PROJECT SCOPE AND PROJECT PERFORMANCE: THE EFFECT OF PARTS STRATEGY AND SUPPLIER INVOLVEMENT ON PRODUCT DEVELOPMENT
By Kim B. Clark
Motivation
l Product development has become a focal point of international competition in many industries.
l A great deal of interest has centered around comparison of Japanese. U,S,, and European firms.
l Most of the research, there was less attention about the strategy of the project
Objective
To examine the effect on product development of project scope: the extent to which a new product is based on unique parts developed in-house.
Scope and Performance
Project scope: What part of the development effort will be done by the internal project team.
Two elements: choice of unique versus off-the-shelf parts, choice of supplier involvement
1 Scope and Manhours:
Ø Decisions about scope have a direct impact on observed manhours in the project
Ø Using off-the-shelf parts is likely that the hours observed in the project will be less than if one were to develop a new part in-house.
2 Scope and Lead Time:
Ø Impact on lead time is not straightforward.
Ø Lead time is determined by the critical path in the network
Ø Supplier involvement may also reduce lead time if a supplier involves in an activity which is on the critical path
Ø Since additional coordination time may offset the gains from supplier involvement, if relationships with suppliers are difficult to manage
Scope in the World Auto Industry
l In terms of performance, the Japanese projects have a sizeable advantage in both manhours and lead time.
Ø U.S firms : do most engineering work in-house
Ø Japanese firms: emphasize black box designs
l Japanese projects use a much lower fraction of common or carryover parts than either the American or European projects
l the supplier effect dominates, leaving the Japanese projects with a lower project scope than either the U.S. or the Europeans.
l On average, the unadjusted data show that the Japanese use one-third the manhours and complete a vehicle about 18 months faster than their competitors in Europe and the U.S.
Scope and Engineering Manhours (regression analysis)
l Adding measures of project scope has a dramatic effect on the regression
l Interaction between price and NH imply that the impact of scope on manhours depends on the complexity of the product
l When the Japanese dummy was excluded from the regression, the coefficient on the supplier variable increases by a factor of 2,7 à quality of the relationship and the way that it is managed is important.
Scope and Lead Time (regression analysis)
l Strong positive impact of scope on lead time à increase in scope from the Japanese level of 0.57 to the U.S. level of 0.66 would increase lead time by 3.9 months
l The effect of Interaction between price and NH is insignificant à scope on lead time does not depend on the complexity of the product.
l Japanese firms derive real advantages from their supply base.
Implications
l Decisions about scope not only may change the mix of hours, but the total engineering effort to develop the product.
l The impact of suppliers in Japan is rooted in far more than just a difference in the fraction of parts engineered by suppliers. There are important differences in supplier capability and in the relationship with suppliers that underlie these results.