Supply Chain Integration of New Products
Last summer I worked with a medical device company based in London as they were finishing up on finalizing their first prototype. Throughout this process, there was a lot of discussion about the location of their suppliers and the integration of their supply chain. The company decided to go with suppliers that were close to the headquarters (so they stayed within an hour of London) so that they would be able to stay in close communication with them throughout the developmental phase and going into the launch of the product. Although they could have found suppliers that would have worked faster and cost less in places like China, they purposely chose suppliers in close proximity, so they would have better communication. Throughout my experience there I saw how useful this decision turned out being. Throughout the developmental/prototype phase a lot of questions came up and a lot of issues had to be worked through. Luckily, the solution to this problem was only a quick trip of an hour away rather than an entire trip to a different country. This meant that problems could be solved a lot quicker, so in the end the process went faster and ended up being less costly due to low travel costs. Also, the close proximity allowed the company to build a good relationship with the supplier, so that they felt they could trust them to work towards the same goal of providing the best quality product possible. In the future this relationship could be beneficial as even more new products are developed because then the company will already have good suppliers they know they can trust and work well with.
I found this article (https://www.sdcexec.com/sourcing-procurement/article/12336811/how-the-supply-chain-can-help-improve-new-product-development-success) that specifically talks about the benefits of using the supply chain to help improve the development of new products. One thing the article mentions is the importance of including the suppliers in the design process. Suppliers can be helpful because they might have different information what kind of supplies that will go into the product, how different processes will work in making the product, etc. By working with the suppliers, possible problems/kinks in the supply chain can be worked out earlier in the process, which saves time and money. The idea is that with more brain power, the product will be more innovative and profitable. In class we talked about the pros and cons of supply chain transparency. While there is a risk in including suppliers in the design process, there are also many benefits that might make the transparency worthwhile. This is especially true if you know you can trust your supplier to uphold their end of the bargain. I find this especially interesting with the development of new products. Do you think there is a point in a product’s life cycle where it makes sense to change the supply chain? For example, after the new product is working well, does it make sense to then change suppliers in order to go with suppliers that are cheaper even if it means the suppliers are further away? Or should you continue to stay with the supplier you know and trust so that you can continue the strengthening the relationship even though it might cost a little more upfront?
It is interesting to hear a real world example of supply chain transparency, especially since we just talked about this in class today. This reminds me a lot of the video we watched today in class (https://www.youtube.com/watch?v=qhn9gpOf8uQ). The main takeaway from this video was that Supply Chain Visibility is necessary because it can help companies identify where something is going wrong in their supply chain and how to fix this problem. If a company needs to create a product and some of their raw materials producers run into trouble it is very helpful if there is supply chain visibility because the company can find a solution very quickly. I think it makes sense that Jordans company would desire to work with companies within a certain radius of it. This can enable them to know a lot about the companies they use as suppliers and information can flow freely and quickly between suppliers and themselves, this way if a problem arises they can quickly correct it.
It’s really cool that you got to see supply chain decisions being made in real time, and then the benefits of those decisions. I think this relates to the post about Allbirds – they were making the best shoe they could, which didn’t necessarily mean they were making the cheapest shoe. Quality is largely determined by communication, and a few more dollars spent on ensuring that communication is established to heighten the quality would be worth it to me as both a producer and a consumer. Thinking of suppliers as part of the team instead of simply an order being filled helps keep that sense of communication and collaboration alive to ensure quality products. It’s interesting to see how the functions of a company rely so heavily on establishing organization culture like this.
I had never really considered the importance of having manufacturing facilities nearby a company’s headquarters in during the development stages before, but it definitely makes a lot of sense. Even with advances in technology that have connected the globe, there is a tremendous benefit to being able to see product prototypes or manufacturing processes firsthand. In addressing your question as to if the company should move production once it is out of the development stage, I see some pros and cons. While they would likely save money by moving to a less expensive factory, it is unlikely that the product will be flawless. Furthermore, they may want to make alterations to it in the future as technology or needs change. In this circumstance, they would essentially be reentering the development stage. I could see a productive solution in which they still perform the bulk of their production in a less expensive facility, but head their research and development closer to home.
The location of suppliers and the company’s headquarters is very important to the supply chain. This summer I will be working as a financial analyst for Inspire Brands, which is the parent company of Arby’s and Buffalo Wild Wings. In November last year, Arby’s purchased Buffalo Wild Wings for $2.4B. After doing this Arby’s established the parent company (Inspire Brands) that will oversee the operations for both Arby’s and Buffalo Wild Wings. Arby’s is located in Atlanta, GA and Buffalo Wild Wings previously had their headquarters in Minneapolis, MN. This forced Arby’s to evaluate where the best strategic locations for each brand would be. As the summer gets closer I have been more informed about how they are going about their decision-making process to decide where to locate them. It is very interesting because they are using many of the things that we have talked in class to help them make the best decision.
I definitely understand why a company that makes medical equipment would want their suppliers to be nearby. These products have an incredibly high level of quality control, I would assume. Furthermore, the costs that healthcare providers face are typically subsidized in some way, whether it is insurance or or federal programs. This ultimately means that the company which produces and sells the equipment can charge a premium for the product.
On the other hand, if we were discussing a company that sold a product such as clothing or household goods, the decision would likely be vastly different. Especially in the development phase of a product, these companies are likely going to engage in some sort of market penetration strategy such as pricing. If this were the case, financial margins would likely be more important than supplier transparency.
Jordan, it’s really cool that you were able to work in a position that allowed you to see our class teachings come alive. Although my position and workplace were very different from yours, I also could see the importance of working close with partners and suppliers. I worked with a Healthcare Coalition that provided permanent housing for homeless individuals, and we worked closely with the city of Camden, the US Housing & Urban Development Department, and various providers. I had to work on external communication and outreach. I can say now that being close to all of our partners made retrieving information so much easier. I know we talk about the importance of communication and the transfer of information, and I would agree that being able to easily visit a specific partner or supplier and ask all the questions you need made the process much easier. Location to suppliers made everything proceed much smoother, and because we were so close to our partners we often met for lunch meetings, and grew a relationship of trust because of this. There is something special about being able interact with a partner and see them face-to-face that makes relationships stronger.
To answer your questions, I believe that a company should make changes to their supply chain when they start to notice competition beating them out. For example, the article we read last week’s blog discussing Nike changing its supply chain to expedite its production time is the perfect example. Nike started to realize that it was losing when they compared themselves to the production time of its competitors. However, as Nike realized, I do not think a company needs to change its suppliers if they are working well and already have a trusting, long-term relationship.