The Benefits of Early Supplier Engagement

05-19-2014

Identifying unique solutions early in the development process introduces opportunities for both cost and time reductions.

As many organizations face increasing competition, the pressure to introduce innovative customer solutions also increases. This pressure creates an urgency to accelerate technical development, shorten product life cycles, reduce lead times and improve response times. Simply stated, heightened competition creates an increasingly compressed timeline for producing innovative products.

Engaging suppliers early in the component development and design process can improve the odds for success and provide advantages in today’s competitive and global marketplace. Even vertically-integrated manufacturers can be at a competitive disadvantage by assuming all processes in house.

Relying on the expertise of the supplier in areas of material and component suitability can save time and cost in the development process. Competent suppliers should possess the optimal knowledge base and technologies related to the components they supply. In short, experience matters.

Generally, optimal value is realized when Early Supplier Engagement (ESE) is employed at the very first stages of concept development. In essence, the ability of an organization to remain competitive is largely dependent upon the amount, quality, cost and timing of its materials and supplies, as well as the effectiveness of its supply chain. These factors can include materials, prototypes, optimal part geometry, manufacturing processes, packaging and logistics. ESE should be considered a fundamental activity as 80% of product cost are identified and committed to during the design phase.

The ESE process starts by defining the customer’s needs and goals: what do they want to accomplish over the product life span? This process helps the customer define reliable target costs for components early in the design process and eliminate unanticipated changes in the cost equation. The customer can then outline the program requirements and share the project’s technical information. A mutual exchange of reliable and consistent information, and establishing and agreeing on timelines is critical to ensure that all expectations are met. This stage can also determine manufacturability and integration of components in the final product/assembly. It is increasingly common for suppliers to assume a greater role in the assembly process as a value added function, contingent on capability.

The bottom line benefit of ESE is enhanced quality and decreased costs, driven by

• Improved component design resulting in better manufacturability and a more efficient manufacturing process, and
• Reduced number of design iterations and engineering changes resulting in a shorter development timeline.

In summary, Early Supplier Engagement, or ESE, can help to establish and maintain a mutually beneficial framework of collaboration, innovation and trust between two organizations. Implemented intelligently, the process will yield significant benefits to both the supplier and sourcing organizations. This is a far more effective way to address increased competition over the long term than by competitive pricing alone.