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Competitive quality, cost, service, and delivery have always been fundamental requirements of suppliers. They are still the cornerstones of integrated supply chain requirements for SME participation, although some aspects of these requirements are changing as integration levels increase. Customer expectations are rising, and to remain competitive, OEMs are demanding higher quality from their suppliers.

Automobiles last far longer than they did 20 years ago. Electronics, although they are orders of magnitude more complex than they were a decade ago which should result in greater opportunities for failure , are far more reliable. The demand for six-sigma 1 and other quality initiatives is an emerging trend.

The aerospace industry, among others, will almost certainly require improvements in supply chain quality as OEMs and prime contractors work towards the goal of producing defect-free work on the first try. It is a fundamental premise of manufacturing that high-quality end products cannot be built cost effectively from low-quality components.

Most suppliers operate in a tolerance range of two to three sigma. OEMs cannot achieve six-sigma quality with three-sigma suppliers. Sigma is a statistical measure of the capability of a business or manufacturing process to perform defect-free work. The common measurement index is defects per unit.

A unit can be virtually anything e. At the six-sigma level, the incidence of defects is nearly zero Velocci, Supply chain integration requires that quality be more than a set of abstract standards.

Quality must be a systemic way of doing business that is instilled in all participants in the chain. Quality has become critical in supply chains using just-in-time manufacturing with low inventory levels because they have very few buffers to protect against quality failures.

SMEs should not consider quality only as a requirement for continued supply chain participation, but as a strategic capability. SMEs that adopt quality as a competitive strategy are finding that they are better able to weather cyclical swings in their businesses and that their product costs are lower. Thus, SMEs may reap benefits by exceeding the quality levels required by supply chains.

Most integrated supply chains require that participants have a carefully reasoned and executed quality plan that includes concerted efforts to provide levels of quality appropriate to the market being served. Proficient problem identification and problem solving capabilities are fundamental elements of the quality plan.

Although six sigma and other quality programs may be of strategic benefit, they can be expensive to implement. Thus, SMEs must carefully target and prioritize improvements in terms of their effect on the company's operational and financial goals, as well as overall business objectives. Delivering a quality product requires, at a minimum, well established and well documented manufacturing processes and controls that meet impartial standards Small Boats To Rent 01 and customer requirements.

Six-sigma is one such standard, but other, less exacting standards may be adequate. SMEs are increasingly being required to identify, capture, analyze, and act on process data in conformance with SPC.

SMEs should discuss with their supply chain partners how quality improvements can affect the overall performance of the supply chain. Together, the partners should identify and prioritize SME actions that will have the greatest impact on overall supply chain quality, cost, and cycle time and determine how these actions will translate into increased competitiveness and profitability for the SME.

Properly implemented quality procedures can reduce rework, scrap, testing, and inspection and improve on-time deliveries. The result can be substantial savings and fewer schedule variances. For example, in the development and pilot production phases of new electronic products, two new quality techniques, highly-accelerated life testing HALT and highly-accelerated stress screening HASS have yielded substantial benefits.

Although they are somewhat expensive, these techniques have been shown to be effective in debugging new products and identifying. In many cases, these new techniques have been better able to identify problems in advance of full-scale production than previous methods, including MIL Standard tests. SPC has advanced beyond its early role as an after-the-fact application of statistics to production and inspection data, when it served primarily as a means of creating a report verifying compliance with customer requirements.

Today, SPC can provide opportunities for real-time assessment of manufacturing processes and can enable response to the causes of process variations as they happen. Thus, processes can be adjusted before more nonconforming products are produced. The savings are immediate and quantifiable, not just in direct costs, but also in more timely shipments, improved product quality, and increased customer satisfaction, all of which reflect favorably on SMEs seeking long-term supply chain partnerships.

Participants in a supply chain need a common language to facilitate accurate communication on issues of quality. Because such languages are not universally defined and can vary from chain to chain, quality standards, such as ISO, can be helpful.

SMEs may wish to adopt such standards voluntarily. SME participation in integrated supply chains can facilitate quality improvements through the exchange of ''best practices" among partners, which can enhance understanding and provide examples of proven techniques.

More advanced participants in the chain can assist those who are less advanced to adopt and use appropriate quality techniques. In response to the requirements of integrated supply chains for improved quality, small and medium-sized manufacturing enterprises should adopt quality as a competitive strategy and consider implementing techniques, such as six sigma, ISO certification, and statistical process controls, to comply with customer demands, improve overall business performance, and provide a common language for communication on quality issues.

Global bidding on the Internet has forced suppliers in many industries to slash prices dramatically. Costs have always been critical, and in the increasingly global economy it is not unusual for SMEs to find sudden gaps between their prices and the prices of competitors from low-cost areas. The convergence of 1 improvements in high-speed communications, 2 reduced transportation costs, 3 widespread adoption of. English as the language of business, and 4 universal access to technology and effective management practices has enabled companies in areas with low labor costs to become competitive regardless of location.

Thus, many SMEs must substantially reduce costs to remain competitive, and they are finding that competing on the basis of cost alone is becoming a losing game. In some industries, geographic proximity is no longer an advantage. The Internet and modern transportation capabilities have combined to enable on-line businesses with low labor costs and appropriate capabilities to compete from anywhere in the world. These capabilities have eliminated two traditional advantages of local suppliers: their physical proximity and customer ignorance of comparison prices.

Large OEMs, including the Boeing Company and United Technologies Corporation UTC , are taking advantage of these trends by turning to on-line bidding for the procurement of low-technology, pre-engineered items, such as nuts, bolts, and steel shafts, for which there are a large number of suppliers. Several companies have sprung up to conduct online auctions that pair worldwide buyers and sellers. Although price is important, buyers may consider other factors in their final decision or may reject all bids.

New suppliers are required to demonstrate appropriate capabilities prior to bidding. Unless the bids of new suppliers are substantially below those of incumbent suppliers, the jobs may go to incumbents because the buyer is more familiar with their capabilities or wants to retain a small base of the most competent suppliers. In , for example, FreeMarkets structured a daylong bidding event for UTC that included numerous lots of simple machined metal parts.

Prior to the bidding, FreeMarkets analyzed a list of preapproved suppliers and selected ones acceptable to the buyer. The buyer was able to specify preferences, such as the inclusion of small and disadvantaged businesses. Each supplier was sent a package in advance detailing the parts being sought, pertinent quality requirements, and delivery dates.

In this example, the bidding was conducted on a secure network. Suppliers were not informed of the names of their Cheap Used Small Boats 300g competitors or the prices paid for similar items in the past. They could, however, see rival bids in real time. Bidding was described as "bare-knuckled," with low bids coming from qualified suppliers in India and elsewhere. In one lot, an incumbent supplier was forced to reduce its price by more than 50 percent from its previous contract to retain the business.

These and other auction services are opening new worldwide markets to SMEs that have competitive costs and capabilities. Once they have become qualified suppliers, only a PC and a modem are required to participate. However, Internet bidding can dramatically reduce the profit margins of SMEs that have not properly positioned themselves in terms of cost, product differentiation, or added value.

Because few SMEs have sufficient margins to withstand such competition, it is essential for their survival that they prepare in advance for such eventualities. Opportunities for internal cost reductions include direct labor, materials, scrap, and rework. Other opportunities can be found through creative reductions in overhead. The Boeing Company, for example, reports saving hundreds of millions of dollars by moving its system of spare parts sales and aircraft maintenance manuals to the Internet.

Techniques, such as just-in-time manufacturing, activity-based costing ABC , vendor-managed inventory, and lean manufacturing, can be used effectively to reduce non-value-added costs. Traditional accounting systems accumulate costs, such as engineering and material handling, into overhead accounts, which are then allocated to products based on the amount of direct labor each product requires.

This approach is useful when there are long manufacturing runs and direct labor is a large part of total costs. However, traditional accounting systems are less useful for firms with substantial investments in information, product design, and agile manufacturing technologies. ABC assigns job costs based on the actual use of resources, enabling firms to price their products appropriately, determine in which markets they can compete effectively, make better capital allocation decisions, and calculate the incremental costs associated with potential courses of action.

Just as OEMs use outsourcing, SMEs must consider creating and Cheap Small Fishing Boats 60 integrating their own supply chains to optimize their own cost structures. This potential for cost improvement has yet to be exploited by most SMEs. Participants may, for instance, reallocate work among themselves to improve the overall efficiency of the supply chain.

Several personal computer companies have implemented "channel assembly," delegating responsibility for final assembly to distributors with specific customer knowledge and lower labor rates. This practice can be used to reduce inventory levels and the probability of obsolete inventories. Other supply chains have succeeded in redeploying, consolidating, or sharing warehouse space and inventories among participants to reduce overall costs to the chain.

Participants in integrated supply chains may also be able to share or preferably eliminate some administrative procedures. Although cost reductions are critical, additional efforts will be required to maintain competitive advantage and meet the challenge of increasingly competent global competition.

Many SMEs will have to do more than provide low-cost parts if they want to become partners with demanding customers. They may have to simultaneously maximize the value and minimize the total cost of the goods and services they provide.

Competitive advantage can be achieved through value-added services, including low-cost storage, rapid response in dealing with warranty issues, ready access to spare parts, and improved logistics. Investment in enhanced product design capabilities can create other opportunities for adding value, linking an SME more closely to the OEM. SMEs should also investigate other innovative opportunities, such as building subassemblies instead of just parts.

Although integrated supply chains are increasingly recognizing the benefits of added value, some customers may be unwilling to pay for it. Thus, SMEs may have to reposition themselves in new industries and find new customers that are willing to pay for value-added products and services. SMEs must carefully identify customer preferences, buying habits, and unfulfilled needs and determine whether efforts to meet them would be appropriately rewarded.

Small and medium-sized manufacturing enterprises should rigorously reduce costs internally and throughout their supply chains. They should also seek ways to increase the value-added to their products and services and find customers willing to reward such value. As levels of supply chain integration have increased and inventory levels have been reduced, reliable, on-time deliveries have become increasingly critical for success.


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