AberdeenGroup Report Focuses on Role of Supplier Relationship Management in New Product Development to Ensure Profitability from Innovation
A successful product launch requires teamwork. Team members must pull together when taking a new product from concept to production. Even when all team members do their part in product development, if the product cost structure doesn't support the price the market will bear, the product launch will not succeed. That is why early Procurement and Sourcing involvement is critical to ensuring that costs and supply risks are addressed in the initial stages of product development.
While sourcing decisions have a major impact on controlling product costs and maintaining product profitability, most companies show significant room for improvement. That is one reason more than 60% of manufacturers report initiatives to involve Procurement and suppliers sooner in product development process. Best-in-class companies are collaborating with Procurement earlier in the design process and making sourcing decisions a higher priority during early phases of the product lifecycle.
In a study UGS co-sponsored with AberdeenGroup, Procurement in New Product Development: Ensuring Profit from Innovation, these best-in class organizations experienced product cost reduction of nearly 18% as well as a 10% to 20% improvements in time-to-market cycles. To request the complete AberdeenGroup report, click here.
Collaborate with Sourcing early in the product development process
Along with the financial benefits of early and broader stakeholder involvement, increased collaboration can also increase product development complexity. Sourcing data must be readily available at the point of design. Processes must allow for input and approval from multiple sources. To reduce this complexity, best-in class manufacturers are using PLM technologies to integrate sourcing collaboration in the product development process.
Some companies continue to ask themselves, "Do I really need to improve collaboration between Sourcing and Product Development?" According to the AberdeenGroup research, the majority of companies meet their product cost targets on only 41% to 80% of their new products. And less than half of manufacturers can predict product costs within 25%.
