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Mitigating Supply Chain Risk To Ensure Product Quality

Building visibility and collaboration across the supplier base can help to alleviate the most common cause of supply chain risk: supplier quality.

Some 92 percent of manufacturers say product quality defines their success in the eyes of their customers, according to a recent survey by IQMS on what drives growth. However, the ability to ensure quality is limited by how well the factors that contribute to delivering the product are managed throughout the supply chain. The implication is clear; manufacturers who take on the challenge of mitigating supply chain risks with direct, highly collaborative strategies will drive the higher product quality required to attract and grow customers.

In defining a roadmap for mitigating supply chain risk and seeking out new ways to improve product quality, the best place to start is by initiating new ways of listening, communicating, collaborating and measuring results. By starting with the mindset of suppliers as collaborators, manufacturers are better positioned to build frameworks that mitigate or reduce supply chain risk while fueling innovation. From providing customized new parts that accelerate new product development schedules to stepping up quality levels on long-standing components, when suppliers become collaborators in creation, risk mitigation strategies improve.

Create More Ways for Suppliers to Collaborate  

Collaborating with supply chain partners needs to be addressed on two fronts — combining improvements in supply chain integration at the platform and application level with a more strategic approach to supply chain collaboration, including advisory councils and surveys. In doing so, manufacturers can gain the deeper insights and knowledge they need.

Improving supply chain integration across platforms and applications provides continual updates on product quality at the network and supplier level to facilitate operational efficiency. Additionally, it creates a network effect that enables greater knowledge sharing.

Based on discussions with manufacturers and suppliers across a broad base of industries, a supply chain integration maturity model has emerged, which maps manufacturing agility with the level of supplier integration, using such technologies as supply chain management (SCM), enterprise resource planning (ERP), customer relationship management (CRM), and analytics, among others. It captures the evolution from operating reactively to anticipating requirements, collaborating, and ultimately orchestrating efforts in order to flex in real time to changes in demand — without impacting quality levels.

However, manufacturers need to move beyond the day-to-day transaction workflows that dominate supplier interactions and create opportunities for strategic engagement. This includes providing direct feedback on supplier quality levels and defining new strategies for suppliers and manufacturers to capitalize on the information each has to mitigate supply chain risk.

One highly effective strategy for helping manufacturers to define a roadmap for reducing risk and improving quality is conducting customer advisory councils, supplier advisory councils, customer surveys, and supplier surveys. Notably, one manufacturer complements the advisory councils and surveys with ongoing supplier conference calls and in-plant visits in its efforts to strategically engage with suppliers.

By combining strong supplier engagement and supply chain integration, manufacturers can give suppliers greater ownership over shared risks and clear feedback on where they are excelling and where they need to improve product quality.

Defeat Complacency with Customer-Driven Goals

The manufacturers most in step with their customers realize that there is an inflection happening today in how, where, when and why their customers buy, which transcends business-to-business (B2B) and business-to-consumer (B2C) industries. In addressing these new customer preferences and purchasing cycles, manufacturing firms will need to evolve their supplier risk mitigation strategies and metrics for evaluating success.

Successful manufacturers often use annual supplier plans that reflect shifts in customer preferences, purchasing cycles, and quality by defining shared customer-specific goals. Dashboards in annual supplier plans typically include overall throughput effectiveness (OTE), perfect order performance, supplier quality, and supplier defect rate, among others. Every month, suppliers and manufacturers meet or review forecasts, quality, pricing, and how sales orders are changing the product mix. The highest performing suppliers are awarded for providing the highest quality products, most on-time delivery, and excellent service.

Use Audits to Minimize Risk and Ensure Product Quality

Periodic supplier audits are another cornerstone of any effective supplier risk mitigation and quality management strategy, particularly with the growing compliance and reporting requirements manufacturers face globally. Starting with suppliers’ internal processes and whether they meet product quality standards or not, these audits need to concentrate on identifying, eliminating and preventing product quality problems.

Product, process quality, and quality systems audits, in particular, are indispensable sources of intelligence. In a recent survey, 63 percent of manufacturers said the most predictive indicator of supply chain risk is when inbound supplier defect rates fluctuate. Audits help determine the causes of why defect rates fluctuate and what needs to be done at the process, product, and sourcing level to improve them.

Reduce Recall Risks via Greater Supplier Visibility

Advisory councils and surveys consistently indicate that strong traceability can quickly avert millions of dollars in lost revenue and save months of time. In fact, manufacturers have observed that the more traceability is embedded in their operations, the more efficient they are at reaching higher quality goals.

At the forefront of traceability are medical device companies that prioritize track and trace initiatives for International Standards Organization (ISO), Current Good Manufacturing Practice  (CGMP), and United States Food and Drug Administration (FDA) compliance.

The essence of track and trace is determining the current and past location of a given part, assembly or component. Most manufacturers use text labels and barcodes, while radio-frequency identification (RFID) tags are most common on high-value components. Increasingly manufacturers are not only initiating pilots with Internet of Things (IoT) sensors; they are evaluating how well new suppliers’ traceability systems can scale for RFID, IoT, and other new technologies.

Building visibility and collaboration across the supplier base can help to alleviate the most common cause of supply chain risk: supplier quality. Moreover, by embedding supply risk assessment and mitigation strategies across the main supply chain functions, manufacturers can turn compliance into a competitive advantage.

Louis Columbus is a principle at IQMS.

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