VI.G Supplier Logistics and Material Acceptance
Identification, selection, monitoring, and improvement of suppliers are part of the plan–do–check–act cycle of supplier management. An additional important piece is how the interface between purchaser and supplier is planned and implemented. Materials must be available when needed, but this must be done in a manner that considers the costs of transportation, receipt, and storage. This often requires coordination of schedules across multiple organizations in the supply chain.
Push or pull systems might be used to assure that material is available when needed. Push systems require suppliers to ship according to purchasers’ demands. Forecasts and demand must be closely aligned and communicated. Pull systems require purchasers to order product from suppliers as replacements for those items that have been used. Pull systems keep purchasers’ inventory lower than the push method.
A ship-to-stock program utilizes supplier performance and supplier certification as a means of identifying suppliers whose materials can be received directly into the organization without verification. Material is simply moved directly to storage when received. The advantages of ship-to-stock include reduced inventory levels and elimination of incoming inspection.
Just-in-time programs eliminate raw material storage altogether on some products by having the supplier ship materials in smaller quantities more frequently and directly to the point of use (see Chapter 13, Section 3). In making such decisions, the shipping lot size and frequency must consider the time in transit, cost of shipment, and cost of inventory. For example, nuts and bolts can be maintained in inventory very inexpensively, and infrequent shipments with higher inventory may make more financial sense. An automotive assembly plant, however, would probably not want to maintain a large inventory of car seats covering the full range of different colors and materials. Some organizations allow suppliers to replenish small hardware stock on premises without paperwork. The supplier is paid based on the quantity of hardware used on the final products produced.
Working on a just-in-time basis requires close coordination between purchaser and supplier. When feasible, it is best to level demand rather than have large swings (for example, created by special promotions) that require the supplier to radically adjust output levels. When the type of business makes demand leveling difficult, production plans and schedules must be communicated more frequently. This often involves electronic communications between the purchaser’s and supplier’s advanced planning and enterprise resource planning systems.
A final method being used to improve and simplify the supply chain is the move toward modular assembly. It is the process of transferring additional business back to suppliers, who produce a complete subassembly that was previously assembled by the purchaser. The result is that the purchaser receiving the subassembly as a completed item can more effectively integrate the subassembly into the final assembly.
Quality Management BOK Reference
VI Supply Chain Management
VI.F Supplier Logistics and Material Acceptance - Describe the impact that purchased products and services can have on final product assembly or total service package, including ship-to-stock, and just-in-time (JIT). Plan and conduct incoming material inspections.
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