Vendor Involvement
Vendor-supplied components do much to determine the quality, cost, and market availability of a product. Not only are more vendors involved today; their contributions to the total product are also more critical. Consider, for example, IBM’s extraordinarily successful entry into the microprocessor (personal computer) market. In a radical departure from practice, the company elected to manufacture only a few selected items and to purchase the bulk of the system’s components from specialized vendors. Similarly, General Motors has raised quality, lowered costs, and reduced investment in inventories through the timely involvement of its vendors in the design process.
General Electric’s jet engine division has carried the integration of engineering and purchasing to its logical conclusion and reaped significant cost and time savings. Some 16 design teams have worked on various aspects of GE’s new commercial engine. Included on each team are three members of the materials (purchasing) organization: a procurement engineer, a buyer, and a subcontract administrator. Vendors participate as appropriate throughout the design process. Normally, it takes three to four iterations through the design process to move from a clean sheet of paper on the drafting board to a workable product. Although the final results are not yet in, GE estimates that its approach to product design will reduce the required iterations by 50% to 60% and prune costs by a whopping 20%