Front-loading problem solving in co-development: managing the contractual, organisational and cognitive dimensions

"Front-loading" problem solving is one of the major strategies to reduce development costs and development lead time. In co-development situations, the implementation of such methodologies raises specific questions, due to the difficult division of responsibilities and skills between the car manufacturer and the supplier, especially when customer and supplier contributions cannot be clearly interfaced in a "black-box sourcing" relationship. This results in a difficult and permanent debate about design modifications. The article analyses such a co-development situation in the case of a car manufacturer and its die design and engineering suppliers. The case illustrates how to combine organisational integration (i.e. co-localisation, shared development methodologies) with new economic contracting rules, which create front-loading problem solving incentives for the two partners. We compare the economic outcomes of a traditional process with a co-developed project, from the viewpoint of both the customer and the suppliers. The study demonstrates how co-development played a major role in reducing the number and cost of modifications for the customer. The benefits which suppliers can earn depend on their ability to be involved in the project in terms of design and engineering capacity at an early stage. These results generate theoretical outputs that bridge the gap between incentive and contract theories on one side, and cognitive and learning fields on the other.