Document Type

Closed Project

Publication Date

Fall 1997


Dragan Milosevic

Course Number

EMGT 506/606


Collaboration between original equipment suppliers (OEMs) and their suppliers can enhance product development. Forces pressing OEMs to collaborate with suppliers are time to market, technology availability, cost pressures, and advanced information technology. OEMs must carefully evaluate which technologies to collaborate on, and be cautious and selective of which suppliers they collaborate with. Collaboration should build competencies and fit product strategies. Leakage of technology must be prevented and project control must be retained by the OEM. The Japanese model of OEM/supplier collaboration in product development uses bureaucratic controls such as targets and prototypes to keep a stable hierarchy of suppliers in line. These can be more successful than pure market competition if implemented properly. The Japanese method provides a balance between maintenance of core competencies and an efficient distribution of tasks amongst a group of tiered suppliers. European and "traditional" US models of collaboration are not as effective. However, the US is becoming more similar to the Japanese in the auto manufacturing industry all the time. A case study of an industrial machinery OEM is presented, describing their evolution in supplier collaboration. Lessons learned from experience, the "best in class" industrial machinery firm, and Japanese auto manufacturers are applied as appropriate to recommend improvements.


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