Product Development Partnerships: Balancing the Needs of OEMs and Suppliers Morgan L. Swink and Vincent A. Mabert A s products continue to become more technically complex and global in scope, pr~)duct development managers are relying more and more on suppliers for help. Finding the right suppliers requires intense scru- tiny ~)f their capabilities. Sometimes the "right supplier" doesn't exist; it must be developed. Unfortunately, such a process is expensive and time-consuming. Firms cannot affbrd to lavish attention on each and every supplier. Limited res~urces necessitate developing close, longer- term. n{mtraditional relationships with a few of the most important ones. Companies such as Procter & Gamble and Ford Motor Company have recognized that only a small group of their suppliers are major contribu- tors ~) long-run success. This select group pro- vides c~maponents or systems that create competi- tive advantages in the product, such as primary oper:~ting and power systems, application-specific circuitry, customized control systems, and crucial, often proprietary, materials. Only these critical few suppliers play "frill partner" roles in NPD-- nexv pro)duct development. Japanese automakers include only about a dozen of their 100-200 first- tier suppliers in this catego U. In addition, suppliers' contributions to new pr~ducl success are broadening. Original equip- mere manufacturers (OEMs) no longer look to supptie~s to merely improve product quality and cut production costs. Now they look to them to generate ideas tk~r differentiating products, offer solutions to technical design problems, and com- murficate insights into global markets and their varying needs. At the same time, suppliers are changing their operations as they seek to acquire new skills and meet the heightened expectations of their customers. Environments of change are inevitably met with varying de- grees of success. And product development partnerships, though hailed as the next manu- facturing rew)lution, are not as successful as many firms would like. Numerous success sto- ries have been docu- mented, but less glow- ing reports have also emerged as the collec- tive experience has grown. Change environ- ments also involve con- flict. A key reason why partners are struggling with new levels of interac- tion is that they often have conflicting needs and objectives. Managers need a clearer understand- ing of these conflicts. Two questions are critical: 1. What motivations of OEMs and suppliers create communication barriers and other difficul- ties in executing effective partnerships? 2. How should firms manage their own changing roles and needs as well as those of their key suppliers in NPD partnerships? THE OEM'S WISH LIST T he traditional mix of criteria used by OEMs to evaluate suppliers--price, deliv- ery performance, defects, and so on--is broadening to include more product development and globalization issu~'s. The "wish list" outlined Produ~'t l)evel~pmenl Partnerships: Balancing the Needs of OEMs and Suppliers 59