The Role of Purchasing in Design: A Study in the British Defense Industry
Guy, S. P., Dale, B. G., International Journal of Purchasing and Materials Management
An increasing number of people are now coming to the view that quality needs to be built into a product at the design stage. Traditionally, a design engineer has attempted to develop solutions in isolation from suppliers and customers. The result of this approach often is the unintended creation of interpretation, cost, and quality problems.
In today's technically innovative environment, expert suppliers exist that can assist in the design process and immediately upgrade quality in their own products and also in the buyer's end product. All too often, however, the designer attempts to produce a component design alone even though he or she may have limited knowledge of the particular manufacturing techniques and processes and their capabilities. Internal pressures that drive for even faster development of new products perpetuate this state of affairs. A cost effective design is sometimes ignored for the sake of speed, often stretching the manufacturer's process capability into areas likely to result in low yields and at times poor product quality.
The problem is compounded by the adversarial nature of traditional buyer-supplier relationships. Fear of losing market share often silences the supplier that should have been highlighting potential difficulties. Instead, the cost of low manufacturing yields inflates the selling price, and further cost is added by the inefficiencies poor design produces in the customer's own product. During the 1990s, this type of avoidable waste must be addressed by those firms that strive to remain profitable. The goal must be to improve quality and reduce manufacturing costs.
This article argues that the function best placed to solve these types of problems is purchasing. In addition to fulfilling its external responsibilities, the purchasing function should now be utilized to create and then manage a relationship between the design function and the supplier base.
Focusing on two U.K. defense contracting firms, this case study research determines the degree to which this logic has been adopted--and whether the role of purchasing has changed as a result. The study also examines two additional issues: (1) the extent to which the purchasing function is being utilized effectively in the design process, and (2) the capability of the purchasing function to carry out such a responsibility.
Company A produces gyros, accelerometers, and fuses. Successfully marketing one particular fuse, its annual sales were approximately |pounds~60M up to 1989. However, new business subsequently declined and annual sales plummeted to |pounds~15M. Compounding this were corporate problems that produced a loss of |pounds~100M in the 1989/90 financial period.
Company B specializes in electro-optical equipment. Its parent company is a blue-chip multinational firm that views the activity at company B as one providing strategic advantage through its advanced optical design capability. Company B's annual sales are approximately |pounds~12M.
These firms were selected to study for the following reasons:
1. They were at different stages of evolution in their relationship with the supply base; this was thought to make for a useful comparison of their approach to the problem of design and supplier interface.
2. The U.K. Ministry of Defense in recent years has sought to introduce a "value for money" contracting approach, in contrast with the previous practice of effectively rewarding inefficiency through the use of "cost plus" contracts. Significant pressure to react to the new competitive environment has emerged, and analysis of the two companies was thought to be useful in gauging their success in reacting to these changes.
3. Given this environment of change, functions impacted most by the change could be identified and analyzed, as could the rate of acceptance of the change by customers and suppliers.