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Matthew Littlefield

Quality Insider

Putting the Quality Back into Supplier Management

Enterprise resource planning software can help organizations manage global enterprises effectively

Published: Monday, January 16, 2012 - 13:39

Manufacturing is now a global game. The United States is still the world’s largest manufacturer but is no longer the engine for growth it once was. China, Brazil, Australia, India, Singapore, and other countries are building new facilities at a breakneck pace.

This growth is also no longer limited to just low-value-added areas. Industries such as automotive, aerospace, consumer packaged goods, food, electronics, medical devices, and pharmaceuticals are now some of the most global in the world.

Much of the growth is driven by U.S. and western European corporations. These companies have achieved a global scale through building a matrix-type structure composed of multiple business units and regions. This structure can act as a source of strength, but it also incurs the challenge of managing complex internal and external operations. Externally, these companies generally have supply networks that span multiple tiers ranging from joint ventures, tier 1 partner firms, and tier 2 or 3 component suppliers. Internally, many of these leading companies have built global centers of excellence for procurement, engineering, manufacturing, logistics, finance, and more. The strategy around a center of excellence approach is to help centralize expertise and act as a shared service provider within the organization to standardize best practices across regions and business units.

To help manage this complexity and support these internal and external business objectives, many leading companies have supported operations with a centralized IT architecture, often in the form of a single instance global enterprise resource planning (ERP) implementation. Such systems can take many years and many millions of dollars to implement, but in the long term help to streamline processes, reduce redundancy, provide better visibility into operations, and more. This is the positive side, but there are also negatives. When it comes to global ERP implementations, not all functional areas or departments are treated equal. Often the majority of resources and expertise are focused on those areas that stand to gain the most direct benefit or cost savings. Often this means the major beneficiaries of a global ERP implantation are finance, accounting, and procurement, along with select other areas of the business that offer a competitive advantage—supply chain management or engineering are good examples.

One of the major losers in this regard is often quality management. There have been more than a few ERP implementations that have neglected quality management capabilities, which in turn has led to the emergence of an entire enterprise quality management software space. These software systems complement a company’s existing ERP investments and other pure-play enterprise applications to help build quality into many different areas of the business. Traditionally these systems have helped companies centralize the management of nonconformances, corrective and preventive actions, document control, audits, and compliance, among others. A good model of how this looks in many companies is shown in figure 1.

Figure 1: Enterprise quality management software as a process platform

Supplier quality management

All of these capabilities are needed for a company to have a robust quality management program, and there are many benefits to managing them with a centralized software system. However, as companies have globalized, quality has moved from an internal issue to a whole value-chain issue. This means companies today need to do more than just manage their own quality; they must also manage their suppliers’ quality. For some companies, their first attempt to better manage their supplier’s quality is focused mainly on supplier scorecards, finished product testing, or certificates of analysis. This approach is often separate from a company’s own quality management system and is often more a function of procurement or supply chain.

Leading companies have moved away from this more traditional approach to supplier management and are now attempting to manage supplier quality as part of their overall quality management process. The software vendors have followed suit and many of the enterprise quality management software vendors now have Supplier Quality Management modules as part of their overall suites. By taking a more integrated approach, companies are able to better create partnerships with trading partners and focus on creating transparency, real time visibility into supplier processes, and improved collaboration.

If you are interested in learning more about implementing supplier quality management at your company, register for Managing the Complex Supply Chain Ecosystem, a live webcast on Jan. 25, 2012.

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About The Author

Matthew Littlefield’s picture

Matthew Littlefield

Matthew Littlefield is president and principal analyst for LNS Research based in Brookline, Massachusetts. LNS Research provides executives a platform for accessing unbiased research and benchmark data to improve business performance. Littlefield writes for the LNS Research blog where he covers topics including enterprise quality management software, manufacturing operations management, asset performance management, sustainability, and industrial automation 2.0.