Supplier Involvement in New PD Projects Dimensionality and Contingency

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International Journal of Production ResearchPublication details, including instructions for authors and subscription information:http://www.informaworld.com/smpp/title~content=t713696255

Supplier involvement in new product development projects: dimensionality

and contingency effects Jayanth Jayaram a

a Department of Management Sciences, Moore School of Business, University of South Carolina,Columbia, SC 29208, USA

First published on: 14 March 2007

To cite this Article Jayaram, Jayanth(2008) 'Supplier involvement in new product development projects: dimensionalityand contingency effects', International Journal of Production Research, 46: 13, 3717 — 3735, First published on: 14 March2007 (iFirst)

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International Journal of Production Research,

Vol. 46, No. 13, 1 July 2008, 3717–3735

Supplier involvement in new product development projects:

dimensionality and contingency effects

JAYANTH JAYARAM*

Department of Management Sciences, Moore School of Business,

University of South Carolina, Columbia, SC 29208, USA

(Revision received October 2005)

In contrast to previous literature, we hypothesize supplier involvement in new

product development (NPD) projects to be multidimensional in nature and testthis assumption using data from a large sample of NPD projects. We also test thecontingent influence of supplier involvement on NPD project performance. Theresults supported the claim of multidimensionality of supplier involvement. Threedistinct factors – communication and information sharing, design involvementand infrastructure – comprising supplier involvement were found. These factorswere significantly related to one or more measures of NPD project performance.The study also found support for the contingent influence of market stability onthe supplier involvement – NPD project performance relationships. The resultssuggest that managers ought to consider adopting different bundles of supplierinvolvement practices that depend on the level of stability in markets and also onthe type of NPD performance objective that is being considered.

Keywords: New product development; Contingency theory; Supplier involvement

1. Introduction

The practitioner press and academic publications continue to emphasize the

importance of supplier integration in new product development (NPD) projects.

There is considerable research that examines the role of supplier integration in NPD

projects. For example, recent attempts at investigating supplier’s role in NPD

projects have focused on ‘extent of involvement’ of suppliers (i.e. how prevalent andin what form are suppliers involved in NPD projects) and on timing issues (i.e. in

what stage of the NPD project are suppliers involved). Yet, the findings from this

stream of research are paradoxical. Despite the conceptual claims of advantages

stemming from supplier integration, empirical findings are mixed (De Meyer and

Van Hooland 1990, Hartley et al . 1997a). In fact, Ittner and Larcker (1997) found

that supplier involvement actually hampered NPD project performance by

lengthening product development lead times. Similarly, in a survey of 109 Swedish

companies, 79% of the responding companies reported the use of supplier

involvement in product development teams; however, this factor did not significantly

relate to development lead times (Trygg 1993).

*Email: [email protected]

International Journal of Production Research

ISSN 0020–7543 print/ISSN 1366–588X onlineß 2008 Taylor & Francis

http://www.tandf.co.uk/journals

DOI: 10.1080/00207540600787010



The notion that the effect of supplier integration on measures of NPD project

performance has contingency effects is gaining attention. For example, Eisenhardt

and Tabrizi (1995) found that the use of early supplier involvement was positively

related to time to market only in the mature mainframe segment of the industry and

not in the growing personal computer segment of the industry. We depart from priorworks and hypothesize that supplier integration has a multidimensional role in NPD

projects. Through an empirical study, we identify the multidimensional nature of

supplier integration and offer insights into the role of supplier integration in

NPD projects.

The purpose of the research is three-fold. First, we identify key dimensions of

supplier integration in new product development projects. Second, we examine the

effects of supplier integration dimensions or ‘bundles’ (i.e. groups of inter-related

supplier integration items) and new product development project performance.

Finally, we examine contingency effects of size and market stability on the supplier

integration–NPD project performance relationship.

This paper is organized as follows. First, the literature is reviewed to identify key

supplier integration practices at the NPD project level. Propositions are introduced

concerning the relationship between the deployment pattern of supplier integration

practices and NPD project performance. The research methodology is described

next, focusing on the sampling procedure and measurement issues. Factor analysis is

used to reduce the underlying dimensions or to ‘bundle’ the various key supplier

integration practices identified from the literature, and regression analyses are used

to examine the relationships between supplier integration factors and NPD project

performance. Contingency effects of the variables ‘size’ and ‘predictability of market

demand’ on the relationships between supplier integration factors and project

performance are reported. Last, the results of the study and their managerialimplications are discussed.

2. Supplier involvement

Traditionally, supplier management in US companies has been characterized by

short term arm’s length contracts with little or no role in design and engineering

(Clark 1989). In contrast, Japanese manufacturers involved suppliers early in the

development process, assigned significant responsibility, and communicated

extensively and directly with product and process engineers. Thus, supply basemanagement took on a strategic orientation. In particular, this strategic orientation

is important in NPD projects. Companies like Sun, Tandem and Mips have

recognized that design and production of new products can no longer be

accomplished by a single firm and thus have resorted to supplier integration

(Saxenian 1991). The Silicon Valley firms cater to a fragmented computer market

that consists of distinct markets for super-computers, super minicomputers,

engineering work stations, networked minicomputers, personal computers, parallel

and multiprocessor computers, and specialized educational computers. This

competitive context has led to the development of specialized systems producers

and their networks of suppliers. Thus, the challenge is to successfully integrate thekey suppliers and assimilate this integration into the buying aspect of new product

development.

3718 J. Jayaram



Research has associated superior NPD project performance with early supplier

involvement (Gupta and Wilemon 1990) and extensive supplier involvement (Imai

et al . 1985, Clark and Fujimoto 1989). Clark and Fujimoto (1989) found that for

Japanese car manufacturers, supplier involvement accounted for about one-third

of the productivity advantages and 4–5 months of lead time advantages. Bonaccorsiand Lipparini (1994) reported the following benefits of early supplier involvement:

lower development costs, standardization of components, consistency between

design and suppliers capabilities, and reduction in engineering changes, higher

quality with fewer defects, improvement in supplier’s manufacturing process,

availability of detailed process data, and reduction in time to market.

In another interesting contrast, Swink et al . (1996) found in a series of five NPD

projects in high tech companies, that early supplier involvement strategy was

effective in reducing overall development time for highly innovative products.

Hartley et al . (1997a) found that the timing of supplier’s involvement was

significantly related to perceived contribution to product development success. Inthe same study, they also found a statistically significant relationship between NPD

project success and supplier involvement.

2.1 Elements of supplier integration

2.1.1 Timing and extent of supplier involvement. Ragatz et al . (1997), in a recent

study, found several practices that differentiated successful and less successful

supplier integration efforts. Specifically, they found the following practices to be

important: (1) supplier’s participation in NPD team of buyer; (2) direct commu-

nication with key suppliers; (3) shared education and training programs; (4) commonlinked information systems (EDI, CAD/CAM, e-mail); (5) co-location of buyer/

seller personnel; (6) technology information sharing; and (7) customer requirements

information sharing. In this study, we included all the items that were found to be

significant in Ragatz et al .’s study but modified the items in some cases to enrich

the concepts by capturing additional details. For example, we included item 2 as a

separate item but also added three additional items to substantiate communication

at the three NPD stages of concept development, prototype and full production.

Also, in lieu of item 6, we added the items, sharing design knowledge and sharing

manufacturing knowledge with suppliers.

2.1.2 Joint strategic programs. Besides, early supplier involvement and extent of

involvement in different stages of the NPD process, key suppliers also participated in

joint strategic initiatives with buyers that enhanced NPD capabilities. For example,

some studies have documented the fact that firms solicit input and suggestions from

suppliers on issues relating to design modifications, problem solving, reduction in

number of parts and critical components (Bonaccorsi and Lipparini 1994, Hartley

et al . 1997b, Liker et al . 1996, LaBahn and Krapfel 1994). This was formalized

through a systematic method of soliciting suggestions from suppliers through

initiatives such as suggestion programs. Some firms provide structural mechanismssuch as co-location of key supplier personnel with the NPD team to facilitate the

exchange of input and suggestions (Ragatz et al . 1997, Twigg 1997a).

Supplier involvement in new product development projects 3719



Thus, the empirical literature in supplier integration have studied issues relating

to early supplier involvement, types of involvement in the different stages of the

NPD process and joint strategic programs which developed firm capabilities in new

product development initiatives. In the early supplier involvement literature, the

dominant emphasis has been on communication and sharing of NPD project-specificinformation with suppliers.

3. Dimensionality of supplier integration

This review of the literature suggests that the broad array of supplier integration

practices affecting NPD project performance can be grouped into three major

categories: (1) communication and information sharing at different stages of the

NPD process; (2) participation of key suppliers in different stages of the NPD

process (such as being part of the NPD team); and (3) participation in joint strategicprograms with the buyer firms. Based on the existing literature we included 18 items

that belonged to the three categories: communication and information sharing,

participation of suppliers in different stages of NPD process and joint strategic

programs (see table 1 for listing of items).

Our research focus was to verify if these three categories of supplier integration

practices are empirically justified. We suggest that supplier integration practices are

best grouped around NPD goals. That is, supplier integration efforts are deployed to

support distinct NPD project specific activities. Thus:

Proposition 1: Supplier integration practices can be grouped according to the type of

activity they are meant to support in NPD projects.The above proposition suggests that supplier integration practices can be grouped

into the sub-dimensions of ‘communication and information sharing’, ‘participation

in different stages of NPD’, and ‘joint strategic programs’. Our next proposition

focuses on these three supplier integration factors: we propose that these underlying

factors will also be related to NPD project performance. In particular, we wish to

determine if joint strategic programs (for example) is related to product cost

performance. Thus:

Proposition 2: There is a positive relationship between each supplier integration factor

(e.g., Communication) and measures of NPD project performance (e.g., product cost

performance); i.e. the supplier integration factors found from the factor analysis are

significant predictors of NPD project performance.

Our goal in this research is to determine whether sets or ‘bundles’ of supplier

integration initiatives (from factor analysis related to Proposition 1) are related to

one or more dimensions of NPD project performance (Proposition 2). Finally, we are

interested in contingency effects of size and market stability on the relationships

between supplier integration factors and project performance. Based on past

literature, the two contextual factors of size and market stability are investigated.

Thus,

Proposition 3: The impact of supplier integration factors on NPD projectperformance is dependent on contextual factors. Specifically: (a) size moderates

the influence of supplier integration factors on NPD project performance;

3720 J. Jayaram



T a b l e 1 .

D e s c r i p t i v e s t a t i s t i c s

o f s u p p l i e r i n v o l v e m e n t p r a c t i c e i t e m s .

S u p p l i e r i n v o l v e m e n t p r a c t i c e s i t e m s

S a m p l e s i z e

M e

a n

S D

C o m m u n i c a t i o n a n d I n f o r m a t i o n s h a r i n g

1 . D i r e

c t c o m m u n i c a t i o n w i t h k e y s u p

p l i e r s

3 3 8

7 . 2

5 0

2 . 2 6 0

2 . C o m

m u n i c a t i n g w i t h k e y s u p p l i e r s d u r i n g c o n c e p t s t a g e

3 3 8

5 . 4

0 0

2 . 7 4 0

3 . C o m

m u n i c a t i n g w i t h k e y s u p p l i e r s d u r i n g f i r s t p r o t o t y p e s t a g e

3 3 7

7 . 0

1 0

2 . 3 4 0

4 . C o m

m u n i c a t i n g w i t h k e y s u p p l i e r s d u r i n g f u l l p r o d u c t i o n s t a g e

3 3 5

6 . 7

6 0

2 . 8 1 0

5 . S h a r i n g d e s i g n k n o w l e d g e w i t h k e y

s u p p l i e r s

3 3 8

5 . 7

3 0

2 . 8 0 0

6 . S h a r i n g m a n u f a c t u r i n g k n o w l e d g e w

i t h k e y s u p p l i e r s

3 3 7

5 . 3

5 0

2 . 8 3 0

7 . S h a r i n g c u s t o m e r r e q u i r e m e n t s w i t h

k e y s u p p l i e r s

3 3 8

6 . 2

5 0

3 . 0 8 0

P a r t i c i p a t i o n / I n v o l v e m e n t i n d i f f e r e n t s t a g e s o f N P D

8 . P a r t

i c i p a t i o n o f k e y s u p p l i e r s i n N P

D t e a m

3 3 8

5 . 8

6 0

2 . 7 1 0

9 . I n v o

l v e m e n t o f k e y s u p p l i e r s i n d e f i n i n g t h e a r c h i t e c t u r e o f n e w p r o d u c t s

3 3 6

4 . 2

2 0

2 . 8 2 0

1 0 . I n v

o l v e m e n t o f k e y s u p p l i e r s i n s e t t i n g d e s i g n s p e c i f i c a t i o n s

3 3 8

4 . 5

1 1

2 . 7 2 9

1 1 . I n v

o l v e m e n t o f k e y s u p p l i e r s i n p r o d u c t d e s i g n

3 3 7

4 . 5

7 0

2 . 7 4 0

1 2 . I n v

o l v e m e n t o f k e y s u p p l i e r s i n p r o t o t y p e b u i l d i n g a n d s m a l l s c a l e t e s t i n g

3 3 7

5 . 9

5 0

2 . 8 4 0

J o i n t s t r a t e g i c p r o g r a m s

1 3 . S h a r e d e d u c a t i o n & t r a i n i n g p r o g r

a m s w i t h k e y s u p p l i e r s

3 3 7

3 . 4

2 0

2 . 6 2 0

1 4 . C o m m o n l i n k e d i n f o r m a t i o n s y s t e m s ( E D I , C A D / C A M , e - m a i l )

3 3 6

4 . 8

9 0

3 . 0 3 0

1 5 . C o l o c a t i o n o f p r o j e c t p e r s o n n e l a n

d k e y s u p p l i e r s

3 3 6

3 . 3

4 0

2 . 7 7 0

1 6 . S e e

k i n g i n p u t / s u g g e s t i o n s f r o m k e y s u p p l i e r s o n d e s i g n m o d i f i c a t i o n s

3 3 7

5 . 6

0 0

2 . 6 8 0

1 7 . S e e

k i n g i n p u t / s u g g e s t i o n s f r o m k e y s u p p l i e r s o n p r o b l e m s o l v i n g

3 3 8

6 . 2

1 0

2 . 5 1 0

1 8 . S e e

k i n g i n p u t / s u g g e s t i o n s f r o m k e y s u p p l i e r s o n r e d u c t i o n i n n u m b e r o f p a r t s a n d c r i t i c a l c o m p o n e n t s

3 2 9

4 . 2

6 0

2 . 8 0 0

N o t e : s u p p l i e r i n v o l v e m e n t p r a c t i c e i t e m s a

r e o n a 0 – 1 0 s c a l e w i t h 0 ¼

‘ N o t U s e d ’ , 1 ¼

‘ E x t r e m e l y L o w U s e o f P r a

c t i c e s ’ a n d 1 0 ¼

‘ E x t r e m e l y H i g h U s e o f P r a c t i c e s ’ .




(b) market stability moderates the influence of supplier integration factors on NPD

project performance

4. Survey methodology

The unit of analysis for this research was a new product development project.

Firms from a variety of industries were selected in order to test for contingency

relationships across different settings. Data collection was conducted using a survey

instrument. The ideal respondent for the survey was specified to be ‘the person with

overall responsibility for overseeing product development projects’. The instrument

was analysed for content validity by product development managers from three

different industries before data collection. Each manager completed the survey and

provided feedback on wording of the items, understandability, organization of

the survey and length of the survey. The instrument was refined based on thisfeedback. The exact wording of the survey items is given in the appendix.

4.1 Sample characteristics

The sampling frame was firms in ‘high-tech’ industries which was defined to include

firms belonging to the Standard Industrial Classification (SIC) codes 35–38

comprising industries such as Industrial Equipment, Computers, Electronics and

Electrical Equipment, Motor Vehicles, Scientific Instruments and Medical Devices.

Firms belonging to these SIC codes were chosen because they represent industries

involved in manufacturing relatively high value-added and in most cases high

technology products. An initial contact list of approximately 5000 firms was

generated from two groups of sources – membership lists in professional associations

and commercial mailing lists. From the contact list of 5000 firms, 1500 firms were

selected at random (without replacement) for the initial mailing. A follow up post

card mailing after 2 weeks of the initial mailing and a second mailing after 4 weeks

of the initial mailing yielded 338 usable surveys (24% response rate).

4.2 Measures

Four aspects of project performance were measured in this study: product cost,

conformance quality, design quality and time to market. The respondents were asked

to provide an eleven-point rating of the project’s performance relative to objectives

set for the project, where 0 represented ‘Worse’ and 10 represented ‘Exceeded

Targets’.

The survey instrument measured the extent of use of 18 supplier integration

practices. Respondents were asked to indicate the extent to which each of these

practices was used by the firm in the NPD project in question (see table 1). If a

practice was not used by a firm, the respondent was asked to circle ‘Not Used.’ The

extent of use scale was a 10-point scale with endpoints labelled ‘Not Used’ (¼

1) and‘Used to a Great Extent’ (¼10). Means and standard deviations for the extent of use

ratings for the 18 supplier integration practices items are presented in table 1.

3722 J. Jayaram



5. Analysis and results

5.1 Dimensions of supplier integration practices (Proposition 1)

The 18 supplier integration items were subjected to principal components factor

analysis with varimax rotation. Out of the original list of 18 items, seven items were

dropped because of cross-loadings. They were:

. seeking input and suggestions from key suppliers on design modifications;

. seeking input and suggestions from key suppliers on problem solving;

. involvement of key suppliers in prototype building and small scale testing;

. sharing manufacturing knowledge with key suppliers;

. sharing customer requirements with key suppliers;

. communicating with key suppliers during concept stage;

. seeking input and suggestions from key suppliers on reduction in number of

parts and critical components.The factor analysis revealed a stable, three-factor solution with each of the factors

having eigenvalues exceeding one. The cumulative percentage of total variance

explained due to these three factors was 58%. Table 2 presents the results of the

factor analysis.

5.2 Research shows supplier integration comprises of three dimensions

It can be seen from table 2 that there was a high degree of convergence within each

factor or dimension (the lowest factor loading within a factor was 0.635). Also there

was a high degree of divergence across factors as indicated by the lack of cross-loading of any item on more than one factor. An examination of the factor loadings

for the items suggested the three factors: communication and information sharing,

design involvement, and infrastructure. It may be recalled that Proposition 1, stated

that supplier integration practices can be grouped according to the type of activity

supported in the NPD process. Based on the results in table 2, Proposition 1 was

supported.

The items forming each of the supplier integration factors were then tested for

internal consistency using Cronbach’s alpha (Cronbach 1951). As can be seen from

table 2, the scales for each of the supplier integration factors were internally

consistent and the constructs were reliable, with Cronbach’s alphas ranging from0.63 to 0.84. Overall, the analyses indicated that the constructs were unidimensional

and reliable; therefore, the factor scores were used in further analyses relating to

Proposition 2.

5.3 Direct relationship between supplier integration factors and

NPD project performance (Proposition 2)

Proposition 2 argued for a direct relationship between supplier integration factors

and measures of NPD project performance. In contrast, Proposition 3 stated that the

supplier integration factor-NPD project performance relationships are contingenton the two contextual factors of size and market stability. Moderated hierarchical

regression analysis was used to isolate the main effects of supplier integration factors




T a b l e 2 .

R e s u l t s o f f a c t o r a n a

l y s i s o f s u p p l i e r i n v o l v e m e n t p r

a c t i c e s .

V a r i a b

l e s

F a c t o r 1

( C o m m u n i c a t i o n

a n d I n f o r m a t i o n

s h a r i n g )

F a c t o r 2

( D e s i g n

I n v o l v e m e n t )

F a c t o r 3

( I n f r a s t r u c t u r e )

P a r t i c i p a t i o n o f k e y s u p p l i e r s i n N P D

t e a m

0 .

7 0 0

0 . 1 8 9

0 . 2 4 6

D i r e c t

c o m m u n i c a t i o n w i t h k e y s u p p l i

e r s

0 .

7 7 5

0 . 1 9 0

0 . 1 9 1

S h a r i n g d e s i g n k n o w l e d g e w i t h k e y s u p p l i e r s

0 .

6 3 5

0 . 3 5 9

0 . 3 7 7

C o m m

u n i c a t i n g w i t h k e y s u p p l i e r s d u r i n g f i r s t p r o t o t y p e s t a g e

0 .

7 5 2

0 . 2 6 8

0 . 1 3 7

C o m m

u n i c a t i n g w i t h k e y s u p p l i e r s d u r i n g f u l l p r o d u c t i o n s t a g e

0 .

6 4 9

0 . 1 5 3

0 . 1 2 2

I n v o l v e m e n t o f k e y s u p p l i e r s i n d e f i n i n g t h e a r c h i t e c t u r e o f n e w p r o d u c t s

0 . 1 5 7

0 .

8 1 8

0 . 1 8 6

I n v o l v e m e n t o f k e y s u p p l i e r s i n s e t t i n g

d e s i g n s p e c i f i c a t i o n s

0 . 2 7 1

0 .

7 3 7

0 . 0 7 2

I n v o l v e m e n t o f k e y s u p p l i e r s i n p r o d u c t d e s i g n

0 . 2 7 9

0 .

7 0 4

0 . 2 8 1

S h a r e d

e d u c a t i o n & t r a i n i n g p r o g r a m s

w i t h k e y s u p p l i e r s

0 . 1 5 7

0 . 3 1 5

0 .

6 8 6

C o m m

o n l i n k e d i n f o r m a t i o n s y s t e m s ( E D I , C A D / C A M , e m a i l )

0 . 2 1 4

0 . 0 6 0

0 .

6 6 6

C o l o c a

t i o n o f p r o j e c t p e r s o n n e l a n d k e y s u p p l i e r s

0 . 1 2 7

0 . 1 4 2

0 .

7 1 5

E i g e n v

a l u e s

8 . 0 1 6

1 . 1 9 9

1 . 1 3 8

P e r c e n t a g e o f v a r i a n c e e x p l a i n e d

2 5 . 4 1 4

1 9 . 9 3 3

1 2 . 1 7 1

C u m u l a t i v e p e r c e n t a g e o f t o t a l v a r i a n c e e x p l a i n e d

2 5 . 4 1 4

4 5 . 3 4 8

5 7 . 5 1 8

C r o n b a c h ’ s a l p h a

0 .

8 4 5

0 .

8 1 6

0 .

6 2 5 1

3724 J. Jayaram



on NPD project performance (Proposition 2), and to independently assess how

contingency variables (i.e. size and market stability) moderated the relationship

between supplier integration and NPD project performance (Proposition 3). The

overall procedure for each dependent performance variable (i.e. conformance

quality, design quality, product cost and time-to-market) was the same. In step 1, thecontrol variable, size and the three supplier integration variables were added as a set.

The size variable was entered first to control for any extraneous effect across

industries and organizations. The number of employees was used as a proxy for firm

size. Significant effects here would indicate a direct relationship between supplier

integration and NPD project performance.

5.4 Contingent relationship between supplier integration factors and NPD

project performance (Proposition 3)

In step 2, the contingency variable, market stability was added to verify for a main

effect between market stability and NPD project performance, before testing for

potential interaction effects involving market stability. This approach is consistent

with standard procedure for moderated hierarchical regression analysis (Stone and

Hollenbeck 1989). Market stability was operationalized as the extent to which

market demand was predictable. Finally, in step 3, the cross products of each of the

supplier integration factors and market stability were added as a set. Entering the

three interaction terms simultaneously controlled for possible multicollinearity

among the variables. Evidence of moderated relationships exists when the set of

interaction terms accounts for significant residual variance in the dependent variable.

Significant effects here would indicate that market stability moderated the

relationship between supplier integration and NPD project performance, therebyproviding support for Proposition 3. Tables 3–6 show the results of moderated

hierarchical regression analyses.

5.5 Research shows direct relationship between supplier integration and

NPD project performance

With firm size and market stability controlled, supplier integration factors as a set

were significantly related to all measures of NPD project performance –

conformance quality (ÁR2¼ 0.026, F ¼ 11.723, P50.01), design quality

(ÁR2

¼ 0.011, F ¼ 3.942, P50.01), product cost (ÁR2

¼ 0.032, F ¼ 11.744, P50.01)and time-to-market (ÁR2

¼ 0.023, F ¼ 7.433, P50.01). Specifically, the infrastruc-

ture dimension of supplier integration had a significant main effect on conformance

quality (b¼ 0.197, P50.01) and product cost (b¼ 0.183, P50.01). The commu-

nication and information sharing dimension of supplier integration had a significant

main effect on design quality (b¼ 0.184, P50.05) and time-to-market (b¼ 0.147,

P50.05). The design involvement dimension of supplier integration was marginally

associated with product cost (b¼ 0.101, P50.10). Overall, these findings provide

preliminary support for Proposition 2 and suggest that, other things equal, a

program of supplier integration that emphasizes communication and information

sharing with key suppliers, involving key suppliers in design efforts andinfrastructure ( joint training, shared information systems, etc.) is a valuable

approach for strengthening NPD project performance.




Table 3. Results of regression analysis for supplier involvement, market stabilityand conformance quality.

Variables Step 1 Step 2 Step 3

ControlSize 0.016 0.003 0.009

Supplier involvementCommunication and information sharing 0.015 0.020 0.017Design involvement À0.027 À0.026 À0.032Infrastructure 0.202ÃÃÃ 0.197ÃÃÃ 0.037Market stability 0.159ÃÃÃ 0.043

Supplier involvement/Market stability interactionsCommunication and information

sharing SIÂMarket stability0.072

Design involvement SIÂMarket stability À0.020Infrastructure SIÂMarket stability 0.242ÃÃÃ

ÁR2 0.026 0.004R2 0.041 0.067 0.071ÁF 11.723ÃÃÃ 3.104ÃÃÃ

F 14.220ÃÃÃ 10.855ÃÃÃ 20.453ÃÃÃ

*P50.10; ÃÃP50.05; ÃÃÃP50.01.

Table 4. Results of regression analysis for supplier involvement, market stability anddesign quality.


ControlSize À0.018 À0.030 À0.031

Supplier involvementCommunication and information sharing 0.182ÃÃÃ 0.184ÃÃ 0.045Design involvement 0.009 0.011 0.002Infrastructure 0.108 0.103 0.115ÃÃ

Market stability 0.107ÃÃ À0.058

Supplier involvement/Market stability interactionsCommunication and information

sharing SIÂMarket stability0.162ÃÃÃ

Design involvement SIÂMarket stability À0.046Infrastructure SIÂMarket stability À0.038

ÁR2 0.011 0.008

R2 0.033 0.045 0.053ÁF 3.942ÃÃ 3.981ÃÃ

F 11.409ÃÃÃ 7.675ÃÃÃ 9.274ÃÃÃ

*P50.10; ÃÃP50.05; ÃÃÃP50.01.

3726 J. Jayaram



Table 6. Results of regression analysis for supplier involvement, market stability

and time to market.


ControlSize 0.085 0.069 0.073

Supplier integrationCommunication and information sharing 0.085 0.147ÃÃ 0.039Design involvement 0.143ÃÃ 0.079 0.075Infrastructure 0.022 0.009 0.018Market stability 0.152ÃÃÃ 0.004

Supplier integration/Market stability interactionsCommunication and information

sharing SIÂMarket stability0.198ÃÃÃ

Design involvement SIÂMarket stability 0.087Infrastructure SIÂMarket stability 0.005

ÁR2 0.023 0.010R2 0.021 0.044 0.054ÁF 7.433ÃÃ 2.309ÃÃ

F 7.011ÃÃÃ 7.559ÃÃÃ 13.461ÃÃÃ

*P50.10; ÃÃP50.05; ÃÃÃP50.01.

Table 5. Results of regression analysis for supplier involvement, market stability andproduct cost.


ControlSize 0.028 0.010 0.009

Supplier integrationCommunication and information sharing 0.067 0.076 0.047Design involvement 0.102Ã 0.101Ã 0.073Infrastructure 0.193ÃÃÃ 0.183ÃÃÃ À0.035Market stability 0.183ÃÃÃ 0.062

Supplier integration/Market stability interactionsCommunication and information

sharing SIÂMarket stability0.101

Design involvement SIÂMarket stability 0.118Infrastructure SIÂMarket stability 0.260ÃÃÃ

ÁR2 0.032 0.010R2 0.037 0.069 0.079ÁF 11.744ÃÃÃ 3.457ÃÃ

F 12.927ÃÃÃ 12.212ÃÃÃ 23.857ÃÃÃ

*P50.10; ÃÃP50.05; ÃÃÃP50.01.




5.6 Research shows differential influence between supplier integration and NPD

project performance depending on level of market stability

Beyond the direct relationships between supplier integration and NPD project

performance, there was also support for the contingency approach to supplier

integration. As a set, the supplier integration–market stability interaction terms

accounted for significant incremental variance in all NPD project performance

measures (i.e. conformance quality, design quality, product cost and time-

to-market). This result indicates that market stability does in fact moderate the

supplier integration–NPD project performance relationship, thereby providing

support for Proposition 3. In testing the more specific moderation propositions,

the results indicate that supplier integration–infrastructure interacts with market

stability to predict conformance quality (b¼ 0.242, P50.01), and product cost

(b¼ 0.260, P50.01). Also, supplier integration–communication and information

sharing interacts with market stability to predict design quality (b¼ 0.162, P50.01),

and time-to-market (b¼ 0.198, P50.01).

5.7 Size has no influence on the supplier integration: NPD project

performance relationship

Interestingly, there was no support for size as a moderator in the supplier

integration–NPD project performance relationship. In this research, size was

operationalized as number of employees in the company. It is conceivable that

other operationalizations of size could have yielded different results.

5.8 Is the performance effect of supplier integration stronger in stable

or unstable markets?

Although the above results revealed that market stability moderates the supplier

integration–NPD project performance relationship, the question of whether the

strength of the effect is more dominant in stable markets as opposed to unstable

markets is yet to be answered. To address this issue, post-hoc correlation analyses

were conducted. The entire sample was split into two sub groups, high market

stability and low market stability based on median scores on the market stability

question. Based on median score split, 179 firms were classified into the ‘high market

stability’ group, and 163 firms were classified into the ‘low market stability’ groupwith five non-usable responses on account of missing data. The correlation analyses

of the significant supplier integration factors (communication and information

sharing, and infrastructure dimensions) with NPD project performance in both the

sub-groups are reported in table 7.

It may be recalled that the previous analyses revealed moderating or contingency

relationships between supplier integration and all the measures of NPD project

performance. In other words, the impact of supplier integration on NPD project

performance differed according to the level of market stability. It was not clear

whether the impact or effect size was stronger in the case of firms facing stable

markets or in contexts wherein firms faced unstable markets. The results in table 7indicate a distinct separation of effect sizes for the performance measures of design

quality, product cost and time-to-market. However, in the case of conformance

3728 J. Jayaram



quality, the difference in effect size in the two groups is not clear. It is interesting

to note that the pattern of results was similar for the performance variables of design

quality and product cost, in that the effect of supplier integration on these

performance measures were stronger in firms facing stable markets as opposed to

firms facing unstable markets. However, for the performance variable of time-

to-market, the opposite was true, i.e. the impact of supplier integration on time-

to-market was stronger in firms facing unstable markets as opposed to in firms

facing stable markets. This result makes sense because of the type of supplier

integration that is in question. Sharing of information and communicating with key

suppliers can be expected to have a stronger influence on time-to-market in dynamic

and unstable markets as opposed to stable markets.

6. Discussion

Until recently, the importance of supplier integration practices was supported

primarily by case studies and anecdotal evidence rather than by large-scale studies.

In the limited empirical studies that existed, there was mixed evidence as to the

importance of supplier integration in NPD projects. We examined a comprehensive

set of 18 supplier integration practices and four NPD project performance measures.

We proposed that deploying supplier integration practices as a set has merit in a

strategic NPD environment. The results indicate that:

. Supplier integration practices can be grouped into the three factors of communication and information sharing, design participation and infra-

structure development of joint programs with key suppliers.

. Supplier integration factors were positively to NPD project

performance, measured as: product cost, conformance quality, design quality

and time-to-market.

. The impact of supplier integration on NPD project performance was

contingent on market stability, but not on size.

. For the performance measures of product cost and design quality, the

supplier integration effect size was higher in stable markets as compared to

unstable markets.. For the performance measure of time-to-market, the supplier integration

effect size was higher in unstable markets as compared to stable markets.

Table 7. Correlational analysis of significant supplier involvement factors and projectperformance in high and low market stability groups.

Supplier integration factorConformance

qualityDesignquality

Productcost

Time-to-market

Communication and information sharingHigh market stability group – 0.259ÃÃÃ – 0.119Low market stability group – 0.091 – 0.164ÃÃ

InfrastructureHigh market stability group 0.198ÃÃÃ – 0.234ÃÃÃ – Low market stability group 0.191ÃÃ – 0.116 –

ÃÃP50.05; ÃÃÃP50.01.




. Supplier integration positively and significantly influenced conformance

quality in both stable and unstable markets, with no marked differences in

effect size.

6.1 Implications for supply chain professionals

The implications of the findings of this study are several. First, our results

demonstrate that supplier integration ‘bundles’ are significant predictors of NPD

project performance. The focus on NPD project performance as opposed to

manufacturing performance offers new perspectives on supplier management and

new product development. Also, our results support the view that the appropriate

unit of analysis for examining the effect of supplier integration is at the factor level

as opposed to a single-item level. This approach also finds support in NPD practice.

Second, the focus on four different aspects of NPD project performance – cost,

conformance quality, design quality and time – provides actionable guidelines for

managers. Our results indicate that supplier integration via infrastructure develop-

ment in joint strategic programs significantly enhance NPD project performance in

the areas of cost reduction and conformance quality improvement. An example of

such a program is co-location of project personnel and key suppliers. This is

consistent with the ‘guest design engineer’ concept of Twigg (1997b) who found that

collaboration between supplier design engineers and the design team ensured

conformance to target costs and quality characteristics. Common linked information

systems between the key suppliers and NPD project personnel is another example of

a program that builds infrastructure jointly between key suppliers and the NPD

team. Supplier integration via communication and information sharing is effective to

enhance design quality and time-to-market objectives in NPD projects. Our resultsindicate that practices such as direct communication with key suppliers, and sharing

design knowledge with key suppliers are effective for this purpose. This result is

similar to the findings of Ragatz et al . (1997), who found that direct communication

with key suppliers, and technology sharing with key suppliers were key distinguish-

ing factors that separated successful NPD efforts from unsuccessful ones. Supplier

integration via design involvement marginally improved product cost performance

suggesting that involving key suppliers in design decisions such as defining the

architecture of new products and setting design specifications influences achievement

of product cost goals in NPD. This is especially important to consider as design costs

constitute a huge portion of committed product costs in new product development(Susman and Dean 1992).

Third, our study found support for the contingent influence of supplier integration

on project performance bringing into question the notion that supplier integration is

imperative in all types of NPD project types. Specifically, we found that market

stability differentially influences the impact of supplier integration on NPD project

performance. This differential influence was found in the cases of all supplier

integration factors except design involvement. The implication of this result is that

firms facing highly stable markets need to deploy a different strategy with respect to

supplier integration, compared to firms facing highly unstable markets. Finally, our

research indicates that firms facing stable markets could use communication andinformation sharing as the supplier integration strategy for influencing design quality

performance and infrastructure development as the supplier integration strategy for

3730 J. Jayaram



influencing product cost performance. Firms facing highly unstable markets and

desirous of improving time to market performance should consider communication

and information sharing as the supplier integration strategy.

In summary, our study offers several contributions to the new product

development and purchasing literature. First, our study demonstrated that deployinggoal-oriented sets of supplier integration practices has a significant influence on

NPD project performance. This has major implications for crafting overall,

coordinated supplier integration strategies and linking these strategies to competitive

goals of new product development. Second, we have shown that there is merit in

looking at NPD project performance dimensions as key indicators for measuring

the effects of supplier integration practices. Third, the direct impact of different

supplier integration factors on NPD project performance revealed new insights.

Communication and information sharing and developing strategic infrastructure

programs with key suppliers were the two important factors influencing NPD project

performance. Fourth, market stability was shown to moderate the impact of supplier

integration factors on NPD performance measures. Finally, the effect sizes of

the impact of supplier integration on measures of NPD performance were shown to

be different based on levels of market stability thereby suggesting context

specific actions for practitioners. This study is an exploratory attempt to build

theory in the area of supplier integration. Thus, additional research is needed to

examine the robustness of our findings, and generalizations should be interpreted

with caution.




Appendix: Relevant Extracts of the Research Survey Instrument

General Comments on this Appendix

1. The Instructions section and Section A is reproduced here to provide an ideaof the context of the entire survey instrument. In particular, please note that

responses to survey questions were in the context of a specified new product

development project which was identified by the respondents.

2. The questions pertaining to Supplier Involvement (Section B) and New

Product Development Project Performance (Section D) are reproduced here

in full to indicate the specific context that anchored all responses. Please note

that the effectiveness measures and importance measures were collected but

not used for this study.

INSTRUCTIONS SECTION

1. This survey takes 25 to 30 minutes to complete.

2. This survey asks about a recently completed (in the last 3 years) product

development project.

Please select a project where:

. first customer shipment has occurred, and

. the product is of either a manufactured or assembled nature

3. Due to the nature of the questions, for most companies the appropriateperson to complete this survey is a person with overall responsibility for the

development project. The respondent must have been involved in all phases of

the project from start to end, and should have interacted with both upper

management and project personnel for key project decisions.

4. Please return the survey using the enclosed envelope.

5. If you have any questions regarding this survey, please feel free to call (517)

355-1237.

SECTION A. PRODUCT DEVELOPMENT PROJECT

Pick a new product development project completed in the last 3 years for which you

were a project leader. By new product we mean any product that is new to your

company or division. This would also include

. innovations and new items

. new product lines

Name of the product for which you are responding:——————————————

Description of this product:————————————————————————

3732 J. Jayaram






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3734 J. Jayaram



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Documents

Supplier Involvement in New PD Projects Dimensionality and Contingency