7B - Innovation & Quality Management in Supply Chain

Innovation and Quality Management

• Open innovation involves creating close collaboration with external parties to share business interests in research and development, new product design and market introduction.

Open Innovation

• Utilizes knowledge from external sources in addition to internal R&D
• Focuses on finding the best research and ideas, regardless of origin
• Controls profits by creating contracts with other companies that use the innovations
• Examples: General Electric (GE), Samsung, LEGO

Closed Innovation

• Companies rely solely on internal knowledge and resources for innovation
• Focuses on recruiting the smartest people in the field and conducting the best research internally
• Controls profits by controlling all innovation efforts internally

The Role of Suppliers in New Product Development

• Suppliers can be a significant source of innovation, especially in industries like automotive
• Early supplier involvement can result in:
  • Shorter development lead-times
  • Higher product quality
  • Shorter time to market

Benefits of Early Supplier Involvement

• Short-term benefits: better product quality, lower product cost, shorter development time, and lower development cost
• Long-term benefits: joint research programs, aligned technology strategies, and gain and risk-sharing basis for new product concepts

Three Core Processes of New Product Development

• Strategic management processes: provide infrastructure for future technological collaboration with suppliers
• Operational management processes: manage individual development projects
• Collaboration processes: foster and implement technological collaboration with external partners

Strategic Management Processes

• Focus on: make or buy decisions, selecting potential technology partners, standardizing product design, and evaluating supplier development capabilities and performance

Operational Management Processes

• Decide which suppliers to address for specific technological questions
• Determine what suppliers to involve early and late in the project
• Determine what contracts to use in relationships with suppliers

Collaboration Processes

• Foster and implement technological collaboration with external partners
• Determine how to work with suppliers in new product development, communicate, assess inter-system compatibility, evaluate product designs, and use contractual agreements

Purchasing and New Product Development

• Idea generation: generate as many new product ideas as possible
• Concept study stage: translate new product idea into a conceptual design
• Definition stage: translate conceptual design into a technical design
• Product development: translate technical design into laboratory models
• Pre-production planning: consider production requirements
• Pilot production: manufacture pre-production series
• Start of regular production: commence actual production

Quality Management

• Quality: degree to which customer requirements are met
• Quality management: ensure that requirements are met and can be demonstrated objectively