Title: Calculating the total value of supplier innovation

Authors: Stefan Winter; Rainer Lasch; Jatinder N.D. Gupta

Addresses: Chair for Logistics, Department of Business and Economics, Technische Universität Dresden, Münchner Platz 2-3, 01187 Dresden, Germany ' Chair for Logistics, Department of Business and Economics, Technische Universität Dresden, Münchner Platz 2-3, 01187 Dresden, Germany ' College of Business Administration, University of Alabama in Huntsville, 301 Sparkman Drive, Huntsville, Al 35899, USA

Abstract: Supplier innovation can contribute to a company's success, not only through cost savings, but also through revenue improvements by means of a higher chargeable price or the attraction of more customers. Although the demonstration of the measurable benefits (cost and revenue effects) from supplier innovation has been suggested in the literature, no approach to determine the total value of a supplier innovation is available. For this purpose, total cost approaches and price setting approaches were examined to design the evaluation components within our proposed total value of suppler innovation approach. We demonstrate how cost effects can be identified by total cost analysis and revenue effects by means of a conjoint analysis and a choice simulator. The developed approach and its description serve as a practical procedure to assess the monetary profitability of supplier innovation and support managers in their decision making efforts. A case example about a smart phone manufacturer demonstrates the applicability of our proposed total value of suppler innovation approach.

Keywords: supplier innovation; innovation evaluation; innovation assessment; total cost analysis; conjoint analysis; decision making; total value; price setting; revenue effects; profitability; smartphones; innovation value.

DOI: 10.1504/IJMDM.2015.070729

International Journal of Management and Decision Making, 2015 Vol.14 No.2, pp.130 - 153

Received: 16 Nov 2014
Accepted: 20 Feb 2015
Published online: 22 Jul 2015 *

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