Supply Chain Management Review

Supplier Risk Management – III
March 14, 2008

Last Friday, a Wall Street Journal article highlighted actions being taken by the U.S. Congress to improve the safety of children’s products. Click here for a complete version of the original article.

Among other points, the article made an issue of the potential conflict that might arise because some of the labs that would be working on behalf of the U.S. Consumer Products Safety Commission also do private testing work for the same companies importing the products. The article also highlighted the potential for larger fines.

What I found interesting was the conventional mindset (or is it captive mindset?) that was implicit in the article. The focus seemed to be on the after-production testing of the products, just before being placed on store shelves. That approach is too little, too late.

During the 1970s and 1980s, and to some degree even more recently, many U.S. manufacturing companies learned the reality that the approach of “inspecting quality in” is the worst of all possible practices. It is expensive, ineffective, and does nothing to correct the fundamental business processes that drive the quality coming out of the assembly line. Apparently, some of those learnings have been forgotten by companies that are in the news.

What you want is confidence that your supply base is utilizing best practices in its own supply management practices, in its auditing of incoming raw materials, in its R & D, and in its manufacturing processes, such that the risk of poor quality or unsafe products is effectively eliminated.

In a world that tends to encourage “outsourcing” and “low-cost country sourcing,” that places special responsibility on top management to support (with adequate resources) proper and comprehensive risk management, including supplier audits. It also requires that the leadership of the supply management function take a pro-active role in comprehensive risk identification, and ongoing risk management.

Simply measuring supplier quality (a lagging indicator) is not sufficient.

More in my next posting.

Posted by on March 14, 2008 | Comments (0)