UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

4. New product development and ESI – early supplier involvement

Initial concept

Feasibility studies

Preliminary design

Prototype testing

Finalised product

Piloting of product and production

Release for commercial manufacturing

Stages of New Product Development

• Concern for overall product design• Concern for JIT delivery and supplier relationship

• Selection of materials• Cost elimination of materials

• Conceptual abstraction of product quality

• General view of product

• Close or near perfect parameters, specifications, features and tolerances

• Practical and economical parameters, specification, features and tolerances

• Limited regard for availability• High regard for availability

• Limited concern for cost• Lowest ultimate cost

• Use of ideal materials• Use of adequate materials

• Wide margins of quality, safety and performance

• Minimum acceptable margin of quality, safety and performance

Design OrientationPurchasing Orientation

Technological aspects….or Innovation orientation

ESI has been defined:

A practice that brings together one or more selected suppliers with a buyer’s product design team early in the product development process. The objective is to utilize the supplier’s expertise and

experience in developing a product specification that is designed for effective and efficient product roll-out.

Early Supplier Involvement in the New Product Development Process

Purchasing in the Future

Improved manufacturability

AccountabilityInterchange of Knowledge

TeamworkJoint problem solving

Ownership of IPRSAccess to new technology

Decision makingLower development costs

Cost and pricing sharingEnhanced quality

Technology sharingImproved specifications

Release of confidential business informationReduced development timeProblemsAdvantages

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

5. Selling and buying at right price. Tendering

Definition of Price

The value of a commodity or service measured in terms of the standard monetary unit.

Price Equilibrium

D1 S1

Seller’sMarket

Buyer’s Market

S1 D1

P1

Price Elasticity of Demand

Price Elasticity of Supply

=

=

% change in quantity demand% change in price

% change in quantity supplied% change in price

Perfect Competition – Conditions

Item must behomogeneous

Item must beeasily

transportable

Must be manybuyers

& sellers

No Preferentialtreatment or

discriminationagainst any

buyer or seller

Easycommunication

must existbetweenbuyers

& sellers

Competition – Types and Conditions

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

Purchasing Considerations in Pricing Agreements

Purchaser’s position in the marketNature of the purchase, e.g., strategies (leverage, bottleneck....)

Is it a rebuy, etc?....new buy items, modiefie rebuy?Number of suppliers

Alternative productsPrices paid by competitors – hard to obtain

Is the learning curve applicable?

Risk attached to purchase

Period to which price will apply - tactical, strategic? What does price analysis show? – reasonable price?

QuantityWhat is a fair price?

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC

Support Tools

Cost

Schedules

Design

Facilities

Sub-contracting

Tender Negotiations - Possible Topics

Industrial relations

Contract terms

After sales service

Experience

Total cost of ownership

Coordinate interests/schedules of both/all participants…..Target dead-line

List of references

Commercial topics…. payment?, financing etc.

UNIVERSITY OF ECONOMICS IN BRATISLAVA, SLOVAK REPUBLIC