Design Options for the Integration of Suppliers in Agile Development
Projects
Günther Schuh, Stephan Schröder, Florian Vogt and Ludwig Volbert
Laboratory for Machine Tools and Production Engineering (WZL), RWTH Aachen University, Aachen, Germany
Department of Technology Management, Fraunhofer-Institute for Production Technology IPT, Aachen, Germany
Keywords: supplier integration; agile product development; development cooperation.
Abstract: The shift from a seller’s to a buyer’s market catalyzes the rising demand for customer-individual products
and shortens product life- as well as innovation cycles. In consequence, many companies implement
iterative and flexible agile development processes instead of the well-established plan-driven approaches to
fasten their product development and to increase the fulfilled degree of customer requirements. At the same
time, nowadays hardly any development project can be implemented by a single company independently.
Both the increasing complexity of technical products and the paradigm shift from a high degree of value
added inside a company to the concentration on core competencies have led to the fact that the involvement
of suppliers and development partners in the development process is indispensable. Due to the
implementation of agile development processes, which are fundamentally different to the plan-driven
approaches, new requirements for the cooperation of companies and suppliers emerge. These requirements
are hardly addressed in existing literature and practice. Therefore, this paper aims at filling the research gap
by deriving a model to describe the design dimensions with their related design options for the integration of
suppliers in agile development processes for physical products.
1 INTRODUCTION
The high volatility of the market environment and
the ever-increasing demand for customer-specific
product solutions present companies with new
challenges (Cooper, 2017; Ehrlenspiel et al, 2014;
Schmidt, 2016). This transformation and the demand
for constant innovation results in shorter product life
cycles as well as shorter innovation cycles.
Consequently, a rapid market entry is becoming a
decisive competitive factor for companies (Schmidt,
2016; Abele and Reinhart, 2011; Minderhoud and
Fraser, 2005).
To meet these challenges, companies are
increasingly relying on agile development models,
since the today well-established plan-driven models
are less and less able to meet these new
requirements. In contrast to plan-driven approaches,
which are defined by a phase-oriented and linear
process, agile development models are characterized
by an iterative approach and focus on adaptability
instead of following a stringent schedule [6].
Hereby, agile development models aim for a fast,
flexible and efficient execution of projects, (Schmidt
and Paetzold, 2018; Schoeneberg, 2014) as well as
for a higher degree of customer satisfaction. In order
to achieve this, a rapid adaption to changes in
requirements and boundary conditions of the volatile
market is necessary (Herrmann et al, 2009; Nerur et
al, 2003). The targeted adaptivity makes it possible
to introduce and implement changes late in the
development process when using agile models
(Ahmed-Kristensen and Daalhuizen, 2015).
One major characteristic of agile development
approaches is the continous validation of
development hypotheses and results by the build-up
and testing of physical prototypes, even in the very
early project phases. This constant development of
physical prototypes pose a challenge in the agile
development of physical products, as the iteration
cycles – so called sprints of two to four weeks –
provide a tight timeframe for the completion of
physical prototypes. This completion depends
heavily on the availability and punctual development
and delivery of components e.g. by suppliers. In
addition to that manufacturing companies
Schuh, G., Schröder, S., Vogt, F. and Volbert, L.
Design Options for the Integration of Suppliers in Agile Development Projects.
DOI: 10.5220/0010308400003051
In Proceedings of the International Conference on Culture Heritage, Education, Sustainable Tourism, and Innovation Technologies (CESIT 2020), pages 325-332
ISBN: 978-989-758-501-2
Copyright
c
 2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
325

increasingly focus on their own compentencies and
force a higher degree of outsourcing of development
services to suppliers, which makes the integration of
external partners a critical factor for success
(Dombrowski et al, 2015; Groher, 2003; Schuh et al,
2008; Spath and Dangelmaier, 2016).
Hereby the adaptability and flexibility striven for
by agile methods places new demands on the design
of supplier integration (Schmidt and Paetzold, 2016;
Gregory et al, 2016). In the plan-driven product
development, a predetermined schedule is followed
and all specifications are defined at the beginning of
the development process in form of a specification
sheet (Nerur et al, 2003; Nerur and Balijepally,
2007). Therefore, a supplier gets all the information
about his specific development activities at the
beginning of the development project. This nature
facilitates the management of the suppliers, since
precise framework conditions can be defined and
fixed. With the use of agile models previous forms
of supplier integration must be reconsidered, since
they don’t meet the requirements of an iterative
approach. Agile methodologies deal with the internal
organizational structure of development processes
and teams, but usually do not take supplier
integration into account (Becker, 2014; Dombrowski
and Karl, 2016). Also strategies, methods and
procedures available in literature for integrating
suppliers into the development process are based on
the application of plan-driven development
processes and are therefore no longer fully
applicable. Consequently, the introduction of agile
development approaches makes it necessary to adapt
the integration of suppliers according to the new
framework conditions (Dombrowski et al, 2015).
Therefore, this paper presents a description
model, which is part of an overall solution approach
for the demand-oriented design of supplier
integration in agile development projects. The
presented model comprises different design
dimensions with related design options for the
integration of suppliers in agile development
projects and represents one of five partial models of
an overall solution hypothesis for the development
of type-based supplier integration forms for agile
development processes (Schuh and Schröder, 2019).
The core of this work is therefore to identify
essential design dimensions of supplier integration
in agile development projects and to develop forms
or design elements that meet the new challenges of
agile development of physical products
2 LITERATURE REVIEW:
EXISTING APROACHES FOR
THE DESIGN OF SUPPLIER
INTEGRATION
In this paper, supplier integration is considered in
the context of product development and refers to the
organisation or design of the cooperation between
customer and supplier
(Becker,2014) In literature various approaches for
the design of supplier integration exist. These
approaches differ strongly in their concrete focus as
the design of supplier integration forms depends on
a number of different factors. In this section, the
most relevant existing approaches within this
research field will be introduced and evaluated in
terms of their relevance for the developed model.
Tab. I depicts the core statements and the relevance-
evaluation of the analyzed approaches (visualized in
a discrete scale using Harvey balls).
Table 1: Supplier integration models.
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The investigation of the existing literature shows
that there is already extensive research in the field of
supplier integration in new product development,
including very different perspectives and concrete
research issues. Groher e.g. presents a very holistic
model for the design of integration forms while
İncekara only investigates the influence of the
degree of innovation on the integration of suppliers.
But with regard to the outlined problem two major
deficiencies can be identified. First and major deficit
is the missing consideration of the effects and new
framework conditions of agile development
processes. Existing approaches neither analyze those
new requirements on the design of supplier
integration forms nor do they present new design
options of integration forms which are adapted to
those special needs of agile development processes.
In consequence, these approaches are not or not fully
applicable to agile development projects. As agile
development processes become more and more
common in the development of physical products, an
adaptation of the integration forms to these new
requirements is urgently necessary. The second
major deficit identified is the lacking consideration
of situational requirements and influencing factors in
the design of supplier integration. The description of
existing approaches is mainly based on different
characteristics of an influencing variable, which,
however, does not do full justice to the individuality
of customer-supplier relationships.
Thus the overall objective of the presented paper
is to identify the relevant dimensions for the
individual design of supplier integration forms,
evaluate their suitability for the use
in agile
development processes and adapt them, if
necessary to the new requirements of these agile
processes.
3 RESULTS: DEVELOPMENT OF
A DESCRIPTION MODEL
The central intention of this paper is to derive a
description model that outlines the design
dimensions including the design options for a needs-
oriented integration of suppliers in agile
developments projects. In this context, a situational
approach is necessary due to the complex and
individual requirements in customer-supplier-
relations as well as the involvement of many
stakeholders in the development process. To develop
a suitable and comprehensive model, two
consecutive steps will be conducted. First, existing
approaches for the design of supplier integration
forms have to be examined and the included design
dimensions have to be evaluated in terms of their
relevance for the scope of this paper. Subsequently,
the identified research gap serves as a starting point
for the development of the description model or, in
other words, the derivation of relevant design
dimensions and their related design options. To
execute these two steps and provide a framework for
the model development, a basis for evaluation is
necessary. Thus, criteria for the evaluation of
existing approaches in literature and the subsequent
selection of relevant design dimensions are
determined in a prefixed step. Agile approaches for
the development of physical products are practice-
driven, leading to a limited number of available
academic literature (Cooper and Sommer, 2016).
Consequently, existing approaches and possible
design dimensions were mainly derived from
literature about supplier management as well as
literature concerning adjacent research fields, like
sourcing strategies, communication and cooperation
in supply chains and organizational forms of vertical
relationships. In addition, the authors’ own
experience from coaching and conducting agile
development projects were an important input for
the model development.
Design Options for the Integration of Suppliers in Agile Development Projects
327

3.1 Framework and Requirements of
the Model
In order to systematically develop the model, four
criteria for the selection of relevant design
dimensions and the evaluation of existing
approaches of supplier integration were initially
determined. These criteria were derived from the
overall objective of this paper to address new
paradigms for the cooperation and communication
between customers and suppliers in agile
development projects of physical products.
Furthermore, these selection criteria can be assigned
to either the object area or the target area. The
criteria belonging to the object area examine the
content consistency between the overall scope of
consideration of this paper and the regarded
approach from literature. The object area comprises
the following criteria.
 Physical product development: The model is
limited to design dimensions referring to
development projects with a focus on physical
products.
 Agile methodologies: The model is limited to
design dimensions that are applicable for the
implementation of agile methodologies in
development projects
On the other hand, the criteria belonging to the
target area take into account, if the goals of the
regarded approach from literature are congruent to
those of this paper. The target area comprises the
following criteria.
 Design of supplier integration: The selected
dimensions have to contribute directly to the
organizational or processual design of the supplier
integration.
 Customized design: The model user has to be
able to choose between the different design
options within the identified design
dimensions according to requirements and the
prevailing development situation.
Based on these four criteria the total of 18 design
features identified in the literature were evaluated
and consecutively the relevant design dimensions
and their belonging design options determined for
the description model, developed in this paper. The
description model and the selected design
dimensions are explained in more detail in the
following section
3.2 Design Dimensions and Options
This section depicts and explains the design
dimensions and belonging design options of the
description model for the needs-oriented integration
of suppliers in agile development projects. The
procedure described above for the evaluation of the
identified design dimensions resulted in a selection
of 14 essential characteristics for the design of
supplier integration in agile development projects.
These 14 dimensions and their belonging design
options are depicted in Fig. 1. In the following a
selection of these dimensions is described in details.
3.2.1 Information and Communication
Structure
The integration of suppliers into the product
development process requires an exchange of
information and knowledge in order to put the ideas
and contributions of suppliers in the right place and
develop the product according to the customer’s
requirements (Jaspers and van den Ende, 2006). Not
only the quality of the information exchange is
relevant but also the efficiency, to minimize the
costs of communication and reduce information
asymmetries.
Figure 1: Design dimensions and options for supplier
integration
Regarding the differentiation of communication
types as well as information channels, academic
literature offers a variety of approaches. FREITAG
e.g. differentiates types of communication, like
Direct (e.g. Face-to-Face) and Indirect (e.g.
Telephone, e-mail) (Freitag et al, 2011).
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To minimize communication costs and ensure
efficiency, an intensive and direct form of
communication may not always be the best choice for
all types of supplier integration. Rather, in many cases
indirect forms of communication should also be taken
into account. Due to the varying intensity of
cooperation between suppliers and customers, both
types of communication depict possible scenarios and
were added as design options to the description model.
Joint development projects with a high degree of
supplier integration require a constant access to all
relevant project information (Spath and Dangelmaier,
2016). To ensure a high accessibility to information for
different users involved in agile development projects,
in practice, so called social-business-platforms are used
to ensure information transparency by creating an
environment for wiki-systems consisting of project-
related information that are collaboratively collected by
project participants (Schröder, 2017
Flad, 2015).
Hence, the design option Transparent was added to the
description model, which implies the exchange of
information in agile development projects with a
variety of participants and a dynamic information
stand, e.g. through the utilization of social-business-
platforms. Last but not least, the establishment of a Co-
location poses a further intensification of the direct
communication form. This concept comprises the
spatial integration of cross-company teams, which
creates the continuous opportunity for face-to-face
communication and exchange and reduces the
likelihood for the not value-adding duplication of
efforts (Groher, 2003).
3.2.2 Intensity of Integration
In the context of this paper, the intensity of
integration refers to the point within the value chain
where the supplier’s services begin. In other words,
it is considered how deeply suppliers’ services
intervene in the internal processes of customers
(Engelhardt et al, 1993). Against the background of
shorter product life cycles and the associated
shortened development times, the intensive
integration of suppliers has gained importance in
recent years (Gassmann, 2006). Literature often
points out correlations between the competences of
suppliers, the time of integration and the intensity of
integration. In this context, high competencies have
a positive effect on the intensity of integration into
development projects (Schuh et al, 2008). The
evaluation of suppliers’ competencies is carried out
by means of the specific development task to be
fulfilled or the characteristics of the object to be
procured. To describe the intensity of supplier
integration, the three qualitative design options
High, Medium and Low were determined. When
choosing an adequate intensity of supplier
integration, companies have to consider the rising
number of communication interfaces and growing
coordination efforts which result from a higher
degree of integration (Groher,2003).
3.2.3 Frequency of Communication
This dimension specifies how often or at what
frequency the communication between customer and
supplier should ideally take place. A high
communication frequency is advisable for
development projects with a strong involvement of
suppliers, since the regular and quick exchange of
information is of great importance for this form of
cooperation. Agile procedures generally require a
fast and highly frequented communication
(Schröder, 2017). However, this general statement
only applies to internal projects and must be
considered separately with regard to external project
communication and different possible scenarios. If
the procurement object is precisely specified and its
development can be conducted by the supplier
without considerable influence of the customer, the
frequency of the customer-internal project
communication may be high, while the interface for
external communication is rather low frequented.
Another possible scenario is the close collaboration
and mutual influence during development projects.
In this case, the external communication pattern is
dictated by the internal communication frequency of
the project, which is primarily determined by the
obligatory meetings within iteration cycles of agile
development. The spectrum of the required
communication frequency can therefore range from
irregular, demand-oriented to high-frequency
communication. Following this argumentation, the
four possible design options As Required
(communication only on demand), Per Iteration
(periodic communication at the beginning / end of
an iteration cycle), Weekly and Daily (participation
at daily Scrum) were derived for the design
dimension frequency of communication.
3.2.4 Contract Arrangement
Contracts provide the legal basis for cooperation
between customer and supplier. Despite supplier
relationships based on trust, the formulation of
contracts should not be waived in order to avoid
discrepancies and conflict situations (Groher,2003)..
Within the framework of supplier integration, the
drafting of contracts is of great importance, since the
selection of the right type of contract influences the
development efficiency of the product covered by
Design Options for the Integration of Suppliers in Agile Development Projects
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the contract (Schmidt, 2016). The thematic focus of
the design dimension contract agreement is on price
conditions, as these constitute a key factor in the
contractual design of supplier integration (Schmidt,
2016). Against the background of volatile product
requirements and imprecise specifications that may
even be modified over the course of a project,
contractual regulations on price conditions are
particularly relevant for agile product development
(Opelt et al, 2012; Peterhoff, 2016). SCHMIDT
distinguishes between different contract types in
supplier-customer relationships based on the price-
fixing mechanism. In the case of so-called Fixed
Price contracts, the price and scope of services are
precisely defined. This type of contract is therefore
only suitable for procurement objects with known
product specifications and a low degree of
technological uncertainty (Schmidt, 2016). Contracts
with a Maximum Price Clause are suitable for the
conclusion of contracts characterized by higher
uncertainties and offer greater flexibility compared
to fixed price contracts in terms of price conditions
(Schmidt, 2016). A guaranteed maximum price is a
limit on the amount that the customer has to pay to
the supplier, regardless of the actual expenditure the
supplier had to afford for the project. Moreover,
Incentive contracts provide the opportunity to
determine the procurement price depending on the
supplier’s performance. By paying bonuses or
charging penalties for not meeting defined targets,
development risks are more evenly split between
customer and supplier. As the product specifications
do not have to be defined precisely from the outset,
incentive contracts are particularly suitable for agile
development processes (Schmidt, 2016). For the
formulation of product specifications, so called Cost
Reimbursement contracts offer the highest
flexibility. Here, the contractor is paid the prime cost
for development and production plus an additional
fee for overheads depending on the final project
scope. This procedure requires the complete
disclosure of all project related activities and costs
through the supplier and shifts the cost risk towards
the customer. Cost reimbursement contracts are
frequently used where a prompt start of production
or development is required even though the
specification sheet is not completed yet and may
alter during the process (Schmidt, 2016). Another
promising design option are so called Agile Fixed
Price contracts proposed by OPELT (Opelt et al,
2012). Here, a cooperation model between the
contractors is stipulated beforehand, which does not
insist on a strict binding of the contracting parties
and regulates the scope of the project as well as the
cost framework in order to facilitate an easier exit
from the project if necessary. Furthermore, the
subject matter of the contract is defined on the basis
of an adequately detailed vision, which can be
reviewed and adapted within intended checkpoint
phases. All of the above described contract types are
applied in the context of agile product development
with a shift in significance towards the more flexible
contract types and were thus included in the
description model as design options for the contract
arrangement.
3.2.5 Point of Integration
The choice of the necessary or most suitable time to
integrate the supplier into the development process
is a major concern and thus probably the most
frequently discussed design dimension in literature
(cf. e.g. (Groher,2003; Denzler, 2007; Kirst, 2008;
Winter, 2014)). The optimal timing depends on
influencing factors such as the complexity of the
procurement object and the competencies of the
suppliers. Existing approaches in literature
determine the point of integration on the basis of the
different stages of the product development process,
such as ideation, phase of product definition,
concept development, product development and
production start (Groher, 2003). For this paper, the
point of integration was also determined with the
different stages of the product development project,
in additional consideration of changes through agile
approaches. In contrast to plan-driven approaches, a
major part of the clarification of technical
specifications no longer happens in the product
conception phase, but rather empirically through
hypothesis formulation and validation within the
framework of the subsequent iterative development
phase. Consequently, the time slice of the
conception phase is significantly lower in agile
development projects and is thus consolidated in the
design option Ideation / Design of Concept. To
distinguish between different design options for the
point of supplier integration within the subsequent
Iterative Development phase, a classification of the
different iteration types according to
KANTELBERG was used. Accordingly, the design
options Exploration (pre-development iteration),
Demonstration and Evaluation (design and
development iteration) and Optimization
(optimization iteration) result (Kantelberg, 2018).
Finally, the startup phase of production after the
product development also constitutes a possible
point of supplier integration at a late stage in product
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development and is expressed through the design
option Start of Production.
4 CONCLUSIONS
An increasing number of companies is implementing
agile development processes to meet the challenges
of increasing innovation pressure. But in the world
of physical product development, with its
significantly decreased depths of added value over
the last decades, an implementation of agile
approaches can only be beneficial if suppliers are
successfully integrated into these new processes. As
discussed in this paper, a needs oriented design of
the customer-supplier-relationship and the
integration form is mandatory for an effective and
efficient supplier integration. The presented model
in this paper therefore seeks to provide a first
solution for the design space of the supplier
integration into agile development processes. Based
on an evaluation of existing approaches in literature
and the authors’ experience from own agile
development projects the developed model
summarizes the relevant design dimensions and their
different design options, suitable for the use in agile
development projects. The developed description
model of the design space is thereby just a partial
model of an overall method for the situational design
of supplier integration forms. Dependent on the
respective procurement object and the prevailing
situation in the development project the most
suitable design options have to be selected for an
effective and efficient development project. Both the
time and monetary expenditure for implementation
and the associated added value or influence on the
overall development project differ greatly between
the various design options. Thus, to complete this
method, especially a logic to select the most suitable
design options according to the concrete situation
has to be developed in future research. A useful
application of the presented design options in
operational practice is therefore only possible in
combination with this logic.
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