What is the logic behind pursuing early supplier design involvement with suppliers?
Supply chain management is an innovative response to the needs of the global business process. Supply chain focuses on quality, cost, flexibility, reliability, and innovation. One of the essential parts of a successful supply chain is the excellent supplier relations. Today’s products have high levels of complexity which forces companies to work with suppliers to reduce the costs of the product as well as improve the production efficiency. The logic behind pursuing early supplier design involvement is clear that Integrated Systems is trying to take advantage of potential benefits of early product and process development. These potential benefits include:
Quality management is a turning point in the understanding the importance of quality. I mentioned about Kaizen in my other posts. Kaizen is a Japanese philosophy that is based on continuous improvement throughout all aspects of life. If implemented correctly to a business, Kaizen may improve all business aspects which in turn will increase overall quality. When overall quality is improved, companies will eliminate waste, decrease defect rate, will simultaneously lowering their production cost. Early supplier design involvement is a form of Kaizen because it focuses on process. In production, small improvements result in a end product that is high quality and low in cost.
Previously I have examined Toyota’s supplier relations as a case study. Many supply chain enthusiast should bow in front of Toyota and their Toyota Way. If we are going to talk about early product and process development with suppliers, Toyota should be without a doubt included in this subject. Integrated Systems should benchmark Toyota’s system and implement into their business. What makes Toyota so special is their extremely high success rate of early supplier relations. Toyota was able to increase product quality and reduce the cost significantly as a result of of the innovative ideas from suppliers. Toyota’s supply chain management and Japanese work ethics are simply fascinating. Figure 3 below shows the essential parts of how unique Toyota’s Supplier relations form a supplier partnering hierarchy. If we have a closer look at the practices in the supplier-partnering hierarchy we discover Toyota’s underlining commitment to forming profound supplier relations. Exchanging practices, sharing information intensively, innovative approach, and Kaizen& learning suppliers are all crucial parts of their successful supplier relation system.
Figure 1: Supplier Partnering Hierarchy
Source: The Toyota Way
Quality is an essential part of production as well as company brand. When overall quality is improved, companies will eliminate waste, decrease defect rate, and lower their production cost. Quality is a race without a finish line because there is limitless room for improvement. Products are driven by customer wants and needs. When there are so many companies in the market, quality plays an essential role in decision making. Founder of Procter and Gamble Company, William Procter said, “The ﬁrst job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a proﬁt.” In addition, quality could be competitive advantage. Competitive advantage makes a significant contribution to business success. Companies can always increase their quality. In this global world, companies will continue to grow and succeed only improve business aspects such as, business processes, customer service, and product quality. Nowadays, quality is not a luxury it is a necessity that must be incorporated into each product.
According to Wall Street Journal, Boeing used moving assembly and supplier early supplier involvement method to reduce defects and assembly time. They were able to reduce assembly time from 40 days to 11 days as well as they had a significant reduction of production cost. Integrated Systems should use Toyota’s Kaizen philosophy and business strategy not only to increase utilization, quality, and productivity, but also reduce lead times, production cost as well as uncertainty.
Firms may use sample process map that I have developed to help decision making. This map may serve as a guide for the firms.