Mutual Agreement on Goals

An integrated supply chain requires more than just agreement on the contractual terms of a
buy/sell relationship. Partners in the chain must appreciate that the only entity that puts
money into a supply chain is the end customer. Therefore, establishing a mutual understanding of
the mission, strategy, and goals of participating organizations is essential. The integrated
supply chain is about adding economic value and maximizing the total content of the product.
Trust
Trust is critical to an effective and efficient supply chain. Members of the chain must enter
into a relationship that shares information. Visibility throughout the supply chainwhat Darden
Restaurants calls a transparent supply chainis a requirement. Supplier relationships are more
likely to be successful if risk and cost savings are sharedand activities such as end- customer
research, sales analysis, forecasting, and production planning are joint activities. Such
relationships are built on mutual trust.
Compatible Organizational
Cultures A positive relationship between the purchasing and supplying organizations that comes
with compatible organizational cultures can be a real advantage when making a supply chain hum.
A champion within one of the two firms promotes both formal and informal contacts, and those
contacts contribute to the alignment of the organizational cultures, further strengthening the
relationship.
The operations manager is dealing with a supply chain that is made up of independent specialists, each trying to satisfy its own customers at a profit. This leads to actions that may not
optimize the entire chain. On the other hand, the supply chain is replete with opportunities to
reduce waste and enhance value. We now look at some of the significant issues and opportunities.
VENDOR SELECTION
For those goods and services a firm buys, vendors must be selected. Vendor selection considers
numerous factors, such as strategic fit, vendor competence, delivery, and quality performance.
Because a firm may have some competence in all areas and may have exceptional competence in only
a few, selection can be challenging. Procurement policies also need to be established. Those

might address issues such as percent of business done with any one supplier or with minority
businesses. We now examine vendor selection as a three-stage process: (1) vendor evaluation, (2)
vendor development, and (3) negotiations.
The first stage of vendor selection, vendor evaluation, involves finding potential vendors and
determining the likelihood of their becoming good suppliers. This phase requires the development
of evaluation criteria such as criteria shown in Example 2. Hov/ever, both the criteria and the
weights selected vary depending on the supply-chain strategy being implemented. (Refer to Table
11.1, on page 453.)
8.7.1 IMPORTANT ASPECTS IN JIT MANUFACTURING
People
JIT has influence in ordering, scheduling and producing sides of a manufacturing firm. This
influence in the manufacturing firm depends on employees, suppliers or customers. They are the
ones on which the JIT-principle is relying. This results in a well known quote: It is the
people that make JIT work [Roger B. Brooks]. Manufacturers put a large element of training in
the JIT to reach to the following goals:
Mutual trust and team work: When managers and workers see each other as equal, committed to
the organization and its success, they are more willing to cooperate with each other in order
to find the problems and solve these problems.
Empowerment of the workers: A firm which empowers its workers gives its workers the authority
to solve problems on their own. When this is done, workers have the authority to stop
production to solve problems instead of first waiting for guidance from the above. The
objective of worker empowerment is having workers involved in problem solving at the shop
floor level.
JIT is a total system, which means that all company members work towards improvement goals. If
only some of the members are involved, then only some of the problems will be solved. It is on
this aspect of JIT that another Japanese idea - total quality - most closely impacts. Total
quality is used here to describe the organization development (OD), or culture changes, needed
to support development into the excellent company.

3.1

Attribute inspection
An inspection that classifies items as being either good or defective.
Variable inspection
Classifications of inspected items as failing on a continuum scale, such as dimension, or
strength.
In service-oriented organizations,
inspection points can be assigned at a wide range of locations, as illustrated in Table 6.4.
Again, the operations manager must decide where inspections are justified and may find the seven
tools of TQM useful when making these judgments.
inspection Attributes versus Variables
When inspections take place, quality characteristics may be measured as either attributes or
variables. Attribute inspection classifies items as being either good or defective. It does not
address the degree of failure. For example, the lightbulb bums or it does not. Variable
inspection
measures such dimensions as weight, speed, size, or strength to see if an item falls within an
acceptable range. If a piece of electrical wire is supposed to be 0.01 inch in diameter, a
micrometer can be used to see if the product is close enough to pass inspection.
Knowing whether attributes or variables are being inspected helps us decide which statistical
quality control approach to take, as we will see in the supplement to this chapter.
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TQM IN SERVICES
The personal component of services is more difficult to measure than the quality of the tangible
component. Generally, the user of a service, like the user of a good, has features in mind that
form a basis for comparison among alternatives. Lack of any one feature may eliminate the service from further consideration. Quality also may be perceived as a bundle of attributes in
which many lesser characteristics are superior to those of competitors. This approach to product

comparison differs little between goods and services. However, what is very different about the
selection of services is the poor definition of the (1) intangible differences beween products
and (2) the intangible expectations customers have of those products. Indeed, the intangible
attributes

Make or buy
A wholesaler or retailer buys everything that it sells; a manufacturing operation hardly ever
does. Manufacturers, restaurants, and assemblers of products buy components and subassemblies
that go into final products. As we saw in Chapter 5, choosing products and services that can be
advantageously obtained externally as opposed to produced internally is known as the make-or-buy
decision. Supply-chain personnel evaluate alternative suppliers and provide current, accurate,
and complete data relevant to the buy alternative. Increasingly, firms focus not on an
analytical make-or-buy decision but on identifying their cdre competencies.