A number of companies make the effort to get suppliers involved early in the design process but few have been able to do so with the comprehensiveness and success of semiconductor equipment maker Novellus in San Jose, Calif.

Novellus has had a history of getting its various internal groups involved early in the design process, and it has successfully been using cross-functional teams and experts from within the entire manufacturing process to achieve this. But expanding the effort to the supplier community has let Novellus enjoy relatively seamless product releases—relatively speaking.

Novellus is even able to implement Lean production processes for new product releases, instead of just existing ones, largely due to the cooperation between internal departments and suppliers. This has led to sustainable competitive advantages, including improved credibility with customers due to shorter time-to-market, predictable completion dates, and successful product launches.

"As the semiconductor industry becomes more competitive, time-to-market and higher margins are more important keys to success," explains Shahriar Shaghafi, vice president, global supply chain and materials operation. Shaghafi has had a lot of experience with Fortune 100 companies in transforming supply chains. The keys, he believes, have always been building bridges and relationships with the business units in the company and with the suppliers.

Business unit relationships. Novellus has five business units and each has its own materials program manager who gets involved in new product development. They connect with the global supply chain managers for given commodities. "This structure involves the global supply chain managers in new product development," Shaghafi says. These managers then bring the strategic suppliers into the process to participate during the design phase.

When the idea of supplier involvement in the design process first came up, Novellus' separate business units had some legitimate concerns, mostly because they had no prior experience in allowing suppliers in at the ground floor. Shaghafi explained that this type of involvement would help to reduce time-to-market and also reduce costs. "Now that they have seen the success, rather than the supply chain organization pushing ourselves on the business units, we are being pulled in by the business units for supplier involvement in the design process."

Supplier relationships. Suppliers also had some initial concerns related to their involvement but soon realized that they would be making an investment, particularly an engineering investment, by participating in the design phase, says Shaghafi. "They wanted to know what kind of assurance they would have that they would subsequently win the production." He explained to them that, when they got involved in the design phase, this would give them input into the manufacturability of the product. This, in turn, would be input that would naturally fit their own specific production processes (including equipment), and their business processes. "By definition, then, this would end up making them more competitive than anyone else," he notes. And, now that they see they are winning the production, suppliers are very eager to participate in new projects.

The concept of supplier involvement in new product design has helped Novellus reduce time-to-market, and also helped to remove cost from the processes and products. Leadtime to production has decreased while the company's time to market improved 25–30%, on top of better margins. One reason is that the number and seriousness of problems is being reduced. Before, the company experienced production delays and excess costs as a result of suppliers reporting problems in not being able to manufacture their parts. Now, because they are part of the design process from the beginning, this doesn't happen.

The next step, according to Shaghafi, will be to get suppliers involved during the planning stage, which occurs after the product design stage. "This is when the product is being released to production," he explains. Once this happens, the transition will be even smoother, costs will be reduced even further, and time-to-market will improve even more.