Abstract
Suppliers are just as important to a manufacturer as the customers and distributors, especially because they affect the quality, quantity and timeliness of the finished products. This is why they must be considered when looking into the management practices of the manufacturing company. This study uses the qualitative approach to establish how important suppliers really are in the manufacturing industry and how they affect the business processes, as well as how they can be managed for effective business operations. The conceptual framework indicates that a supply chain management is a great way for manufacturers to keep their business processes running smoothly and that suppliers must be treated as a major component within the manufacturing business. To test this, a series of interviews were conducted on some of the major manufacturers in the UAE via email and the findings indicated that suppliers do have the power to ruin a good manufacturing business if they are not monitored effectively. To avoid such a situation, it was thus concluded that each manufacturer must have a supplier management system in place as part of their supply chain management in order to monitor their suppliers and avoid losses associated with bad suppliers.
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Supplier Management
Introduction
Background
In order to improve efficiency and ensure that the business processes within an organization go on seamlessly, most management teams have had to embrace technology and new management information systems that enable them to collaborate effectively with their stakeholders including suppliers, distributors and customers as well as shareholders. The aim is to keep every aspect of the business running in order to avoid inconveniencing the entire organization when one department fails to live up to the set expectations. A majority of the inconveniences within such organizations stem from the suppliers who are sometimes unable to deliver the raw materials on time. This means that a successful organization must be able to communicate effectively and monitor their suppliers if they intend to optimize their productivity and avoid inconveniences that would in the end be transferred on to the consumers and then the shareholders eventually.
Problem
Suppliers are pivotal to the operations of the organization and in most cases, it is very important if they are managed effectively. The suppliers are usually independent businesses but under the supply chain concept of effective business management, they have to be monitored and managed along with the other departments of the organization in order to ensure seamless and optimized operations. Supplier management is thus a very significant component of the manufacturing organizations management practices although most companies continue to consider it only as some extra burden that they could avoid by just trusting their suppliers.
Aim, Objectives and Scope
This research aims to establish how important supplier management is to the overall operations of the organization. The study will especially target organizations in the manufacturing industry in order to establish how they practice supplier management and how it impacts their productivity. The specific research objectives that are meant to guide the study will include:
- Conducting a literature review to establish the theoretical significance of supply chain management in the manufacturing industry
- Understanding the relationship between manufacturing companies and their suppliers
- Exploring the concept of supply chain management in the manufacturing industry with a special interest in the relationship between the organization and their suppliers
- Establishing and stating the recommendations on what constitutes effective supplier management for the manufacturing industry.
Research Question
With the aim of consolidating a definition for best practices in supplier management within the manufacturing industry, this research project will be answering the question: what is supplier management within the manufacturing industry and how does it affect the business processes within a given manufacturing organization?
Literature Review
Supply Chain Management
Like many other management concepts, supply chain management has numerous varying definitions since there are many scholars with different opinions and valid justifications for the specific views on the subject. A general definition can however be noted by Chopra & Meindl who define a supply chain as a scheme consisting of all the parties that are directly or otherwise involved in the process of meeting the customers needs. This means that a supply chain would include the manufacturer and their suppliers, as well as the transporters, warehouses, distributors and the end consumers. For a manufacturing organization for example, the supply chain is responsible for receiving and fulfilling the needs of the customers since it starts from the market where the demand is established, to the product development team all the way to the source of the raw materials and eventually to the retailers who deliver the products to the end consumers. Supply chain management thus encompasses functions like product research and development, marketing operations, manufacturing, distribution and customer service among others.
This definition implies that supply chain management is not only about managing the activities within the organization in question, but also about being concerned and taking responsibility for all the supportive activities engaged in the companys business processes. This essentially means that supply chain management will include looking into the activities of the companys suppliers in order to ensure that they are meeting the demands of the organization in terms of quality, quantity and timely delivery. All these factors affect how the company meets the needs and expectations of their customers thus making the supplier a very important entity in the companys business processes.
More generally, Ross asserts that supply chain management is all about integrating various activities within an organization from procuring materials and services until they are transformed into intermediate goods and then final products. This means that the process of supply chain management entails monitoring all the processes that given materials and services are taken through until they get to the end consumers.
Significance of Supply Chain Management to the Organization
Klassen & Menor, on the other hand propose a rather different perspective when it comes to looking at the concept of supply chain management. They state that supply chain management consists of a number of approaches that are used to integrate the activities of suppliers, manufacturers, warehouses, and retail stores, so that the products can be manufactured and distributed at the right quantities, to the right locations, and at the right time. The goal here is to minimize the overall operational costs without compromising on the quality of the product or services being offered.
This means that supply chain management is significant within a given organization because it enables the management to integrate their activities and synchronize them with those of their salient stakeholders in a bid to optimize productivity and make the organization reliable and cost effective. Supply chain management thus enables the company to do the right thing in the right quantity and at the right time. This means that all the effort within the organization is seen as productive in the end given that everything happens exactly as it is supposed to happen. With the supply chain management system, the company will always have the right quantity and quality of products in the right location and at the right time.
The Role of Suppliers in the Manufacturing Industry
Most manufacturing companies operate with independent suppliers thus making them inter-organizational in their supply chain system. The supplier in this case is expected to find the raw materials and then transport them to the manufacturing plant, the quantity, quality and time having been agreed upon with the clients in question. This means that among other things, the supplier is the manufacturers baseline in that without an effective supplier, the manufacturer would have nothing to use in their manufacturing plant. Therefore, it can be noted that the role of a supplier is to provide the manufacturer with the right quantity and quality of raw materials for the manufacturing process. A bad supplier will thus compromise not only the quality and quantity of the manufacturers output but also their ability to deliver to their customers on time. This is why supply chain management is important and also why manufacturers must create sustainable working relationships with their suppliers.
Conceptual Framework
Based on the literature review above, a number of things can be agreed upon at this point. First, manufacturing companies need to have a comprehensive supply chain management system in place if they are to monitor and control their business processes effectively. The fact that they often operate with independent suppliers and distributors implies that they should be able to monitor them and thus influence their activities to suit their interests. Without an effective supply chain management system, a manufacturers activities are at the mercy of their suppliers and distributors. This is why some manufacturing organizations today are looking into vertical integration as they seek control over all of their business processes from procurement and supplies to distribution and customer service. It has also been noted that suppliers are very significant in the manufacturing industry because they determine when the organization can manufacture and how much they are able to produce. The suppliers determine whether the manufacturer will meet the market demand for their products by deciding on how much they can produce within a given time. This means that when looking at the supportive industries in which to indulge, the suppliers should be at the top of the manufacturers list since they have the power to greatly influence the business processes involved in manufacturing. Manufacturing organizations thus depend on their suppliers to not only provide the right quantity of materials but also the right quality and at the right time. Thus, the suppliers must be managed on account of the quality of the materials, the quantity that they are set to provide, and the timeframe within which they must provide these materials.
Methodology
This research is all about understanding the significance of the supplier and thus establishing why each manufacturer should have a supplier management system in place as a part of their supply chain management. Having already established how important supply chain management is to the manufacturing organization, the study will try to establish how suppliers affect manufacturers and thus how they should be managed to ensure that they live up to the expectations of the manufacturing organization in question. As such, the research will require the use of structured interviews that seek to establish how different manufacturers have been affected by their suppliers. Each manufacturer has had a different experience with their suppliers and thus the interview will help to understand these experiences and the solutions that the manufacturers employed within their specific circumstances. The questions for the interviews were sent by email to 15 different manufacturing organizations, out of which only 12 responded. The questions were as follows:
1. Is your organization invested in the supportive industries or do you rely on independent suppliers?
2. Have you ever had some trouble with your suppliers? If yes, what kind of trouble?
3. What have you done to avoid a recurrence of that situation?
Data Analysis and Findings
Out of the 12 companies that responded, 10 were dealing with independent suppliers. The other two had to vertically integrate in order to avoid the problems associated with dealing with independent suppliers. As such, all of them had some bad experience with their suppliers. As evidenced in Burnham analysis, most of these companies at some point had to cancel their operations because of a supplier who failed to deliver raw materials as promised. Others had to seek new suppliers at a short notice and this led to higher expenses. One of the companies also reported having had to miss out on customer contracts due to an inability to deliver on time. Their suppliers had failed to meet the delivery deadlines thus causing delays in the manufacturing process. This too cost them a lot of money in the end.
In order to avoid recurrences, most of these manufacturers have had to seek numerous suppliers thus guaranteeing their ability to get the raw materials even when the main supplier is unable to deliver. The problem however is that in most cases, the alternative comes at a compromise either in terms of cost, quality or in some cases even quality. Two of these companies had opted for vertical integration such that their supply chain management is currently intra-organizational. Only five of these companies had considered supply chain management with an emphasis on supplier management as a solution to their problems with the suppliers. The others could only seek out suppliers with a good reputation for delivering the right quality and quantity on time.
Discussion
Based on the literature review, it is important for manufacturers to have some influence over their suppliers. The suppliers are very important to the manufacturer because they affect their business processes by determining the when they can manufacture, how much they can manufacture and what quality they will be able to offer in the end. This means that the manufacturer must have a supply chain system that focuses on the activities of their suppliers. From the results of the study, manufacturers are at the mercy of their suppliers unless they take control by vertical integration or by seeking out other suppliers as back up when their suppliers fail them. Supplier management however covers more than just looking for alternatives. Rather than establishing a relationship with numerous suppliers, a manufacturer could just as easily incorporate their suppliers into their management system and monitor their activities while sharing all the relevant information with them so as to avoid mistakes. Information here is crucial when it comes to seamless operations thus the need for manufacturers to have a full time communications platform where they can update their operations in preparation for any changes that the suppliers bring their way. The suppliers have to be a part of the manufacturing organization if they are to always deliver in the right quantity, quality and at the right time. A comprehensive information system is thus the key to effective supplier management since the manufacturer will also be able to prepare in advance when the supplier is unable to meet their expectations.
Conclusions and Recommendations
Companies often have to take on a lot of business processes to get their finished goods into the market. It is especially difficult for companies that are not vertically integrated to oversee all of the processes involved from the procurement of raw materials until the goods are delivered to the end consumers. With this in mind, manufacturers need to appreciate the importance of their suppliers and thus look to integrate their management systems with that of their suppliers in order to ensure a seamless sharing of relevant information. The only way for these companies to operate effectively and cost-efficiently is to always have the right information regarding the capacity of their suppliers and whether they will be delivering as promised or not. Each manufacturer thus has to invest in a supplier management system as part of their supply chain management component for better and seamless business processes and customer satisfaction through high quality, right quantity and timely delivery.
