Early Engagement of Suppliers or Contractors - Coursework Example

EARLY ENGAGEMENT OF SUPPLIERS/CONTRACTORS Name: Tutor: Subject: Date: TABLE OF CONTENTS 1.Executive Summary 3 2.Introduction 4 3.Literature Review 4 3.1.Customer-supplier engagement models 7 4.Data Collection and Analysis 12 4.1.Methodology 13 4.2.Results and analysis 13 5.Conclusion 15 6.Recommendations 15 REFERENCES 16 1. Executive Summary The aim of this report is to describe the challenges that face early engagement of suppliers and how these problems can be avoided. In the present world, organizations are experiencing pressure to come up with creative customer solutions due to increased stiff competitions they are facing. This pressure forces the organizations to speed up their technical developments, reduce lead times and response time and to minimize life cycle of products. Early engagement of the suppliers is an advantage to the organizations in a competitive environment. This will also improve success of the development and designing processes. (Gianluca, 2007). Suppliers should be competent enough so that time and cost is saved in the process of development. Therefore, there is a need to rely on expertise of suppliers in the sectors of materials and component suitability. ( Turner, J.R 2005). Early supplier engagement ESE importance is realized if it is applied in the early stages of concept development. This is because an organizational ability to maintain its competitive capabilities largely depends on the cost, timing, quality and amount of materials and the supply efficiency sequence. The early engagement of suppliers begins with the identification of the client’s needs and goals. This way, the customer can estimate the cost anticipated for the design course and also share technical information and develop a program required. The benefit of ESE is that it promotes component design and this in turn improves manufacturing process in general. It also encourages short time development by reducing iterations and engineering changes. The early supplier engagement assists in developing and maintaining mutual benefits in terms of the innovations, collaborations and even trust between two organizations. This is the best way of handling competition issues. 2. Introduction Industries and firms are facing high levels of competitions globally. The markets in which they are operating are also demanding creativity in terms of innovations and high quality products. Early engagement of suppliers is used by many companies as an approach for competitive advantage. This engagement is applied in the early stages of product design. (Handfield et.al 1999). The engagement is also faced with challenges such cases of accusations of favouritisms from the suppliers who are unsuccessful. Some companies also stick to a certain solution so early. These problems and others can be avoided if appropriate measures are applied. This paper describes the main steps on how to avoid these issues by examining key successful areas. 3. Literature Review Early engagement of suppliers is a process that enables mangers to communicate the needs of the organizations to the suppliers and come up with possible solutions to the problems. The engagement also helps the managers to understand the market structure and developed strategy design for delivery and innovation of products. Good engagement enables the procurement leaders to gain more trust and reliability of suppliers making them to become good customers. It is also helpful in developing an improved procurement plan. ( Fraser et.al, 2003). There are two categories of engagement. The first one is where a supplier engages commercially in order to assist in preparation of what could be considered of more importance. A good example of this kind of engagement is involving a consultant firm to offer advises on the main procurement exercise. The other form of engagement is when a contracting authority decides to assist more than one organization in researching on products or market, to ensure that procurements are structured properly or give way forward. In this kind of engagement, the contractors want to obtain market ideas and are not paid; this is not a commercial engagement like the other one. The problem with this method of engagement is that, the companies which do not benefit from the engagement, they will complain to others who received. They may even term this as discrimination. Engagement partners are facing a number of problems which includes absence of managerial knowledge required to run complex inter-organizational partnership. (Monczka and Trent,1997). Due to this problem, customer companies need to develop competency so that they can benefit from engagement partnership. (Bidault et.al 1998 and Wynstra, et al 2001). These two scholars argue that the competency must consider the capacities of both the customer and the supplier. There are some key areas that contribute to the success of early supplier engagement for product development. These areas are evaluated by use of maturity models like life cycle model by Farrukh et.al (2003). This model discusses some issues that might occur in different inter-related phases of New Product Development. These phases include preparation, formation, management, evaluation and conclusion. The preparation phase is significant because the earlier decisions made on design determines the quality, cost and development time of the final product. (Handfield et.al 1999). Involving suppliers who are time conscious in design process is important because the designers will benefit from their technical skills and competencies. Understanding of the risks and interest of early engagement and their impacts on the overall objective of the project is a requirement to the project developers. The stage of formation is considered to be the most important in NPD. (Goffin et.al 2006). According to an empirical study carried out by Petroni and Panciroli (2002 pp 147) states that, a customer might waste resource if inappropriate levels of suppliers responsibilities are chosen. They further argued that suppliers need to act beyond their competencies and technical knowledge and design parts when ‘off-the-shelf’ are available. From engineering perspective, the number of registered suppliers who are approved does not represent the most appropriate ones. Selection of suppliers should be conducted with professionalism so that they deliver good work. Management, evaluation and conclusion stage has areas of collaborative design relationship management which is a process area that require specific competency which a customer must accomplish a working relationship with the suppliers. The working environment should be of mutual learning and trust. (Fraser et.al, 2003). This includes mutual respect, ability to respond to all questions or requests, provision of suggestions and development of a cross-functional relationship at all stages. Three projects in UK which used early engagement of suppliers These are trial projects which were developed under engagement with suppliers. 1. Housing refurbishment programme- Hackney Homes and Homes for Haringey (SCMG). This programme uses alliance agreement and the outcomes of the project are: Reduced waste through lean program value engineering and rationalisation of specifications Substantial time savings through new pricing and mobilisation systems New opportunities for SME subcontractors and suppliers, and substantial employment and skills improvements 2. Surrey, project horizon This is a repair and improvement programme based on long term alliance contract. The project recorded some significant outcomes common in early engagement with suppliers. Improved warranties Improved skills and employment output Significant cost saving Improved innovations and sustainability Establishment of intelligent client capability and Contribution to national economy. 3.cookham wood- new build young offenders institution This project is under the ministry of justice-cookham wood. This also gave similar results like for the projects outlined above. These are such as: Innovative design solutions Substantial savings Collaborative working team Time saving and better programme certainty 3.1. Customer-supplier engagement models A model can be defined as a specific representation of a real or an abstract object. It helps in understanding something in a simplified way. A model is concrete and specific but they present overall requirements and principles that could have been ignored. Engagement models are developed to represent an entire lifecycle of a certain relationship. Customer-supplier engagement model represents the lifecycle of a specific service or product in a given relationship by making use of customer-supplier engagement framework. It bridges the gap between narratives that are emotional and the interactions which can be implemented. 3.2. Customer-Supplier Engagement Framework The framework can be summarized in 12 steps as follows; Step 1- Search and Target During this stage, both the customer and the supplier do not know what they need. The supplier produces services and focuses on marketing in order to meet a customer who wants such services. This stage is based on trial and error. Step 2-Find and field Inquiries In this stage, the customer has already identified the product/service that he needs. They now want more information from the suppliers and this can occur in various forms of engagement like trade shows, talking over the phone, workshops or even online. Step 3- Negotiations At this level, both the parties consider the best alternatives in order to reach a satisfying agreement. They agree on the pricing and terms which are mutually beneficial to both of them. The negotiations are carried out during interactions and when the customer knows exactly what he/she wants. Step 4- Buy and Sell There is agreement on the offer and the two parties make legal transactions which may involve paperwork. The mode is also agreed on which could be cash or obligations are made on when and how to make the payment. This step can be complex depending on the type of the product or services being bought. Step 5-provisions This stage involves establishment of all appropriate entries in the systems of both the supplier and customer for ease management of the new relationship. More details concerning the transactions and the agreement are kept in the system. Step 6-Configurations The service or the product is delivered and configured for use at this stage. This could be physical delivery of the product or configuration of specific service such as activating an application on the phone. Step 7-Use and Enable use In this stage, the product or service is now in use. Some of the services might require support from the supplier so that they become operational. This could involve adding some information, innovation or applications. Step 8-Update and Maintain Changes occur with time and this requires and this requires updating of the information. The data in the systems might also need to be updated to add new names or change in agreement. The systems should also be maintained to prevent loss of the data. Step 9- Improve and Develop When the condition of the products and services are good, more customers can purchase them. Also the relationship between the customer and the supplier should be good so that the relationship is improved and maintained. Step 10-Fix and Handle problems There are unanticipated problems in any relationship and therefore both parties should put in place ways of handling these problems. Step 11-Leave and Manage exits The relationship will eventually come to an end and both parties should ensure that, it ends well. This is achieved by designing for a good end. It should be done competently so that future re-engagements are made possible. Step 12-Restart and Re-engage The process of restarting and re-engaging is simple because the parties know each other and therefore development of trust is easy. A relationship which is respectful re-engagement is one way of maintaining future relationships. 4. Data Collection and Analysis Technology is the major emerging issue in the customer-supplier engagement. It is the main focus where suppliers deliver their services and products to the customers and it is also the fastest and most convenient means of communication between the two parties. Despite these advantages of technology, it is also a challenge to the partnership. The challenges include poor knowledge on how to use it, lack of technological resources etc. apart from technology, there are other emerging issues in the engagement such as relationship between the two parties, communication, negotiations and many others. For this reason, a research was conducted in ASI Solutions which is an ICT company in Australia based in Sydney on the challenges facing customer-supplier engagement. 4.1. Methodology The research was conducted by use of various methods such questionnaires, interviews and sampling. Several questionnaire papers were distributed to the employees of the company and the response was good. Also a part of the staff (100 of them) was selected through sampling and was interviewed orally to explain the challenges of supplier engagement process face to face. 4.2. Results and analysis Challenges Strongly agree Agree Strongly diasgree Disagree Inability to adapt new supply chains 23 65 7 5 Customer-supplier relationship 40 45 3 7 Lack of proper product design 22 56 6 16 Competition 85 10 2 3 A table showing the results of questionnaire conducted in ASI Solutions employees A good percentage of respondents reported that the main challenge is the customer-supplier relationship. The customers have developed habit of changing their needs on regular basis and this makes them to go after every new item or product in the market. (Handfield,et.al 1999). These solutions are high-tech products which are very expensive but of low quality. This indicates that, they are lacking adequate knowledge about the market and therefore they need support from suppliers who understand market trends. This way, the customers will be given advice through the interactions and be able to get what they want. Inability to adapt the supply chain is another challenge. The research justified that, most companies stick to their supply chains even when new changes or strategies arises instead of adapting their supply chains to address the changes in the market. Adaptation of supply chain brings competitive advantage which will enable them to remain in the market and most successful companies use this method. The best supply chains are able to acquire the latest information, identify major patterns and filter out unnecessary data so that any fluctuation in the market is identified before it occurs. (Lee, H. 2004). The products produced lack proper design that can attract more customers according to the research carried. These findings indicate that, there is high competition in the market and there is need for innovation and designing of products. The products should be designed in such a way that the end product is unique and of high quality. This strategy is referred to as “postponement” (Edward Feitzinger, 1997). This strategy is the best in responding to demand changes because the companies can produce a finished product once they have fully acquired information on the customer’s preference. The other outcome from the research was that, technology is a big challenge to the market engagement. The respondents argued that the challenge is on use of new technologies that are present in the market today. One of the issues is related to large data which the suppliers are expected to handle. The suppliers are also experiencing difficulties on this matter and they cannot define if the data is beneficial or not. The other issue is inadequate use of technological gadgets such as mobile phones. These results are in consistent with other investigations. One of the studies suggests that customers need to utilize the use of these equipments because they are reliable and cheaper although not applicable in all cases. (Smith, 2005). Another challenge which was presented by more than 85%of the questionnaire respondents is competition. There is high competition rate that makes things difficult for the suppliers to know what is valuable to them because there is so much available information. The same applies to the customers. The suppliers and consumers should therefore be competent enough so that they can pick the information that is important for them. It is wise for the firms to establish reliable logistic system that will respond quickly to changes and needs. This provides data on supply and demand changes to both engagement partners. They can involve a logistic system provider to assist in this. (Lee, H. 2004). 5. Conclusion Companies should practice early engagement of suppliers in their organizations. This will help them to understand the market trends because of the expertise knowledge of the suppliers. This is a competitive advantage to the companies. It has also proved to successfully develop products.(Lemming et.al 1996). The engagement is also associated with some challenges which include poor relationships which can be disrespectful hence leading to termination of the partnership. The other challenge is that the engagement makes some of the companies who do not have any engagement to be disadvantage. 6. Recommendations It is recommended that organizations should follow the stated steps above so that the engagement become successful. This is because research has shown that most of them do not apply them hence making them to incur losses. It is also recommendable that each organization or company set policies which state how the engagement will be carried out, they type of the engagement to adapt and other issues of customer-supplier engagement. REFERENCES 1. Turner, J.R. (2005). The commercial project manager. England: McGraw Hill. 2. Walker, D. and Rowlinson, S. (2008). Procurement systems: a cross-industry project management perspective [online]. London: Taylor and Francis. Available at: https://ezproxy.buid.ac.ae/login?url=https://www.dawsonera.com:443/abstract/9780203939697 3. Lee, H (2004). The triple a supply chain [online]. Harvard Business Review, October. Available at: ftp://ftp.software.ibm.com/software/emea/dk/frontlines/Tripple_supply_chain_Havard.pdf 4. Farrukh, C., Fraser, P. and Gregory, M., 2003. Development of a structured approach to assessing practice in product development collaborations. Proc. Instn Mech. Engrs: Journal Engineering Manufacture 217(B), 1131-1144 . 5. Fraser, P., Farrukh, C. and Gregory, M., 2003. Managing Product Development Collaborations: A Process Maturity Approach. Proc. Instn Mech. Engrs: Journal Engineering Manufacture, 217(B), 1499-1519. 6. Goffin, K., Lemke, F. and Szwejczewski, M., 2006. An exploratory study of ‘close’ supplier– manufacturer relationships. Journal of Operations Management 24(2), 189-209. 7. Handfield, R.B., Ragatz, G.L., Petersen, K.L. and Moncska, R.M., 1999. Involving Suppliers in New Product Development. California Management Review 42(1), 59-82. 8. Masterman, J. (2002). An introduction to building procurement systems. 2nd ed. London: Spon Press. 9. Association for Project Management. (1998). Contract strategy for successful project management: a guide for project managers on best practice. Norwich: Association for Project Management. 10. Morledge, R., Smith, A. and Kashiwagi, D. (2013). Building procurement. 2nd ed. Oxford: Blackwell Publishing. 11. Wynstra, F., Weggemann, M. and Van Weele, A.J., 2003. Exploring purchasing integration in product development. Industrial Marketing Management 32(1), 69-83. Read More