Early Supplier Involvement (ESI) and Business Development Report

This report delves into the concept of Early Supplier Involvement (ESI) in the business world, emphasizing its significance in modern product development and supply chain management. It explores the benefits of ESI, such as improved product quality and reduced costs, while also addressing implementation challenges. The report reviews relevant literature, including the Resource Dependency Theory and Social Exchange Theory, to understand the strategic implications of ESI. It also examines the role of ESI in new product development and provides recommendations for its application in emerging markets and retail sectors. The research methodology involves secondary data collection from various sources, including books, journals, and websites, to analyze the theoretical aspects of ESI and derive relevant findings and conclusions.

Running head: PURCHASING AND MATERIAL MANAGEMENT
Purchasing and material management
Name of Student
Name of University
Author Note

1
PURCHASING AND MATERIAL MANAGEMENT
Abstract
The report focuses on the importance of Early Supplier Involvement in the modern world.
From the report, it has been found that the application of such a strategy can help an
organisation reduce any mistakes regarding designing of product. Recommendations are
made in order to improve such a system in emerging markets for the betterment of the
organisations in those regions. Retail sectors also need to implement this strategy in order to
maintain the quality of the products.

2
PURCHASING AND MATERIAL MANAGEMENT
Table of Contents
Introduction................................................................................................................................3
Literature Review.......................................................................................................................3
Concept of Early Supplier Involvement.................................................................................3
Importance of Early Supplier Involvement............................................................................4
Early Supplier Involvement in new product development.....................................................5
Early Supplier Involvement and Resource Dependency Theory...........................................6
Early Supplier Involvement and Social Exchange Theory.....................................................7
Hypothesis and gaps...............................................................................................................8
Research method........................................................................................................................8
Findings......................................................................................................................................9
Discussion of findings..............................................................................................................10
Implication of findings.............................................................................................................10
Conclusion................................................................................................................................11
Reference..................................................................................................................................12
Appendices...............................................................................................................................15
Appendix 1...........................................................................................................................15
Appendix 2...........................................................................................................................15

3
PURCHASING AND MATERIAL MANAGEMENT
Introduction
The report focuses on the concept of early supplier involvement in the business world.
Early Supplier Involvement is used to define the collaboration between supply chain partners
and manufacturers at the initial stage of product development (Brindley, 2017). The reason
for choosing this topic is to understand the benefits that a business may encounter if the
suppliers are involvement from the initial stage before the development of a product. The
study can help in understanding the theories involved in the supply chain and the results that
are normally derived by a manufacturer. The report can help in comparing the difference
between involvements of suppliers at an early stage with that of the involvement at a later
stage. The report focuses on reviews by scholars and identifies models involved in
understanding the topic. The methods used for gathering data has highlighted that help in
deriving the result. The discussion related to findings and the implications are mentioned in
the report.
Literature Review
Concept of Early Supplier Involvement
In the modern day, every business organisation wants to gain a competitive advantage
in the market. This needs to be done by formulating strategies that are required for
conducting the business in a proper manner. According to Menguc, Auh & Yannopoulos,
(2014), Early Supplier Involvement (ESI) is one such strategy that is adopted by managers in
order to promote a product before its release. This promotion is done by involving the
stakeholders that have considerable interest in the company. The stakeholders involve the
customers, suppliers and the manufacturers. The early involvement of the stakeholders
provides various advantages to the business. One such advantage is the better quality of

4
PURCHASING AND MATERIAL MANAGEMENT
products. Preview about the process used for product development is provided at an early
stage to the stakeholders. This provides an opportunity to entertain ideas about the ways by
which a product can be improved.
The quality of a product can be improved depending upon the needs and wants of the
customers. Keeping this in mind, the cost of the product can also be reduced. In the opinion
of Yurtkulu, Hilletofth & Johansson, (2014), the involvement of manufacturers reduce the
cost of manufacturing the product. Subsequently, the final price of the product is also
reduced. The product life cycle is also reduced which can help in the rapid development of
the product. However, there are certain challenges as well. The basic challenge that every
manager faces is the implementation of the system. Most of the employees believe that
involvement of manufacturers and customers can result in the failure of the product (Sarang
et al., (2016). This is mainly because of the loss of the surprise element that at times can
attract the customers.
Importance of Early Supplier Involvement
In order to develop a product in a manner the customers can use, certain specifications
are required to be maintained. These specifications can at times be complicated for the
engineers designing the product. Hence, the involvement of suppliers can reduce the burden
of calculating the specifications and gathering resources one at a time. According to Roh,
Hong & Min, (2014), the involvement of suppliers in ESI is an important factor for the
company. Apart from this, the change in process is another factor that is important for the
implementation of ESI. In earlier times, the suppliers were not involved in product
development. Hence, the process used for manufacturing a product was lengthy. The
involvement of suppliers after the designing of the product proved to have a negative factor
as in most times there remained discrepancies in the product.

5
PURCHASING AND MATERIAL MANAGEMENT
However, with the involvement in the initial stage, such discrepancies can be avoided
(Zhao, Cavusgil & Cavusgil, 2014). Based on the quality of the products that are being
manufactured the inventory can also be controlled. This provides an opportunity to manage
the inventory and make a place for involving new products (Luzzini et al., 2015). Thus, the
importance of ESI can be attributed to reducing the number of flaws that an engineer may
commit while designing a product.
Early Supplier Involvement in new product development
According to Yeniyurt, Henke & Yalcinkaya (2014), long-term relationship with the
customers is required in order to maintain the supply chain of a company. Cooperation
between the suppliers and the customers can help in the sales of the products and provide the
company with an added advantage. Hence, while developing a new product, it is necessary
that the opinions of the customers be taken into consideration. This can be done by providing
the customers with feedback forms that can help in understanding the tastes and preferences
of the customers. The ways by which the customers remain involved in the business is
indicative of the level of expectations that exist in the business.
Pystynen (2016) stated that the dependence structure followed by the customers have
a considerable influence in the supply chain. Apart from this, the involvement of suppliers
can also lead to the increase in profit. This can be done by proving proper knowledge about
the ways by which the products can be manufactured. The manufacturing cost is reduced
which makes it possible for setting up a reasonable price for the customers. Thus, it can be
said that in order to develop and launch a new product, the involvement of the suppliers is
important (Monczka et al., 2015). The new product development method involves five steps
that help in the involvement of the suppliers.

6
PURCHASING AND MATERIAL MANAGEMENT
Figure 1: Process of developing new product
(Source: Yue & Jing, 2015)
Early Supplier Involvement and Resource Dependency Theory
In the modern world, Resource Dependency Theory (RDT) has become influential in
understanding organisational and strategic management theories. Rossignoli & Ricciardi,
(2015) is of the opinion that the need for support from external sources is required by every
organisation. In the course of this assistance, the organisations become dependent upon the
external resources. RDT helps in removing such dependencies by analysing the potential
issues that may arise in the organisation. RDT helps in creating an innovative atmosphere that
helps enterprises to continue the current task. According to Jones et al., (2016), the use of this
theory can help in gaining a competitive advantage for an organisation.
Therefore, the link between ESI and RDT can be well established from the fact that
the introduction of an innovative model can help any organisation to satisfy customers. This
theory can particularly be used in the case of developing new products. In this regard, it can
IdeagenerationBuildprotoype

7
PURCHASING AND MATERIAL MANAGEMENT
be said that the profitability of the enterprises depend on the techniques used for innovation
and the dependence it has on the external factors (Craib, 2015). Hence, an organisation needs
to maintain a future course of action in order to ensure that the profitability is maintained.
The building of social relationships can also help in the development of resources. This is
because, with the involvement of people from various sectors, the designing of products can
be made in an effective manner. Hence, this theory can help in the effective involvement of
suppliers and contribute to improving the quality of the product.
Early Supplier Involvement and Social Exchange Theory
According to Christopher, (2016), Social Exchange Theory (SET) is important to
understand the decision-making issues that a purchaser normally faces. In order to make an
assessment regarding the product that needs to be purchased, decision-making is important
considering various elements. The elements include planning of the demand, analysing the
strategy, analyse the strategy adopted by the supplier and the awards or rewards that may be
obtained. It has been observed that SET is applicable while trying to analyse the strategies
adopted by the suppliers. This can be done by establishing a long-term relationship with the
suppliers, gaining the trust and remaining committed to a certain level of purchase. In the
light of this statement, it can be said that the application of SET is an important in order to
improve the buyer and supplier relationship (Stadtler, 2015). This helps in increasing the
performance of the organisation. The involvement of suppliers at the initial stage is useful for
maintaining the relationship with the suppliers. This is because SET helps in analysing the
potential benefits and pitfalls before making a decision. This is an important part of an
organisation as the decisions involved may lead to the proper execution of the product and
services. Apart from this, Wisner, Tan & Leong, (2014) stated that social exchange also
involves the analysis of the outcome by calculating the rewards from the cost involved. This

8
PURCHASING AND MATERIAL MANAGEMENT
is indicative of the fact that people willing to make social exchanges weigh the difference
between the cost factor and the reward factor.
Hypothesis and gaps
After analysing the theories and the models that involved in the involvement of
suppliers in the early stages of production, a possible hypothesis can be gathered. The
theories provided are indicative of the fact that in the modern business world, the implication
of ESI can help an organisation to develop in an effective manner (He et al., 2014). The
benefits that are involved in the application of the technique signify that the use of the
technique can help identifying flaws in the organisational context. However, Jean, Sinkovics
& Hiebaum, (2014) stated that the relation between the suppliers and designers need to be
involved more in the organisational context. Another important thing that the theories failed
to deliver was the fact that the use of ESI in the modern day is in contrast with that involved
in earlier times. The relation to change in a manufacturing process is a huge bonus for
organisations that involve in profit-making objectives and customer satisfaction (Pulles,
Veldman & Schiele, 2014). Thus, the application of such information can help in
understanding the ways by which ESI is applicable in the modern world. Apart from this, the
theories can be used in order to come to a relevant conclusion and findings that help in the
implication of ESI in the business.
Research method
In order to conduct the research in a successful manner, the researcher has adopted
certain methods to collect data. The secondary method of collecting data has been chosen in
order to understand the concept of ESI and its importance in business. The secondary data
can help in understanding the concept in a broad manner and suggest ways to make
improvements. Based on these findings can also be derived that are essential for the research.

9
PURCHASING AND MATERIAL MANAGEMENT
The researcher used information from books, journals and websites in order to gain the
necessary details concerning the topic. Analysis on the theoretical aspect is done in order to
develop the idea of the concept in a broader manner. The resources used for collecting data
are the reviews and opinions of renowned scholars. The reason for choosing this source is to
understand the opinions of the scholars and help in the development of a proper knowledge
about the topic.
Findings
From the analysis of the literature review, it can be said that the use of ESI in the
modern business has influenced a lot of change in the business world. Reports claim that
most significant changes have been seen in organisations that specialise in manufacturing
cars and other technologies. Such a detail is evidenced by the fact that the involvement of
suppliers has helped in reducing callbacks of the cars considerably in the past year. It has
been seen that about 15% of the automobile industries have applied the process and have
managed to reduce the callbacks. However, some automobile industries have failed to use the
system in an effective manner. The literature review also provides an understanding of the
models that are required to maintain proper manufacturing of a product. These models are
used along with the ESI in order to understand the ways by which an organisation can be
impacted. The conservation of resources has made about 2% production houses to engage in
sustainability of the environment. The completion of the literature review also helped to
identify the potential areas that need improvement. The supplier and designer relation need to
be analysed in order to understand the level of collaboration among the employees. Evidence
shows there has been a rise by 4% of the sale of goods from small enterprises due to the use
of ESI method. It has also been seen that the managing of resources needs to be done in order

10
PURCHASING AND MATERIAL MANAGEMENT
to avoid any potential dependent on the external environment. The following part provides
the discussions of the findings.
Discussion of findings
From the findings, it can be said that the use of ESI in business can help in the
development of competitive advantage in the market. The involvement of the suppliers can
bring about expertise for the management and designing of the products. This can help in
reducing any discrepancies in the work place. The application of RDT and SET is useful in
engaging the suppliers. This is because with the application of proper resources in the
business, it can be easy for organisations to maintain track of the level of expertise required.
It can also help in maintaining sustainability in the business as evidence from the findings.
The literature review also suggests that the use of SET can help in determining the
advantages of a particular business. In this regard, the decisions taken by the managers can be
influenced by the application of SET during the involvement of suppliers. The advantages of
such an involvement can help in reducing many mistakes that can occur. The advice from
experienced people can bring about knowledge for the designers. RDT can reduce the
dependency of the external resources. Thus, the implications of these findings can help an
organisation in every way. However, in certain areas, the application of this cannot be
implemented properly.
Implication of findings
The findings suggest that the use of ESI has not been implemented in emerging
markets of the world. The implication of ESI in business markets in Brazil, India, Russia,
China and South Africa need to be made in order to improve the level of productivity. In the
recent areas, these countries have emerged as serious marketing countries in terms of
manufacturing of goods and products. However, with backward technology and an unstable

11
PURCHASING AND MATERIAL MANAGEMENT
economic environment, the countries have been unable to improve the techniques used for
product marketing. Apart from this, the lack of ESI in the service industry also needs to be
improved. In retail industries, the use of the manufacturing tools needs to make with the
application of ESI and its supporting factors. Service industries, like retail stores that
manufacture goods, need to implement this in order to maintain the quality of the products
and satisfy customers.
Conclusion
Thus, it can be concluded that involvement of suppliers before the finalisation of
products can help an organisation avoid major flaws. The way by which an experienced
supplier can guide the designing team can be useful for the employees. In this regard, the
application of different theories can also help in developing the concept. However, while
conducting the research there have been certain limitations in terms of a gathering of data.
This is mainly because of the fact that the research is based on secondary data and recent
implications in business in the last 25 years were difficult to find. In the modern world, the
implication of this strategy in the service sectors has been limited. The future scope of the
research is the study of ESI in the service industry. The impact creates in the emerging
market can also be a course of study for the future.

12
PURCHASING AND MATERIAL MANAGEMENT
Reference
Brindley, C. (Ed.). (2017). Supply chain risk. Taylor & Francis.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Craib, I. (2015). Modern social theory. Routledge.
He, Y., Lai, K. K., Sun, H., & Chen, Y. (2014). The impact of supplier integration on
customer integration and new product performance: the mediating role of
manufacturing flexibility under trust theory. International Journal of Production
Economics, 147, 260-270.
Jean, R. J., Sinkovics, R. R., & Hiebaum, T. P. (2014). The effects of supplier involvement
and knowledge protection on product innovation in customer–supplier relationships: a
study of global automotive suppliers. Journal of Product Innovation
Management, 31(1), 98-113.
Jones, T. M., Donaldson, T., Freeman, R. E., Harrison, J. S., Leana, C. R., Mahoney, J. T., &
Pearce, J. L. (2016). Management theory and social welfare: Contributions and
challenges.
Luzzini, D., Amann, M., Caniato, F., Essig, M., & Ronchi, S. (2015). The path of innovation:
purchasing and supplier involvement into new product development. Industrial
Marketing Management, 47, 109-120.
Menguc, B., Auh, S., & Yannopoulos, P. (2014). Customer and supplier involvement in
design: The moderating role of incremental and radical innovation capability. Journal
of Product Innovation Management, 31(2), 313-328.

13
PURCHASING AND MATERIAL MANAGEMENT
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing
and supply chain management. Cengage Learning.
Pulles, N. J., Veldman, J., & Schiele, H. (2014). Identifying innovative suppliers in business
networks: An empirical study. Industrial Marketing Management, 43(3), 409-418.
Pystynen, H. (2016). Purchaser’s role in the early supplier involvement: a case study of an
automotive tier 1 company.
Roh, J., Hong, P. & Min, H., (2014). Implementation of a responsive supply chain strategy in
global complexity: The case of manufacturing firms. International Journal of
Production Economics, 147, 198-210.
Rossignoli, C., & Ricciardi, F. (2015). Theories Explaining Inter-Organizational
Relationships in Terms of Coordination and Control Needs. In Inter-Organizational
Relationships (pp. 7-36). Springer International Publishing.
Sarang, J. P., Bhasin, H. V., Verma, R., & Kharat, M. G. (2016). Critical Success Factors for
Supplier Development and Buyer Supplier Relationship: Exploratory Factor
Analysis. International Journal of Strategic Decision Sciences (IJSDS), 7(1), 18-38.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management
and advanced planning. Springer Berlin Heidelberg.
Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A
balanced approach. Cengage Learning.
Yeniyurt, S., Henke, J. W., & Yalcinkaya, G. (2014). A longitudinal analysis of supplier
involvement in buyers’ new product development: working relations, inter-

14
PURCHASING AND MATERIAL MANAGEMENT
dependence, co-innovation, and performance outcomes. Journal of the Academy of
Marketing Science, 42(3), 291-308.
Yue, L. I. U., & Jing, S. U. N. (2015). The Impact of IFFE on NPD Performance: The
Moderating Effect of Customer Involvement and Supplier Involvement. Management
Science and Engineering, 9(4), 7-14.
Yurtkulu, E. Z., Hilletofth, P., & Johansson, G. (2014). Foundation of the integration of
supply chain decisions in new product development. In EurOMA.
Zhao, Y., Cavusgil, E., & Cavusgil, S. T. (2014). An investigation of the black-box supplier
integration in new product development. Journal of Business Research, 67(6), 1058-
1064.

15
PURCHASING AND MATERIAL MANAGEMENT
Appendices
Appendix 1
Possible impact of ESI
Appendix 2
Evaluation of ESI involvement

16
PURCHASING AND MATERIAL MANAGEMENT