly related to the percentage of the supplier's activities completed on time. The frequency of phone calls was significantly related to the percentage of the supplier's activities completed on time (p _< 0.06), as shown in Table 4, but the direction of this relationship was the opposite of what was

Table 4 Analysis of covariance: percentage of supplier's activities completed on time a Independent variables

Sum of squares

F

Supplier technical capabilities (covariate)

5108

Timing of supplier involvement Supplier's design responsibility Frequency of face-to-face communication

178 1211 460

0.24 1.60 0.61

Frequency of phone calls Frequency of memos by mail Frequency of memos via fax

2 225 3 288

2.94 ÷ 0.01 0.38

Residual

13.45 * * *

2 3483

n = 76 (list-wise deletion of missing data). + p_<0.1, * ' * p < 0 . 0 0 1 .

expected. That is, frequent phone calls were related to fewer of the supplier's activities being completed on time. There was no statistical support for relationships between the dependent variable, percentage of the supplier's activities completed on time, and any of the other independent variables, the timing of supplier's involvement (H 1), the supplier's responsibility for design (H 2), the frequency of face-to-face communication (H3), the frequency of memos by fax (Hs), or the frequency of memos by mail (H6). Results of linear regression analysis support hypotheses H 7 through H 9 as shown in Table 5. A statistically significant regression model of the overall project time performance was developed (R 2= 0.25, p < 0.001) in which all three of the proposed variables were in the equation and were statistically significant. Top management priority (H 8) entered first ( p < 0.001), then degree of technical change ( H 9) ( p < 0.05), with the percentage of the supplier's activities completed on time ( H T ) entering last (p < 0.05), using a stepwise approach. However, the imTable 5 Univariate regression: overall project time performance a Independent variables

Beta

T

Priority by top management Degree of technical change Percentage of the supplier's activities completed on time

-0~43 0.25 - 0.23

-4.45 * * * 2.37 * - 2.21 *

R 2 = 0,25, significance of F = 0.001, n = 78 (list-wise deletion of missing data). p < 0.05, * * p < 0.01, * * * p < 0.001.

J.L. Hartley et al. / Journal of Operations Management 15 (1997) 57-70

portance of the degree of technical change to overall project time is confounded by its statistically significant correlation with top management priority ( r = 0.35, p _< 0.01). The degree of technical change was not significantly correlated with the project's overall delay ( r = 0.08)

5. Discussion

Techniques used to manage the buyer-supplier interface were not related to fewer supplier-related delays in the projects we studied. Of the buyer-supplier interface management variables studied, only use of phone calls was found to be significantly related to the percentage of supplier's activities completed on time. However, this relationship was not in the expected direction: more frequent phone calls were related to fewer supplier's activities completed on time. This suggests that phone calls are a reaction to supplier-related problems encountered during development with the supplier using phone calls to obtain assistance from the buyer or the buyer using phone calls to try to get the supplier back on schedule. The results confirmed empirically that working with technically competent suppliers reduces supplier-related product development delays. Technically capable suppliers contribute to faster product development through problem avoidance and rapid problem solving. Because the use of technically capable suppliers increases the percentage of activities that are completed on time, a high priority should be placed on careful supplier evaluation and selection. However, we suspect that few buyers place enough weight on technical capabilities during the supplier evaluation and selection processes. In this study, only 11% of the respondents stated that the supplier's technical capability was the most important selection criterion that they used. Low cost (24%) and high quality (22%) were the most frequently mentioned reasons for selecting a supplier, which were followed by manufacturing technology (13%), and technical skills (11%). Although a supplier's product quality and manufacturing technology provide insight into its technical capabilities, direct measures of technical capabilities are more informative. The results suggest that by weighting technical skills more heavily when

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selecting the supplier, on-time completion of product development activities is more likely to occur. Two of the three control variables measured duration of the buyer-supplier relationship and degree of component change - were not significantly related to the supplier's time performance. Researchers such as Helper (1991) contend that the duration of the buyer-supplier relationship is not a sufficient indicator of the nature of the buyer-supplier relationship. Other factors such as the level of mutual commitment, strategic importance, and the quality of the relationship could further clarify the character of the buyer-supplier association. It was somewhat surprising that the degree of the component change was not related to the percentage of supplier's activities completed on time. During our interviews, one manager commented that his firm was increasing the use of standard parts as a way to accelerate product development. Further research is needed to explore the relationship between degree of change and the supplier's internal processes. Making projects a top priority is an effective technique for increasing the buyer's on-time performance. Even though top priority in the buyer's firm improved buyer time performance, it was not significantly related to the supplier's on-time performance (r = 0.03). Because the study was from the buyer's perspective, the supplier's level of awareness of the importance that its customer's top management placed on timely completion of the project was not measured. If the supplier's top management is aware that a valued customer wants a project completed quickly, perhaps development delays in the supplier's organization may also be reduced. Our results confirm that a buyer's overall project time performance is significantly related to the percentage of supplier's activities that are completed on time. Thus, supplier's on-time performance directly affects a buyer's ability to successfully complete its product development projects in a timely manner. In addition, product quality is not adversely affected by reducing supplier-related delays. Thus, the next question facing buyers is how best to work with suppliers to assist them in meeting their time goals? Our results suggest that the buyer's and supplier's internal processes rather than those used to manage the buyer-supplier interface are the primary determinants of product development time performance.

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Empirical research has shown that use of cross-functional teams, dedicated team members, and overlapping activities within a firm are related to fast product development (Eisenhardt and Tabrizi, 1995; Zirger and Hartley, 1996). Therefore, by understanding and exerting influence over the supplier's internal processes a buyer may be able to reduce supplier-related product development delays. This study reinforces the mutual benefits of transferring best practices between buyers and suppliers rather than managing just the interface. Firms, such as Toyota, that involve themselves in their suppliers' product development processes and freely transfer technical and managerial expertise are more likely to have productive supplier relationships than those that manage only the interface relationship. 5.1. Limitations

There are several limitations of this research. As is often the case with field-based empirical research, the sample was not random, and in this study, was skewed toward small- to medium-sized firms. Therefore, caution must be used when generalizing the findings of this research to other situations. For example, perhaps interface management techniques are beneficial for large firms with very complex product development projects, such as automobiles, which typically take from three to six years from initiation to start of production (Cusumano and Takeishi, 1991). The data is perceptual in nature, and we relied on the respondents' memory, introducing the potential for reporting of socially desirable responses rather than factual occurrences. Different results may have been obtained if a longitudinal research approach had been used. Another limitation is that the respondents were engineers and engineering managers in the buyer's firm. If this study had used the buyer's purchasing managers or design engineers in the supplier's organization as the key respondents, different results may have been obtained. Only one respondent was used per firm which also introduced the opportunity for bias. Another limitation is in the measure used for communication. Frequency and medium were measured but the communication content was not. Communication effectiveness during product develop-

ment is most likely affected by an interaction among content, frequency, and medium, so future research should include a measure of content. However, even considering its limitations, this research extends the understanding of buyer-supplier interface management during product development. 6. Conclusions

The percentage of the supplier's activities that are completed on time does affect the overall timeliness of the product development project, and therefore should be a concern for product development project managers. However, the findings will be somewhat disappointing to managers who are looking for confirmation that effective management of the buyersupplier interface will significantly reduce supplierrelated delays and, thus, accelerate development projects. The findings did not confirm that effective interface management will improve a supplier's time performance. Instead, buyers should look for other ways to reduce supplier-related product development delays such as selecting suppliers because of their strong technical capabilities. The buyer should also understand and (if necessary) try to improve the internal processes used by its key suppliers during development. For example, the use of a cross-functional development team within the supplier's organization can accelerate product development. Within the buyer's firm, top management priority and limiting the degree of product technical change can reduce overall product development delays. Do the findings of this research suggest that techniques such as early supplier's involvement, increasing the supplier's responsibility for design, and communication with suppliers should not be used during development? Not at all; however, managers should not expect to realize major time reductions on any one project by applying these interface management techniques. In this study, no measurable detrimental effect on the supplier's time performance was found, but management of the buyer-supplier interface can increase the complexity of project coordination and control for the buyer. There are other potential benefits from using these techniques besides faster development that should be investigated in future research. For instance, shifting component design responsibility to technically capable suppliers

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can reduce costs if suppliers have lower wages and overheads than their customer. Early supplier involvement and frequent communication may increase goodwill, may improve the nature of the buyer-supplier relationship, and may lead to longterm mutual benefits.

Acknowledgements We thank the anonymous referees, the associate editor, and the editor for their constructive comments on earlier versions of this paper. We are also grateful to Dr. Jack Meredith, Dr. David McCutcheon, and Dr. Dave Anderson for their helpful suggestions during the data gathering phase of this study. Funding for this research was provided by the National Association of Purchasing Management, the University of Cincinnati, and Bowling Green State University.

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