The ASQ Supply Chain Management Primer
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About this ebook
The global economy has presented both a challenge and an opportunity for organizations to better manage their supply chains. An organization’s supply chain has come to be viewed as more like a supply web, because an organization has a complex network of customers, distributors, wholesalers, suppliers (first tier, second tier and sometimes third tier), and includes logistics, transportation and warehousing.
This primer draws content from experts in the field and was blended into a useful tool for you to use managing your organization’s supply chain. It covers key supply chain topics, like: supply chain and logistics management processes, defining organizational needs and requirements, identifying supply network sources, building relationships, awarding contracts, and managing supplier performance.
Creating an effective supply chain is key to staying ahead in today’s complex global economy. This primer provides the tools, guidance, and examples to help maximize business performance and create competitive advantage for your organization.
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The ASQ Supply Chain Management Primer - ASQ Quality Press
The ASQ Supply Chain Management Primer
J.P. Russell, Editor
ASQ Quality Press
Milwaukee, Wisconsin
American Society for Quality, Quality Press, Milwaukee, WI 53203
© 2014 by ASQ
All rights reserved. Published 2013.18 17 16 15 14 13 12 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
The ASQ supply chain management primer/editor, J.P. Russell.
pages cm
Includes bibliographical references.
ISBN 978-0-87389-867-6 (hardcover: alk. paper)
1. Business logistics. I. Russell, J.P. (James P.), 1945-
HD38.5.A87 2013
658.7—dc23
2013037474
No part of this book may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Acquisitions Editor: Matt T. Meinholz
Managing Editor: Paul Daniel O’Mara
Production Administrator: Randall Benson
ASQ Mission: The American Society for Quality advances individual, organizational, and community excellence worldwide through learning, quality improvement, and knowledge exchange.
Attention Bookstores, Wholesalers, Schools, and Corporations: ASQ Quality Press books, video, audio, and software are available at quantity discounts with bulk purchases for business, educational, or instructional use. For information, please contact ASQ Quality Press at 800-248-1946, or write to ASQ Quality Press, P.O. Box 3005, Milwaukee, WI 53201-3005.
To place orders or to request ASQ membership information, call 800-248-1946. Visit our Web site at www.asq.org/quality-press.
6798.pngTable of Contents
Cover
Title page
Copyright
Foreword
Notes to the Reader
Acknowledgements
About the Authors
1 – Supply Chain Management Briefing
DEFINE YOUR REQUIREMENTS
SELECT A SUPPLIER
AWARD THE BUSINESS
BUILD AND STRENGTHEN RELATIONSHIPS
MONITOR THE PERFORMANCE
THE ENTERPRISE PROCESSES
2 – Define Requirements
GENERAL CONCEPTS OF PROCUREMENT CONTROL
DESIGN
CONTRACT/ORDER REVIEW
3 – Select Suppliers
SUPPLY CHAIN BACKGROUND
SUPPLY CHAIN COUNCIL AND THE SCOR MODEL
ORGANIZATIONAL REQUIREMENTS PLANNING
SOURCING
STRATEGIC SOURCING
SOURCING ALTERNATIVES
OUTSOURCING
SOURCING DOCUMENTS
SUPPLIER SELECTION AND EVALUATION
SUPPLIER EVALUATION CRITERIA
SUPPLIER EVALUATION AND SELECTION SURVEY
APPROVED SUPPLIER LIST
SUPPLIER CERTIFICATION
4 – Award Contracts
PURCHASING FUNCTION
LEGAL ASPECTS OF PURCHASING
COMPETITION
TERMS AND CONDITIONS
UNDERSTANDING COST
SPECIFICATIONS AND DESIGN RESPONSIBILITY AND APPROACH
TYPES OF AGREEMENTS
TEAM SUPPLIER SELECTION
NEGOTIATIONS
PURCHASE ORDER PROCESS
CONTRACT RISK MANAGEMENT
PERFORMANCE RULES
5 – Build Relationships
SUPPLY CHAIN RELATIONSHIPS
SUPPLIER RELATIONSHIP MANAGEMENT
CUSTOMER RELATIONSHIP MANAGEMENT
RELATIONSHIPS BASED ON CRITICALITY
COMPETITION AND STRATEGIES
MANAGE SURPLUS INVENTORY AND MAXIMIZE AGILITY
CUSTOMER-SUPPLIER VALUE CREATION PARADIGM
VALUE PROPOSITIONS
SUPPLIER PARTNERSHIPS
PRINCIPLES OF SUPPLIER PARTNERSHIPS
WORKING OUT PARTNERSHIPS AND COLLABORATION
KEY FACTORS IN PARTNERSHIPS
INTELLECTUAL PROPERTY
PROFESSIONAL ETHICS
6 – Monitor Supplier Performance
WHY PERFORMANCE MANAGEMENT FOR SUPPLIERS?
VERIFICATION OF ORDERED ITEMS
WHAT PERFORMANCE SHOULD BE EVALUATED?
ELEMENTS OF A SUPPLIER MANAGEMENT PROCESS
BEST PRACTICES
7 – Supply Chain Management Processes
SUPPLY CHAIN DEFINED BY THE EXPERTS
THE SCOR MODEL
PLAN
SOURCING
MAKE
DELIVERY AND WAREHOUSING
RETURNS
MEASURING SUPPLY CHAIN PERFORMANCE
RISK MANAGEMENT
Appendix A
Appendix B
DIRECTIONS FOR AUDITOR OR ASSESSOR
Supply Chain Glossary
Bibliography
Foreword
The ASQ Supply Chain Management Primer is an investment by the American Society for Quality’s Customer–Supplier Division (CSD) into the quality body of knowledge (QBoK™) and member value. Indeed, the inspiration for this text came when we were searching on how we could best serve our members worldwide. I believed that placing this supply chain management fundamentals book in the hands of all our divisional members would permit a developing step in both our technology and community. I asked Dennis Arter, a key leader in the development and dissemination of customer–supplier theory and practice in ASQ’s Customer–Supplier Division, and he agreed. Together we approached J.P. Russell, asking him to gather subject matter experts and provide the leadership required to bring the book together. In true community fashion, a call went out to the Division’s immense resources. The call was answered and their gifts of wisdom were poured into writings. JP then performed the skilled work of a master project manager and created a common voice and flow from the individual contributions.
Appreciations go out to the contributing authors and CSD leadership. Both made this project possible. Also, thanks to Sue Daniels for her copyediting and to Quality Press resources, especially Matt Meinholz.
I trust you will find The ASQ Supply Chain Management Primer informative and applicable to your daily work. CSD remains dedicated to the mission of providing answers that develop, improve, and strengthen customer–supplier relationships. As a volunteer leader-based community, we welcome members to jump in, be involved, and share their knowledge of best practices. Our community strength is sourced from each of you.
Stephen K. Hacker
Chair of ASQ Global Advisory Committee and ASQ Chair-Elect 2013
Notes to the Reader
The Use
This primer provides a foundation for supply chain management. It may be used by executives to understand the risks and strategic issues surrounding global sourcing. It is also for purchasing professionals new to the idea of supply chain management as an enterprise within an organization. It can also be used as a review for supply quality specialists or as an introduction for personnel involved in the supply chain management process.
It was written with the assumption of operating in a free and competitive environment.
The Contents
The primer is organized by first presenting common processes used to purchase goods and services. Our aim is to cover basic fundamental responsibilities and duties for each process. Historically, many of these activities operated independent of one another. But as the number of suppliers has increased and their geographic locations have expanded globally, added inefficiencies and risks surfaced.
The last chapter of the book brings together the individual methods plus other tasks necessary to manage a global supply chain. Because of our approach there is some necessary redundancy, but the degree of detail varies according to the focus of the chapter. For example, we introduce the SCOR model in a couple of early chapters but it is not discussed in detail until Chapter 7.
Obsolescence management is included in the appendix because it goes beyond basic or fundamental supply chain management.
The Glossary
Originally we did not plan to include a glossary, but as the supply management field evolved so has the vocabulary and new words and phrases have been introduced to better describe certain actions or tasks. If no appropriate definition existed, the authors created one. The definitions were reviewed, edited, and added to the glossary to help in the understanding of supply chain management. The first instance of a glossary word is italicized within the main text.
Acknowledgements
Authors
Dennis Arter (primary author Chapter 1)
Zubair A. Khurshid (primary author Chapters 3 and 5)
Helen Kiesel (general topic author and contributor)
Jodi L. Medley-McMahon, (primary author Chapter 6)
Akio Miura (primary author Chapter 2)
Paul Myerson (primary author Chapter 7)
Dan Reid (primary author Chapter 4)
Once the ASQ Customer–Supplier Division leaders approved the project, a call went out for contributors. The above persons volunteered their time and expertise to join ASQ and the Customer–Supplier Division in an effort to provide a supply chain primer to fill a growing worldwide need. These experts and practitioners provided the fundamental knowledge needed to craft this book. We are thankful and appreciative of their contributions, patience, and responsiveness to queries. The primer is designed to be a starter document for developing fundamentally sound supply chain networks.
Reviewers
Beatriz Fuentes Castañeda, Qualified ISO/TS internal auditor and MMOG internal auditor
Mark Durivage, ASQ Fellow, CMQ/OE, CRE, CQE, CQA
Dick Gould, ASQ Fellow
Elias Monreal, ASQ-CQIA, CQPA, CMI, CQT, CSSGB, CCT, CQA, CQE, CMQ/OE
Teresa A. Whitacre, CQA, CQE, CQM/OE, CSSGB, ASQ Fellow
The final development steps of the project involved a peer review to make sure the information in the primer is credible and to identify technical issues. We thank the above reviewers for taking their valuable time to review and comment on the draft manuscript. The reviewers pointed out a need to reorganize the primer to better align with project objectives.
About the Authors
Dennis Arter is an author, consultant, and trainer from Kennewick, Washington State, United States. He earned a bachelor’s degree in chemistry from the University of Illinois and became a nuclear submarine officer. After military service, Arter wrote Quality Audits for Improved Performance, a best seller published by ASQ Quality Press. He teaches and publishes on auditing, management systems, and risk. Arter is an ASQ fellow, certified quality auditor, and former member of the ASQ Board of Directors.
Zubair A. Khurshid, PE, is a management and quality consultant, adjunct faculty member, and guest speaker to executive programs. He holds a bachelor’s degree in electrical engineering and a master’s degree in engineering management. He is a senior member of ASQ and is certified by ASQ as a Six Sigma Black Belt and manager of quality/organizational excellence. He is also a member of IEEE, APICS, and the Project Management Institute. Professionally he has contributed in various management positions to partner and vendor strategy, ISO 9001, Six Sigma, program management, corporate governance, and processes spanning capital and operating budgeting, tender and contracts, invoicing and payments, material management, and service provisioning in the Middle East