A guide to global supply chain management
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Product recalls are every manufacturer’s worst nightmare, and the headlines are full of stories about companies having to fess up and make good on manufacturing-quality-control disasters, from Baxter Healthcare's 2008 Heparin scare to Mattel’s recall of toys made in China.
High-profile, quality-related incidents like these not only sully a manufacturer’s reputation, they can do irreparable damage to the customer relationship, completely squashing demand for a product. While quality control has long been a top priority—albeit an ongoing challenge for manufacturers—the discipline has been made even more complex by the rise of outsourcing noncritical product development and manufacturing functions to an extended supply chain of partners that, more often than not, are scattered around the globe.
Global supplier networks that are multiple layers deep compound the quality issue for manufacturers in a number of ways. For one thing, they hamper their ability to respond quickly to market changes and evolving customer requirements because operations are far-flung and not under direct control. It also makes it more difficult to keep product costs down, which is an ongoing mandate for any manufacturer trying to maintain a competitive advantage in today’s tough economic climate.
In many ways, the problem boils down to a case of reduced visibility. “The hard thing about quality and compliance when you have an extended supply chain is having the confidence that your supply chain partners are doing all the right things at the right times and in the right places,” noted Peter Blok, a senior partner at Pharma Team USA, a Princeton, N.J.-based consulting company specializing in supply chain optimization and quality and compliance issues for the life sciences industry. “You need to have a quality system in place that not only qualifies a vendor when you initially contract with them, but you have to have an ongoing process and quality dialogue. Without this kind of visibility and communications, you need a tremendous amount of trust with your extended supply chain—and that’s a hard thing to [achieve].”
Closed-loop quality-control systems
It’s especially hard to use traditional quality management and manufacturing systems to achieve the level of visibility that begets such trust. Conventional plant systems are just that—software and, more likely, paper-based processes that give some visibility into what’s happening on a single plant floor without the context of what’s happening in other areas of the business, let alone at outside partners.
Manufacturers are likely to have an array of siloed applications: document control systems, lab information systems, a handful of Six Sigma tools, maybe even some data mining programs that tap into historical data to analyze past quality trends. What’s lacking in such setups is integration. The quality control tools are typically deployed within a company’s four walls and even then are not synced up to share data with other enterprise systems that are critical to quality processes, such as ERP or supply chain management.
“There’s never been any sort of closed-loop quality system; just about everything is lacking,” said John Blanchard, principal analyst at ARC Advisory Group, a research firm based in Dedham, Mass. “All of the functions have been piecemealed together, and a lot of them have been manual. But due to the global nature of manufacturing operations, cost containment and response time is critical, hence the need for more visibility and better metrics.”
The visibility problem is exacerbated when you factor in external partners. Typically, a manufacturer will receive a certificate of analysis that is intended to show that its supplier has passed certain quality or compliance standards. “But when I have an extended supply chain, I really want more data than a certificate of analysis,” Blok said. Not only does this workflow fail to foster early collaboration between the manufacturer and supplier to prevent quality issues, it does little to foster a collaborative working arrangement to come up with a corrective action that will ensure the problem doesn’t crop up again.
"We become highly dependent on our vendor’s systems, and in order for me as a purchaser to be comfortable, it takes a tremendous amount of trust,” Blok said. “That means my quality people have to be talking to their quality people consistently, and today, that only happens when you’re initiating the purchase or have a problem.”