TABLE OF CONTENT 1. Abstract1 2. Introduction2 3. Partnering as opposed to traditional purchasing3 4. Total quality management and supplier partnerships4 5. Research hypotheses and design. 4 6. The Case Study5 1. Period A:- The initial operating period using traditional purchasing7 2. Period B:- The Partnership8 3. Period C:- A Change in suppliers. 9 4. Period D:- Re-establishing the partnership10 7. Conclusion11 8. References11 LIST OF FIGURES & TABLES 1. Case output by time period6 2. Case output by timeline with slope profiles6 TABLE 1.
Comparison of means6 Abstract Many North American have established partnering arrangements with their suppliers for the purpose of improving the quality of product or service offerings. Using longitudinal field study, the results of one firm use of supplier partnerships is examined from the perspective of continuous improvement in quality and productivity. This case study is unusual cause both partnering and no partnering approaches were employed during the course of this study, providing data for contrasting statistical analysis.
The study shows the actual benefits achieved in productivity and quality from the firm’s supplier partnering activities. The implications for management along with the difficulties encountered in relating to traditional purchasing philosophy are discussed. INTRODUCTION Terms like quality management and partnering, or strategic relationship with suppliers are unavoidably linked. Quality guru Dr. Edward Deming has recommended limiting the supply base and forming single source relationships to reduce the sources of variance in incoming product quality.
In past several case studies have appeared in the literature that highlight the benefits of that can accumulate from the supplier partnerships. For example Cambell Soup Company case study, but unfortunately those case studies do not necessarily prove that supplier partnerships are the cause of improvement. The purpose of this study is to examine the interrelationship between Total Quality Management (TQM) and supplier partnering activities outside of the automotive sector. In this study a carton manufacturer was involved in a TQM program that included supplier partnering activity with a buyer.
In this study, carton supplier was subjected to traditional purchasing practices by the buyer when the alternate supplier was temporarily utilized. The implications of utilizing traditional purchasing practices are explored, as are the difficulties in developing purchasing partnerships without the commitment of top management. PARTNERING AS OPPOSED TO TRADITIONAL PURCHASING Partnership involves elements such as the use of long term contracts, a reduced number of supply sources, and a high degree of mutual trust between two parties.
One researcher has defined strategic partnership as a “ mutual ongoing relationship involving a commitment over an extended period, and a sharing information and the risk and rewards of the relationships. ” There are five attributes of buyer-supplier relationships as researched by some scholars, as given below:- 1. A supply pool consisting of one or a preferred few suppliers. 2. An alliance incorporating a credible commitment between the buying and selling firms. 3. Joint problem solving activities. 4. An extensive exchange of information between firms. 5. Joint adjustment to marketplace conditions.
In contrast with the partnering approach, for a number of reasons, traditional purchasing methods typically involve the use of multiple sources for major materials, with relatively short term contracts awarded on the basis of competitive bidding. Multiple sources can provide quick recovery in the event of supply problems or sudden schedule changes. They can also used to provide competitive price pressure. On the other hand multiple sources can be costly to maintain simply because of the repetitive nature of the bidding process. In this method technology and information sharing is limited.
Join development towards continuous improvement is virtually nonexistent. Investment by supplier in research and development and process improvement usually limited to that which can be economically justified within duration of contract. Of more importance, perhaps is the fact that multiple sources introduce additional sources of variability, which is nemesis of consistent and high quality incoming materials. TOTAL QUALITY MANAGEMENT AND SUPPLIER PARTNERSHIPS All processes, both the supplier’s and the manufacturer’s, must be in control, centered, and possess minimal variation.
When the processes are in control inspection cost and time involved in it reduces, which ultimately reduces the overall cost. Key element of TQM is continuous improvement; Kaizen, due to increase in customer’s expectations the quality is to be improved on continuous basis. Many of the TQM tools provide information and data that can be used for improving the process quality, not just for its control. RESEARCH HYPOTHESES AND DESIGN Prior to undertaking empirical portion of study following hypotheses are formulated:- H1:- Supplier partnerships will lead to an absolute increased level of quality.
H2:- Supplier partnerships will lead to continuous improvement in quality over the course of contract period. To test these hypotheses a longitudinal case study was conducted and evaluated. Initially data was gathered concerning manufacturer’s productivity levels both before and after the establishment of a partenering relationship between manufacturer and supplier. The data produced provides evidence to test the hypotheses concerning absolute quality levels and quality improvement over time. Study is covered over a time period of one year and in ceteris paribus conditions. THE CASE STUDY
In this case study we our manufacturing firm is a food processing company which needs catons for its produc delivery hence our supplier is a Carton supplier firm. For ease of discussion the study is divided into four time periods as follows:- 1. Period A:- The initial operating period using traditional purchasing. 2. Period B:- The partnership. 3. Period C:- A change in suppliers. 4. Period D:- Reestablishing the partnership. [pic] Every period is described as per below and the diagram shows the result of studies. 1. PERIOD A:- THE INITIAL OPERATING PERIOD USING TRADITIONAL PURCHASING
The carton supplier provided for products packaging used by the food processing firm, whose product was on a high speed line. The cartons arrived complete with the processors logo, contents and other descriptions. There was downtime each day experienced by processor’s high speed production line due to unknown causes. These downtime in turn added up the cost. Hence the firm developed a performance criteria to get to the root cause of the problem. This performance criterion was “case output per unit of time”, which was used as a key productivity measure.
Period A represents the situation prior to establishment of a supplier partnership. As seen in figure 1 and figure 2 through out this period the processor is trying to determine casue of downtime and unacceptably low productivity. Further examinations in line operations revealed problems with carton opening carousal leading to empty filler pockets (misstep). The frequency of carousal related carton problems coupled with a lack of rectification through equipment adjustments finally led to the isolation of the problem- inconsistency of carton quality.
In period although concern for low productivity was evident but no significant improvement in performance was observed as shown in figure 2. In the period A slope is determined through least square, was positive, but it was not statistically significant slope. Periods of average performance often mixed with periods of downtime. Consequently the processing firm proposed the development of a partnership with the carton supplier. 2. PERIOD B:- THE PARTNERSHIP Thus a TQM partnership between two firms was formed. A careful study of processing line was conducted by carton supplier to obtain the complete understanding of manufacturing process.
On the other hand personnel from processing firm studied the oprations of carton supplier thoroughly- from design to manufacturing and delivery. Teams from both the firms met time by time and brainstorming activities were conducted, cause and effect diagrams were developed and total process flow diagram was examined carefully. Due to all these pain taken they came to know that carton itself was the source of problem. Hence experimental test were run on the cartons those “ran well” and those “ran poorly” and with the help of results obtained from this test root cause was identified which was “ opening force “ .
Cartons with a high opening force requirement resisted pickup and forming, often causing misstep to occur. An optimal opening force value was determined as a result of these results. Now after reaching to true cause teams developed a SPC control charts to monitor two critical measures in the supplier’s carton manufacturing process. The objective was to design improved and more consistent quality into all the production processes. The emphasis thus shifted from “inspecting poor quality out” to “designing good quality in”/ Improvement was clearly seen in this period.
Carousel downtime was reduced, as were carton yield losses and product yield losses. Quality and cost improvements spread to other carton lines, resulting in increased customer satisfaction and sales for the carton manufacturer’s other business units. As seen from table 1 the average output yield by 6. 8% in period B. This data provides strong support to hypothesis H1. The improvement was continuous throughout this period B, as evidence from positive and statistically significant slope of regression line shown in fig 2. Hence support for hypothesis H2 is also provided. . PERIOD C:- A CHANGE IN SUPPLIERS In this period the food processing firm wanted an alternative carton source. Because a continueing flow of cartons was so critical to the operation, the buyer felt that a secondary source was essential in case of a supply disruption. A secondary source would also provide a useful pricing benchmark. Hence the carton shipments from the first supplier were suspended for an indefinite period. The original supplier however did maintain a presence during period C by continuing to supply other products and materials.
The alternate carton supplier’s relationship involved limited information exchange and limited trials. As evident from figure 1 & 2, productivity levels of period A and B were same. Also no measurable continuous improvement was seen. The alternate carton supplier was not able to achieve the benchmark set by previous supplier. The evidence from period C tends to suggest that partenering arrangement was the source of improvement experienced during period B. 4. PERIOD D:- RE-ESTABLISHING THE PARTNERSHIP
In this period alternate supplier’s services were discontinued, the original supplier began again to supply cartons under previous partnership arrangements. The firm returned with improved internal control systems and heightened awareness of food processor’s needs. The use of SPC charts and CAD were institutionalized as part of the supplier’s total quality system. During this period, output productivity level were stable. The mean value for the period was 8. 2% higher than during period B. Apparently none of the learning that had occurred during the partnering period B was lost.
However, the slope of the regression line during period D was not statistically significant, indicating an absence of continuous improvement. Either some practical productivity ceiling has been achieved or the supplier was upset about the processor’s purchasing actions during period C. The partnership, clearly the relationship based on trust, could have been damaged by the unexpected actions of a trusted partner. CONCLUSION From this study it is evident that a good supplier buyer partnership leads to better quality and continuous improvement. Hence we proved the hypotheses we had assumed earlier.
In this study it is clearly seen applications of TQM principles between original supplier and buyer helped them to identify the root cause. The movement from traditional purchasing practice to a collaborative partnership operation produced gains in both average case yields and of greater improvement over time. Reverting to traditional purchasing practice yielded a drop in absolute loss in quality levels and drop in continuous improvement over time. Reestablishing partnership with original supplier brought absolute quality to even higher levels, but no evidence of continuous improvement was found.
If top management, is committed to total quality management and continuous improvement over time, steps must be taken to avoid damaging fragile relationships of trust. Periodic use of traditional purchasing practices may well be viewed by key suppliers as an indicator that a full commitment to a long term buyer supplier partnership does not actually exist. REFRENCES ? Stuart, F Ian; Mueller, P Jr; Total quality management and supplier partnerships: A case study; International Journal of Purchasing and Materials Management; Winter 1994; 30, 1; ABI/INFORM Global