Supply Chain Quality Management

Abstract

Supply Chain Management has been an area of focus for many businesses to drive sustainable competitive advantage for decades. In addition, Total Quality Management has gained popularity in asserting that quality mechanisms can be applied to any area of a business to improve value to the customers, increase sales, reduce wastes, and improve overall profitability. Recent convergences, in theory, have left managers with decision on how to apply the concepts of Supply Chain Management and Total Quality Management. The new practice, while not always applied effectively, is called Supply Chain Quality Management. The paper provides a synopsis of Supply Chain Management, Total Quality Management, and identifies the best practices of a successful Supply Chain Quality Management Program. The aim is to eliminate any confusion in the convergence between the two theories and give the reader a set of best practices to shift an old model of supply chain management to a new paradigm that focuses on quality first.

Supply Chain Quality Management

Many companies have been improving strategies in regards to quality along the supply chain in order to deliver the best products to the consumer. While quality assurance was once a job exclusive to inspecting production items along the manufacturing line, it is now a business function that spans from the production line to the end-user. Therefore, quality management techniques have been embraced by industries as a mean of securing competitive advantage, forming business alliances, and ensuring the product that leaves the manufacturing plant gets to its destination in the same state of high quality than when it left the warehouse. The vital component of Total Quality Management is the practice of leadership, strategic planning, human resource management, managing supplier’s quality, and a process management strategy that is focused on customer needs and wants. The shift from Total Quality Management to Supply Chain Quality Management will be facilitated through effective leadership that understands cultural change practices that will take time to lead. The shift will require long term strategic planning and joint thinking among leadership executives. The plan must evaluate all of the strengths and weaknesses, realize and work towards an improvement in communication, and also improve transportation logistics and infrastructures. Companies need to work in all areas of the business to derive additional competitive advantages and supply chain quality is no exception. Those companies that can excel will integrate supply chain quality management to improve design, delivery, manufacturing, support, and the relationship between suppliers and customers in that process.

In an effort to satisfy customers and improve competitive advantage businesses have placed greater importance on quality in the supply chain. According to Harland (1996) “Supply chain management is the management of the flow of goods. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.” Total Quality Management is a similar business model that is designed to improve the quality of manufactured goods and their performance that will agree with what the customer expects to find in a good or service. “In supply chain quality management, the six total quality management factors that are related to supply chain performance are leadership, planning, human resources, supplier quality management, customer focus, and process management” (Azar et al., 2010). This goal can be accomplished through the convergence of all functions and processes within a business that are related to quality. Total Quality Management measures every area used by the company to provide high-quality products including design, development, quality assurance, research, and development, as well as the supply chain. Total Quality Management embodies an approach that uses all levels of a business, even the supply chain, to assure quality in the products being delivered. This has led to a number of businesses integrating total quality management practices into the supply chain management function.

Managing the supply chain embodies the oversight and direction of goods or materials from one place to another. The important elements to make a successful supply chain efficient and effective are the people and procedures in place to manage the flow of those materials. Therefore, Supply Chain Management is the art of managing the employees and the policies in place to make sure the customer gets their needs met through obtaining a high-quality product or service. According to Sun and Ni (2011) “Manufacturing organizations worldwide are progressively recognizing the critical effects of integrating with suppliers and customers in their business operations to gain competitive advantage over its competitions.” As a result of this realization, the business world has experienced a convergence of quality management practices such as total quality management with supply chain management practices. In essence, the practices such as ISO 9000 have been infiltrating the supply chain to enhance quality along the supply chain. Nevertheless, the drive behind any quality management tactic is customer-focused. This is because the effort to have the highest quality product is driven by the customer’s desire to have the best product to purchase. This is difficult because the supply chain can involve many entities that handle the product such as manufacturing staff, semi-truck delivery people, suppliers, warehouse staff, and even people who stock shelves with products. Maintaining quality given all those variables is an arduous task. According to (Guangshu, 2009) “more than half of the quality problems in supply chain are resulted by specifications because of the inadequate communications between the members of supply chain. In many cases, the procurement specifications released by buyers are equivocal while suppliers dare not argue against buyers.” In short, the main business enterprise has to pay close attention to the desires of the customers as well as the supply chain staff have to be attentive to the needs of the backflow users. The core principle and driving force of applying Total Quality Management on the Supply Chain are to realize that quality efforts are derived from understanding and attempting to fulfill what the customer wants.

The success of any business venture is contingent upon the performance of people. Therefore, leadership is a core component in the integration of quality on the supply chain. It is as simple as this – the success of total quality management along the supply chain is contingent upon the success of leadership managing the quality process along the supply chain. This is because the effort towards quality is a combined group effort of people who work along the supply lines that directly affect the quality of a good or service. These employees have to care about the business or they could damage goods without giving much thought to the potential customer loss and revenue downgrading that can occur from products of low quality reaching the marketplace. Quality is important because it directly relates to repeat customers. If a customer gets a poor quality item, the probability of that same customer purchasing that item again is low. Therefore, leaders are very important to the effectiveness of quality management along the supply chain. This is because the people who impact quality the most should understand through an effective leader how important their job is for quality. It’s important for employees to feel that their job is important and have support from company leadership. This support form leadership can produce enthusiasm and working creativity that embraces the ideas of all employees to continually improve. Many of the best ideas in terms of quality improvement and supply chain processes come from the line workers. As such, for supply chain quality to be of utmost effectiveness, the employees need to feel like their voice is heard and that they can express ideas to leadership that will be processed and valued. In the supply chain environment, an atmosphere that honors hard work, enthusiasm, and the consideration of new ideas that are creative. Fostering an environment along the supply chain like this will allow for problems to be solved, friendliness to be embraced as a part of the company culture, and ultimately, it will work to establish a workplace that values teamwork and group achievement.

Total Quality Management and Supply chain Management concepts have merged and formed an idea that teams can work together to harbor an environment that is continually improving. This approach has been seen in trendy improvement processes such as Six Sigma and Lean Management. The business must improve the quality of the product of service endlessly to reduce waste, or cost, to further make the customer happy. Meanwhile, the customer is getting happy, the business is reducing costs. Therefore, the profitability of the business can increase while the same high-quality product is being delivered to the customer at the same price. The pressure to constantly improve is driven by competition. As competitors find new ways to reduce waste and form alliances that are strategic along the supply chain, increased pressure is placed on competing businesses to preserve their market share and profit margins. According to (Guangshu, 2009) “Not only the core enterprise but also the other members, such as suppliers, sellers, and logistics providers, must improve their product and service respectively so as to c0onstruct the continual improvement of products and services all over the supply chain process.” This pressure to improve has reached into every avenue of the supply chain to the point where all business components must continually work to improve their service and reduce waste along the supply line.

The most successful supply chains are embracing an alliance approach along the supply line that almost treats other businesses along the supply chain as if they are partners This alliance approach has proven to be very effective in areas like Hong Kong. In fact, a study by Lo & Yeung (n.d.) has shown that “local companies tend to treat their suppliers as an extension of their business unit, and to work closely in schedule improvement and quality reliability.” There are three vital areas to obtain effective quality management in the supply chain. The three areas of most importance are supplier selection, supplier development, and supplier integration.

The supply chain quality management system requires a structural change in the buyer and supplier relations. While the business models were usually short term agreements that were used to maximize profits and allow an exit strategy to the business relationship, the best model is now a long term alliance or partnership. This promotes the business practice of selecting a supplier based on quality metrics as opposed to the short-sighted price or delivery schedule. It could be argued that the leading supply chain companies that are quality-focused would pick a supplier to do business with that is focused on the customer above profits. This is because thinking about the customer’s needs allows a business to improve continually to adjust and remain sustainable as they constantly meet the needs of the customer. On the contrary, businesses that are focused on price point may not care about the customer and their business life may be shortened as a result. According to Saraph et al., (1989) a customer-oriented supplier should have the following characteristics. These characteristics include a “reliable quality assurance system, control of operation management for maintaining quality, build in quality in day to day activities, continuous quality improvement and an awareness of quality policy within the company and the international quality certifications such as the ISO 9000, the BS 7850, or QS 9000.” These standards are known as the gold standard in international quality metrics that a company can achieve. In addition to supplier selection, supplier development is the second of three important objectives for successful supply chain quality management. Supplier development is a set of actions that are taken by a company to improve supply chain quality with consideration to operational improvement on the supplier side of the supply chain. According to Hahn et al., (1990) “these activities involve evaluating the supplier recognizing supplier achievement with awards and certifications, providing training and technical assistance, and establishing effective communication between parties. “Furthermore, companies must demonstrate a proactive attitude and commitment to the supplier development activities (Trent and Monczka, 1999). The last important in Supply Chain Quality Management is the integration of the supplier that moves the supplier into a sort of strategic alliance or partnership with the organization. Supplier integration works by improving quality by joining development activities with the supplying organization. Opposite to supplier development, integration is an activity that takes both parties to work correctly. The supplier and buyer both work together to improve this activity. The important features in supplier integration are the sharing of information that is secret and strategic in nature. According to Ellram (1995) “establishing ling term buyer-supplier relationships with mutual trust; this phenomenon results supplier base reduction - Besides, both parties will conduct joint problem-solving activities to improve the quality in both parties,” Therefore, in two business working together in an alliance by sharing strategic information, both businesses can improve their quality management along the supply chain.

Edward Deming, a prominent business mind, believed it is management’s top responsibility to support and be committed to employees and accept the responsibility for the output’s quality. In turn, top managers are therefore responsible for the delivery of the quality product through effective supply chain quality management. Through supply chain management strategy, suppliers can assist in preventing defective products in raw materials used in assembly and this can work to improve downstream quality management and increases the effect of inventory quality and safety as defects in inventories are reduced. In turn, this directly impacts financial costs perspective on the supply chain by reducing waste and improving cycle times.

The ability to focus on customers illustrates a commitment by the business to the customers through measuring customer satisfaction and holding employees accountable by performance evaluations that incorporate metrics that use customer satisfaction. The customer’s involvement in performance ratings allows a feedback element to allow management to more effectively keep customer needs as the primary focus of allocating so many resources to improve quality. The quality of product design is greatly influenced by the results of the relationship between suppliers and buyers. Businesses that focus on providing quality and improving relationships with suppliers and also integrating main suppliers into the design of products or services will be able to derive a very high level of competitive advantage in the marketplace. The management of this process can be improved through merging quality management techniques like process controls, designs, and empowering staff with training that focuses on quality and processes, as well as product designs focused on the customer that allow the input from the customer will inevitably allow an organization to be a front runner in achieving higher profitability from this strategic approach. There are best practices that can be employed by an organization to optimize quality in its supply chain management approach. First, the customer requirements must be embedded in the service or product design early in the planning stage of production. This must also take into consideration if the suppliers can accommodate the specific designs driven by the customers’ preference. Second, engineers that are on the design teams should include elements of quality into the services and products through engineering tactics and tools that can be used to develop new products across boundaries of companies. Fourth, there must be cross-functional communications between company departments and among suppliers so that there is a reduction in new product development time. Essentially, knowledge must be readily shared so that products are designed and manufactured the right way the first time. Fifth, trust must be established among supply chain members in order for customer requirements to be designed into the products at an affordable price. There is equilibrium between what customers want, which usually comes at a very high price, and customer capacity to spend, which is very low. Essentially, customers want high quality at a very low price and that is often impossible to achieve. However, a balance can be met that keeps both the customer and the manufacturer happy.

Leadership is often an overlooked component of successful supply chain quality management. It is critical because the top executives manage and direct the resources along the supply chain. Keeping this in mind, leaders have direct authority over the cultural, processes, supply management, and all of the human resource issues within the organization. In order to develop supply chains that are competitive with a focus on quality, it is important that leadership blends quality mindfulness with its suppliers and also the customers to improve the product’s quality performance. Executive leaders help support quality achievements as the organization extends the integration of strategic quality initiatives to suppliers. This can prevent the problems that may be occurring with suppliers because it helps install a sense of teamwork among two organizations that have very different strategic goals and mission statements. Executives should use teamwork, interpersonal relations, frequent positive communication, and a sharing of cultural traits that can foster a sense of trust among the two businesses in order to improve quality along the supply chain. These traits can allow a company to reach a competitive advantage because many companies do not share these sentiments and many organizations fail to address the disparity that is present between top management and middle management in regards to the relationship between suppliers and buyers. According to Novak (2001) “with respect to quality initiatives, both types of managers use data analysis, job training, project management, surveys, and customer relationship management to foster continuous improvement.” While the top and mid-level managers use similar approaches to quality assurance along the supply chain, top executives tend to be focused more exclusively on the customer’s desires than middle managers. Middle managers tend to be more tasks oriented rather than visionary and this can often lead to adversarial relationships between suppliers and buyers.

In closing, quality management and the supply chain can be merged into a positive relationship that works to help all stakeholders and deliver quality products to the customers that are better and in a more efficient way than ever. The process management perspective can be ingrained within the relationship between quality management and supply chain management to allow a very focused and effective quality component to the supply chain from design to production to end-user. The same best practices that are found in supply chain management are also the same best practices that are inherent to total quality management. This means that quality management along the supply chain has the same best practices as supply chain management and supply chain management. The only difference is that they are integrated into the supply chain quality platform. Lastly, the transition from total quality management to quality supply chain management requires a deep knowledge of the areas of supply chain management, quality driven by customer needs, and manufacturing and supply chain processes.

References

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