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January - 2015 - issue > CXO View Point
Riding the Next Wave of Outsourcing Supply Chain Management for New Product Development
Arun Kumar, VP of Omnex Asia, Omnex
Monday, January 12, 2015
Large corporations have been outsourcing supply chain management services for some time now. Typically the outsourced work has revolved around ERP implementation/ integrations, supplier portals, logistics,material tracking/handling, firewalls/ inspection and other similar activities. However, one major aspect that continues to fly under the radar is long-term supplier capability and the ability to support delivery, including market fluctuations. Supply chain management (SCM) is a large canvas and organizations can always look for improvements in this area outside of the typical cost reduction exercise that is conducted every year with the supplier. Long-term supplier performance and Q,C,D criteria (Quality, Cost, Delivery) are of critical importance to any organization, especially those that are launching new products.

Supplier Development/ Supplier Quality is a critical area that any company has to work on in order to achieve long-term sustainable supply chain performance and reliability. Developing suppliers is not a small project or a flavor of the month activity. It's not an implementation of ISO 9001 /ISO/TS 16949 /AS 9100 or any related customer-specific requirements. It definitely is not monitoring supplier dashboard and metrics, nor is it conducting training workshops that suppliers may attend at-will.

The implementation of any supplier improvement program has to ensure that a systemic culture is put in place at the supplier's end to make certain their processes are capable to deliver products/services as desired by clients and at the same time ensure that the supplier's interests are addressed.

This article will discuss the nuances from an Automotive Supply chain perspective gained through the experience of working with Automotive OEM/Supplier Bases worldwide on new vehicle launch programs.

There are five key aspects to a successful supply chain improvement program for a new product launch.

Supplier Capability Improvement:
Our colleagues from the OEM / SQA/SQE divisions would agree that supplier capability improvement work is not as easy as it sounds. There are cultural and geographical barriers present in every supply chain and once a foreign supplier/alien language is added to the mix, that complexity just multiplies.It is vital that the team spends its time designing a module(s) that addresses both the capability improvement of supplier's team members as well as the changing environments of business and volumes.This gap between the customer and the supplier is particularly true when a new product and or a new supplier is added to the supply base. There are many misunderstandings and communication issues between customer and supplier that needs to be solved before a supplier invests time and effort to doing exactly what a customer wants.
Supplier learning programs should leap ahead off traditional training and must be meticulously crafted to integrate their work processes with the OEM, and include workshop sessions that are conducted with a focus on implementation. Thorough follow-up and consistent reviews are a must.

Supplier Process Qualification and Improvement
Simply giving suppliers process improvement/ cost reduction targets is a thing of the past. Currently, many OEMs work with the supplier to ensure the targets are met and also work hand-in-hand with them in order to confirm the new product launch processes are in place.
Informed decisions must be made in terms of supplier productivity levels, worker availability/ability, equipment loss, process capability, Takt time/process cycle time analysis,Supplier Risk management etc., just to name a few. Subject Matter Experts have to work at supplier locations to ensure targets are met and that quality issues don't interrupt the OEM production lines or the product launch.

Supplier PPAP Development:
Companies are bringing out new products at a pace never before seen in order to beat the competition. OEMs and Tier 1s cannot keep adding SQE resources based on the new product's launch plans because these launch programs are sporadic. Spending time with the suppliers during the NPD/launch is essential as well.
For example, in the Asian market, we see that atleast 30 new models and 20+ variants of cars, buses and trucks are in the offering for the next 12-18 months. More often than not, we find that companies struggle to give adequate support and coaching to suppliers due to tough target dates and lack of resources. This leads to more design and process changes at a later point of time, resulting in delayed PSW sign-offs thus affecting the overall launch of the vehicle. Having developed thousands of PPAPs for PEMs and Tier 1s, PPAP development and outsourcing is the answer.

The IT Differentiator
It goes without saying that none of these methods are possible without an IT tool that can be used by project teams. Now, there are many different IT software or products available, but none that can effectively integrate the entire APQP (New Product Development Process used by Automotive/Aerospace/Truck) and PPAP (Production Part Approval Process) processes while, at the same time,incorporate the use of the SPC, MSA and problem solving documentation in the same package. With inadequacies plaguing the suppliers to handle such developments, a proper Methodology adoption may create the difference.

SQE Qualification:
Hiring SQEs (Supplier Quality Engineers) is easy. But the effort required to train and mentor them on the real skills to develop suppliers as a Subject Matter Expert, a coach and a well-wisher, while still being firm on the requirements without deviation is a talent. This talent not only requires technical ability but also the soft skills of team management, conflict resolution and effective communication. A decade ago, supplier development was mainly revolved around the carrot and stick method of promising volumes to the supplier and applying some pressure. This approach no longer works in today's world.

Whether we like it or not, the process of SCM/ NPD development outsourcing is here to stay. Consulting companies who have a robust methodology will go a long way in supporting OEM/Tier1 corporations. Not everyone can effectively understand the OEM/Tier1 requirements and incorporate them into an effective implementation plan that addresses commonization, standardization, and efficiency. With the internet and social media on their side, anybody can claim they are an International training company, which makes the first decision the most difficult: Choosing an SCM partner who has a strategic view point of the supply base worldwide&demonstrates core competence of having executed their models.

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