Companies are finding it increasingly tough to control their supply chain costs. Failures in a supply chain mean companies leave their reputation in the hands of suppliers, either because they don’t understand how they operate or they simply don’t have adequate risk management strategies in place. The cost of quality control is a methodology that allows an organization to determine the extent to which its resources are invested in processes that assure quality and prevent quality deprecation by appraising both internal and external activities. By gathering this information, the organization can make an educated assessment of where potential savings may be gained by implementing process improvements.If your business or organization is struggling with the cost of poor quality and supply chain costs, hope is not lost. An effective quality control management program can substantially lower your expenditures.
What factors contribute to supply chain costs?
In a seminal 2012 paper, Prof. Henry Quesada and colleagues outlined numerous key factors affecting supply chain management.
- Environmental uncertainty, such as unexpected changes in customers, competitors, suppliers and technologies.
- Government support, which is especially integral when it comes to such aspects of the supply chain as the use of domestic materials and the importation of raw materials or products from overseas. These aspects can be further complicated by transportation, tariffs, administrative practices and exchange rates. There is also a significant level of uncertainty involved when it comes to the political landscape overseas, which can increase risk for suppliers, provoke decisions of no investment and alter business strategies and decisions.
- Information technology, which, when implemented effectively, reduces lead time and unnecessary activities such as paperwork.
- Social uncertainties overseas, including environment, language barriers, cultural issues, religion and limitations on communications. These must be accounted for when implementing an international supply chain strategy.
- Communication tools used to facilitate data transfer and communication between trading parties.
- Planning tools, including material requirement planning, enterprise resource planning and manufacturing resources planning. A strong planning protocol is the backbone of any solid logistics system.
- Flexibility, the ability of an organization to react and adapt rapidly to changes in the market that occur because of increases or decreases in customers’ requirements and the acceleration or deceleration of manufacturing processes.
What makes some industries particularly vulnerable to supply chain issues?
Today’s economy relies on the smooth operation of sophisticated and complex supply chains. The ability to move components, materials and products in an efficient and timely manner brings numerous benefits:
- Reduced cost of manufactured products
- New markets and business opportunities for producers
- Improved access to advanced technologies
Modern supply chains are more intricate and global than ever before — but this leaves them open to a wider variety of disruptions and risks.
- Transportation delays
- Theft
- Natural disasters
- Cyberattacks
- Inclement weather
- Tougher environmental regulations in a move to tackle climate change and reduce pollution through controlling the use of toxic materials and chemicals
- Cargo flow issues
- Economic uncertainty due to shifts in local, national and international trade and regulatory policies, which in turn can lead to the imposition of unexpected import tariffs
- Raw material shortages
- Recalls and safety scares
Some industries are particularly susceptible to supply chain cost issues. Take the apparel and textile industries. Both are still primarily driven by manual labor and factory processes, meaning products are extremely vulnerable to physical or mechanical quality issues. That being said, these problems can be addressed relatively well with a good quality assurance plan, but the same cannot be said for quality control issues involving chemistry. This is because chemical tests are especially costly and must be carried out regularly by law. Due to a large number of different styles or items, chemical testing can be very expensive, thus, can hurt margins.
