Supply Chain Quality Planning
Structuring the supply chain requires an understanding of the request patterns, service level requirements, distance considerations, cost elements and other related factors. It is simple to see that these factors are highly variable in nature and this variability needs to be considered during the supply chain analysis process. Furthermore, the interplay of these complex considerations could have a significant bearing on the outcome of the supply chain analysis process.
There are six key elements to a supply chain:
- Production.
- Supply.
- Inventory.
- Location.
- Transportation.
- Information.
- Production: Strategic decisions regarding production concentrate on what customers want and the market demands. This preliminary stage in developing supply chain agility takes into consideration what and how many products to produce, and what, if any, parts or components should be produced at which plants or outsourced to capable suppliers. These strategic decisions concerning production must also focus on capacity, quality and volume of goods, keeping in mind that customer demand and satisfaction must be met. Operational decisions, on the other side, focus on scheduling workloads, maintenance of equipment and meeting immediate client/market demands. Quality control and workload balancing are issues that need to be considered when making these decisions.
- Supply: Next, an organisation must determine what their facility or facilities are able to produce, both economically and efficiently, while maintaining the quality standard. But majority of the companies cannot provide excellent performance with the manufacture of all kind of components. Outsourcing is an excellent substitute to be measured for those products and components that cannot be produced effectively by an organisation's facilities. Companies must cautiously select suppliers for raw materials. While choosing a supplier, focus should be on developing faster quality and flexibility while at the same time reducing costs or maintaining low cost levels. In short, strategic decisions should be made to decide the core capabilities of a facility and outsourcing partnerships should grow from these decisions
- Inventory: Additionally, strategic decisions focus on inventory and how much product should be in-house. An elusive balance exists between too much inventory, which can cost anywhere between 20 and 40 percent of their worth, and not sufficient inventory to meet market demands. This is a critical matter to be noted in effective supply chain management. Operational inventory decisions revolved around best levels of stock at each location to make sure customer satisfaction as the market demands fluctuate. Control policies must be looked at to determine exact levels of supplies at order and reorder points. These levels are critical to the day to day functionality of organisations and to keep customer satisfaction levels up.
- Location: Market demands and determination of customer satisfaction is location dependant. Strategic decisions must focus on the situation of production plants, distribution and stocking facilities, and placing them in main locations to the market served. Once customer markets are identified long-term commitment must be made to situate production and stocking facilities as close to the consumer as is practical. In industries where components are lightweight and market focussed, facilities should be located close by to the end-user. In heavier industries, careful consideration must be made to decide where plants should be located so as to be close to the raw material source. Decisions relating to location should also take into consideration tax and tariff issues, especially in inter-state and worldwide distribution.
- Transportation: Strategic transportation decisions are closely linked to inventory decisions as well as meeting customer demands. Using air transport obviously gets the product out faster and to the customer expediently, but the costs are high as opposed to shipping by boat or rail. Yet making use of sea or rail mode of transportation often means having higher levels of inventory in-house to meet quick demands by the customer. It is sensible to keep in mind that since 30% of the cost of a product is encompassed by transportation, using the correct transport mode is a critical strategic decision. Most of all, customer service levels must be met, and this often determines the mode of transport used. Frequently, this may be an operational decision, but strategically, an organisation must have transport modes in place to ensure a smooth distribution of goods.
- Information: Efficient supply chain management requires obtaining information from the point of end-use, and linking information resources throughout the chain for speed of exchange. Inspiring paper flow and disparate computer systems are unacceptable in today's competitive world. Fostering innovation requires high quality organisation of information. Connecting computers through networks and the internet, and streamlining the information flow, consolidates knowledge and facilitates speed of products. The major components of efficient supply chain management scheme are account management software, product configurations, enterprise resource planning systems, and global communications.
The detailed quality planning with suppliers follows three approaches:
- Inspection: The focus is on different forms of product inspection.
- Prevention: The premise is that quality must be built by the supplier with the purchaser's help.
- Partnership: suppliers are offered the financial safety of a long term relationship in exchange for a supplier's commitment to quality that includes a strong team work relationship with the buyer.