CPSM Blog

Quality Management fundamentals for supply management

Quite simply the supply manager wants to ensure that the product or service delivered is as per user requisition,contract and terms. One approach to achieve this is the inspection of every piece delivered or alternatively a supply source that is so good that there is no need of quality assurance. In between these two extremes are a variety of suppliers and a whole function of quality management including TQM and Quality Tools like Pareto charts ,Ishikawa (cause effect ) diagrams. Matters become more interesting when service quality has to be managed. The starting point of service quality is a service level agreement (SLA); for example it must be decided in advance that a service call will be responded to within the same day or the next day.

The Quality section is the last section in the Effective Supply Management ( Part 2) of the CPSM.

Project Management for Supply Managers

Project management is big for supply managers because either you are doing a project within the department (eg. supplier rationalization) or you are part of an organizational project ( like a New Product Development project) where you are expected get suppliers on board.

In any event project management is a hot topic in supply management with PMI being the main source of expertise in the field.

Supply Management in Product and Service Development

This topic is really a favorite with me. There are two sections and these are both brief. The first talks about how supply management should get involved internally with folks to figure out customer needs. These include understanding customer requirements, QFD etc.

Supply management can do a great deal to help the product and service development initiatives of the organization. These include Early Supplier Involvement (ESI), Qualified Product Lines (QPL) and Target costing.Of these concepts, qualified product lines is a rather nice concept. The supply management folks can tell the NPD team about which items are more easily available and which ones to avoid given the imminent supply situation for that item. Frequently, NPD teams can come up with great concepts but have huge delays because of delays in obtaining components or parts from the market.

Once however, the product or service starts taking off the supply management role changes from just trying to get things started to improving efficiency,lower costs and improve quality and reliability of supply. For example, a key manufacturing point to watch for is investment in tooling. It should not be too less to loose out on market demand and should not be too much to add undue capital cost.

Planning with technology ERP and MRP II and DRP II

How technology has impacted planning and forecasting in supply management is the subject of this section. For example, Enterprise Resource Planning systems help keep track of men,materials and money in terms of processes happening in human resources, supply management, production, production planning,accounting and finance among a myriad of sub-processes. Materials Requirement Planning (MRP) has grown into Manufacturing resource planning  II (MRPII) that extends from materials to other elements of ERP like production plans and manufacturing schedules so that it is not only materials you track but also when they come in and how much they cost on an ongoing basis. On the downstream side we have Distribution Requirement  Planning (DRP) that tracks requirements for distribution of finished goods. DRP II extends "requirements" to "resources" (for the "R" in DRP) and accounts for multi-level distribution, manpower requirements and financial flows.

Monitoring,control,development and compliance

No wonder that this section (2-D bridge portions particularly) focuses on topics that emphasize the growing personnel and importance of supply management in organizations. If you have a critical function like supply management to manage, with lots of people then it becomes important to develop goals and measures of how well you are achieving these goals. Metrics of department performance include total cost reduction ( eg. of financial metric); how well suppliers are integrated electronically for PO's, invoices etc.(IT metric) diversity supplier spending ( sourcing metric); supplier report cards ( relationship and control metric).

I particularly liked the separation of different types of audits like ISO, GAAP  and Sox. The ISO is about standards and processes that assure quality and improvement, GAAP is about good practices and records in financial transactions, SOX pertains to reporting for public companies. The supply management organization must not only be able to meet the requirements of these different audits but aim to exceed standards.

Both departmental performance metrics and external metrics need alignment to organization mission for every supply management organization.

Standardization, inventory management system,movement of assets and disposition

Four subsections mark section 2 C or the Materials and Inventory Management topic. In all of these subsections I could find something of current interest to the profession. But first some nostalgia. My first management position was in materials and inventory management and although I was the supervisor I was in great awe of my very experienced deputy MC Patel (MC). MC  did not have a college degree and I can't remember if he had cleared high school and this  was with computerization just starting. Couple of key things I had learnt from MC that jumped out in this topic was a) You must be able to find and issue stuff when someone came asking for it - he remembered over 1500 items! b) If things were running out you ordered in time c) When goods came in you managed the receipt and inspection process efficiently to enable suppliers to be paid in time and finally d) You were able to demonstrate to auditors that you had what your books said you had. Thank you MC  Patel!

So what's new in this domain? Well for one the standardization issues where you want to, where possible to look for ISO 9000   particularly in international suppliers. a system that utilizes bar codes and if possible RFID that speaks to the ERP system and importantly the security related provisions like C-TPAT.

C-TPAT  or the Customs-Trade Partnership Against Terrorism which calls for the US Border Protection service asks businesses to ensure that security guidelines are not only clear internally but are clear and communicated  to partners like carriers,warehouses,importers etc.

Finally, understanding value stream mapping to value goods for return or disposal and care with environmental concerns in disposing.

Designing logistics to support business model,freight consolidation,international and 5S

There are three subsections to the logistics section and the first is designing the logistics system to support the business model. Logistics sounds less glamorous in the developed world, for example if you send goods in a truck - by and large you expect them to be delivered. In most of the world though, this is not the case particularly for inland transportation. You literally have to have mechanisms to track the truck particularly if it is a LTL (less than truckload).

Efficient logistics that speaks to the business model is critical for business success. For example if you have a JIT model or your customer has a JIT model you need to figure out how the loading/unloading docks are organized so that the loading/unloading does not become long drawn.

One neat acronym in the 2-B-1section was 5S the Japanese process improvement technique involving Sort (Seri),Set in order or orrange (Seiton),Shine(Seiso),Standardize(Seiketsu) and Sustain(Shitsuke). These help in organizing the workspace.

ESI and managing forecasted data with suppliers

This final section (2-A-3) of managing the forecast data with suppliers is the last section in forecasting and to me,one of the most interesting ones. Early Supplier Involvement (ESI) is again discussed in the context of data sharing. To have successful ESI and in turn, improved new product designs, forecast data and other relevant data needs to be shared with suppliers. For both legal and strategic reasons the best way to manage information with suppliers is to test if you would normally share such information with your market competitors.

Finally the section moves to collaborating with suppliers with  Supplier Managed Inventory(SMI) and Collaborative Planning Forecasting and Replenishment(CPFR).The latter is common in retail contexts like Wal-Mart and Sara Lee while the former (SMI) can very well happen in manufacturing environments like auto etc.

Supply forecasts based on economic,competitive,technology,market and currency trends

This section (2-A-2) is rather long and covers a variety of aggregate data sources that allows the supply manager to make some calls on what the prospects will be for her/his product category. Among various data sources the ISM Report on business is an important source of data. The data consists of leading indicators that allow prediction and second the data compares monthly data and therefore is of a much narrower time frame compared to other reports.

Macro and Business issues in Forecasting

I still needed to write about a few sections of Supplier Relationship Management in the Foundations of Supply Management series but today we got a reminder about the CPSM exam dates. So it's a bit of a rush and I thought that this blog should move forward with the Exam 2 material viz. Effective Supply Management Performance.

The first section starts with discussion about the macro factors that the supply manager must consider when forecasting requirements. These macro issues include trends in industries,firms and markets including an understanding of business cycles and the nature of the flow and ebb of economic tides. Typically a downturn might lead to a recession, like now, but the good  news is that  economies  will come out of recession. Understanding the type of cycle and its potential duration can help the supply manager in examining the situation with respect to her own industry and suppliers. Other trends that seem rather relevant at this time are Transportation trends,political stability/instability and environmental trends with each trend being examined for globally dispersed suppliers.

The market analysis section and supply market and complexity section both deal with business level environments like Porter's five forces, SWOT analysis and the Kraljic model in so far that they help in understanding the forecasting context for the supply manager.