Save Now or Save Later: Purchasing’s role in new product development

This is an excerpt of the original article. It was written for the September-October 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

September-October 2021

This time every year, we publish Gartner’s Top 25 supply chains, the annual list of the supply chains that have made it to the top, a list that now also includes 5 Masters, or companies that have consistently outperformed year after year. You can read the article in this issue, along with the web exclusive material we publish on scmr.com, to find out what it takes to become a supply chain leader.

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It’s an annual ritual, extending back to 2007: Every fall, Apple introduces the latest model of the iPhone, an event that is awaited as anxiously as the winners of the Oscars and in some years, with as much press coverage and fanfare. Months before the still secretive date of the release of the iPhone 13, there were leaks and rumors about what to expect in the 2021 lineup. It’s anticipated that, as in most years, the new phone will set off a rush to stores, as customers look to upgrade their phones.

Apple’s success with the introduction of new products and services underscores a fact of business life: The development and introduction of new products is critical to the success of many organizations. While it can seem as if consumer electronics products have a shelf life equivalent to that of fresh fruit, industries across the spectrum from automobiles to wine and spirits depend on new products and features to maintain or gain market share. In recent years, Diageo, one of the world’s largest producers of alcoholic beverages, introduced more than 250 new products a year, driving more than $500 million in annual sales. Even a 100-plus year old company like 3M lets designers spend 15% of their time to pursue their own ideas and expects 30% of its revenue to come from products introduced in the past five years.

Whether creating innovative new products or variations of current ones, new products help maintain and grow market share through customer interest and loyalty. They also help the organization stay ahead of the competition. To be successful, new products need to be attractive to customers, timely and contribute to profitability. To achieve these goals, many firms rely on target costing or similar processes.

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