Buyer-Supplier Collaboration in New Product Development Between Two Equally Powerful Firms: A Case Study of ABB and SKF


Author

Lisa Melander
Linköping University, SE-581 83Linköping, Sweden


Content

Collaboration in new product development (NPD) is becoming ever more important as firms specialize and rely on suppliers to provide the latest technology. Most studies on supplier involvement are of collaborations between a powerful buyer and a less powerful supplier, and taking the buying firm’s perspective. In contrast, this study focuses on a collaborative NPD project between two equally powerful firms, including both firms’ perspectives. A case study of a project between ABB and SKF was conducted. It is shown that not only is the supplier selection important, but it is also important for the buying firm to have an attractive project to motivate the supplier to join the project. Such attractions include business opportunities and learning possibilities. However, these learning possibilities could be viewed as harmful by the buying firm. Particularly when considering that the supplier was equally powerful. Fear of knowledge spillover that could make it possible for the supplier to become a future competitor could hinder the collaboration. These fears were avoided mainly through trust built during prior history with the supplier project

Keywords: NPD, supplier involvement, power, supplier selection, case study

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Firms collaborate with suppliers in new product development (NPD) in order to gain access to suppliers‟ technology. It is important to many firms to integrate new technology into their products, especially large system integrators, since many use multiple technologies (Brusoni et al. 2001; Takeishi, 2002). Collaboration with suppliers is common; a survey made by the Boston Consulting Group (BCG) shows that most firms collaborate with their suppliers. However, it seems that these firms mainly focus on operational efficiency and thus miss opportunities for collaborative product development (Tevelson et al. 2013). Similarly, academic studies have shown that firms can gain more from collaborating with competent suppliers (Lau et al. 2010; van Echtelt et al. 2008; Wasti and Liker, 1999). Hence, it is important to make a thorough supplier selection. Von Corswant and Tunälv (2002 p. 253) show the importance for firms to collaborate with suppliers in NPD by stating that in most of the cases studied “… the achieved product development performance would not have been realized without involving the suppliers.” However, there are challenges related to involving suppliers in NPD, for instance the buying firm does not have complete control of the project and is dependent on the supplier

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This paper is based on a case study of an NPD project where the buying firm and the supplier collaborated to develop a new component to be implemented in the buying firm‟s product. Performing a case study is a method to systematically study a phenomenon, and is recommended for the study of a complex unit which has multiple variables (Merriam, 1998). In the supply chain management field of research, case studies are valuable as they collect rich data (Kähkönen, 2011

The sampling process consisted of finding suitable firms, project, and respondents to interview. The firm ABB and their supplier SKF were selected to study, these firms are market leaders in their respective industries and can be expected to demonstrate „best practice‟ in collaborative NPD. During the sampling process at the initial meeting, the technical manager at ABB presented several NPD projects involving external suppliers. The chosen project was successful, involved new technology, and included a powerful international supplier, namely SKF. The technical manager contacted the supplier, and when the supplier agreed to be included in the study, the project was selected.

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The results of the study show that supplier selection is important, and that firms need to consider not only the suppliers‟ technology but also how well the firms work together. Similarly, many studies stress the importance of making a careful assessment of suppliers before selecting one for NPD projects (Handfield and Lawson, 2007; Hoegl and Wagner, 2005; Petersen et al. 2005; Surjandari et al. 2010; Un et al. 2010). In this project, the buying firm had to convince the supplier to join the project. As the firms were viewed as equally powerful, it was not for certain that the supplier would want to join the project although the buying firm had selected it. Table 2 shows an overview of the buying firm‟s selection criteria and the reasons for the supplier to join the project.

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About Author

Lisa Melander has a PhD from Linköping University in Sweden in industrial organisations. Her research interests include collaborative new product development, supplier selection, supplier integration, project management and procurement strategy. She has conducted research at companies such as ABB, Ericsson and SKF. Today Lisa works as a consultant at ÅF in Gothenburg, where she conducts studies on growth, competitiveness and challenges for industrial firms in the western region of Sweden.