Supply Chain Management and Quality - Term Paper Example

 «Supply Chain Management and Quality» TABLE OF CONTENTS Introduction ………………………………………………………….. 3 Framing of the Research ……………………………………. 4 Strategy and Strategic Management ………………………………… 4 Quality as a key element of strategic planning …………….. 5 Supply Chain Management and Quality …………………………… 7 Quality and the Supplier in Supply Chain ……………….. .. 8 Quality and the Customer in Supply Chain …………………. 9 Lean Six-Sigma of Quality Management ……………………………... 10 Quality across sectors and cultures …………………………………… 12 Leadership, People and Knowledge Management …………………… 13 Knowledge Management ……………………………………. 14 Evaluative Conclusion and Recommendations ……………………… 16 References …………………………………………………………… 17 Introduction A number of business and economic factors including rapid changes in technology, globalization, fierce competition among businesses, changing workforce and fluctuating market conditions increase the complexity of modern management. Modern management is responsible not only to manage activities internal to the organization, but also to respond to the challenges created by its remote external environments. More specifically, today’s management, due to a number of economic and business factors, has to monitor, anticipate, assess and incorporate immediate environments like competitors, suppliers and government as well as remote external environments like economic and social conditions, political contexts and technological changes. In a broader view, large-scale management activities have become dramatically more sophisticated in recent years. Strategic planning was considered as a competitive advantage in the past decades (Alkhafaji, 2003, p. 30), but, it has gained extreme importance in today’s global business world. Planning, programming, budgeting and business policy making are some of the recent developments that have resulted in establishing ‘strategic management concepts’ at organizational levels. When a business is able to implement a strategy or to take a strategic decision that its competitors are unable to duplicate or find too expensive or difficult to imitate, the firm is virtually gaining a sustainable competitive advantage. Modern managerial concepts have promoted strategic concepts mainly in relation to a number of management interdisciplinary like Quality Management, Customer Relationship Management, Knowledge Management, and Learning Organization and so on. Framing of the Research The main purpose of this research work is to address the role of quality management as a key element of organizational strategic planning. This paper presents strategic management theory and the role of quality management and explains why customer-driven strategic management is essential at all levels of an organization. Different functional areas of quality and strategic management concepts like supply chain, six sigma, knowledge management, quality across cultures and sectors and organizational theories of leadership and people are detailed in this paper. This research is conducted in relation to the floating production storage and offloading vessel of the chosen organization, an Oil and Gas operator based in Norway. Strategy and Strategic Management Strategy in business concepts is a clear sense of an organization’s objective and a sense of how it is going to achieve those objectives. According to Michael Porter, “Strategy is about achieving competitive advantage through being different” (Dobson, Starkey and Richards, 2004, p. 1). An organization can approach a number of ways to reach its target of becoming different in order to achieve competitive advantages. The Oil and Gas operator, for instance, would deliver a unique value to the customers, focusing on increased customer satisfaction and having a different view of how to be better positioned in customers’ mind so that it can become different to achieve competitive advantages. The strategic management is a process comprising of or full set of commitments, decisions and actions that are required for a firm to achieve competitive advantages and earn above-average returns. The very basic step involved in strategic management is analyzing of internal and external environments to determine the resources, capabilities and its core competencies so that it can establish and develop its vision and mission and formulate its strategy (Hitt, Ireland and Hoskisson, 2009, p. 6). Organizations that have formulated effective strategies have been found to be highly successful in achieving sustainable competitive advantages, gaining better customer loyalty and reputation, establishing high performance working, creating highly productive labors and earning above-average revenues as well as profits in its business operation. Quality as a key element of strategic planning The market is customer-driven and therefore neither product nor service alone is the significant matters, but, the perceived value to the customer of the entire relationship with an organization is extremely important. Many companies attempt to measure the quality of their product or service from the internal quality assurance to external customer satisfaction and from that to the ‘customer value’ issue (Simchi-Levi, Kaminsky and Simchi-Levi, 2004, p. 187). Generally, ‘Quality’ refers to providing of outstanding goods and services including its attractiveness, perfectness with no manufacturing defects and long term dependability and reliability (Bateman and Snell, 2003, p. 12). When it comes to the Oil and Gas operator, customers demand increased value and high quality when they buy oil or gas. Customers may perceive that these should be easily available or should be useful various purposes like household, vehicles and for operating some machines. Customers basically ay not satisfy with its oil and gas if the company fails to deliver such qualities and facilities as well. Quality and the concept of Total Quality Management play significant roles in strategic planning and strategic management. Strategy, as detailed above, is an attempt to achieve competitive advantage through being different. It is the application of available resources of the firm to pursue the specific aims of the policy. Strategic thinking and conversion of the vision in to in to plans in order to achieve its realization are the very basic two elements involved in ‘strategy’ (Sower, 2010, p. 26). Modern management requires incorporating quality and continuous improvement as strategic objectives of the organization in a way that these strategic objectives will be turned as integral part of the business. To be more specific, the present day management scenario shows that achieving ‘quality’ in all the functional areas that a business is related with is critical to the success, because, the market that it operates in is customer-driven and thus ‘quality’ gains a significant role in the objectives of the firm. Strategic thinking, strategic planning and strategic managerial activities are aimed and designed to achieve sustainable competitive advantages. Management thus becomes responsible to consider its objective of achieving quality in strategic planning and strategic decision making processes so that it can have a specific goal regarding what standards its products or services are to meet, how and when these standards can be achieved and what specific values to be added in order to satisfy the customers. Achieving quality needs to be incorporated in strategic thinking of the Oil and Gas operator. When it takes significant strategic decisions regarding its manufacturing, refinery, products development, marketing and services, it should necessarily consider ways to achieve ‘quality’ in all its functions in order to satisfy customers’ needs. The floating production storage and offloading vessel are the two important functions of the Oil and Gas operator where it requires considering ‘quality’ as part of its strategic thinking. Supply Chain Management and Quality Various factors like competition, high customer expectation and introduction of products with shorter life cycles have forced many industries to invest in and concentrate their efforts in supply chain management. Supply chain management gives greater emphasis on facilities that have an impact on cost and it plays pivotal role in designing and developing products that ultimately conform to customer requirements, through a number of channels, from supplier and manufacturing facilities through warehouse and distribution to the retail stores (Simchi-Levi, Kaminsky and Simchi-Levi, 2004. p. 2) The process of supply chain begins from collecting raw-materials and then selling to the raw-material manufacturers. These manufacturers are turning the raw materials in to those that are usable by their specific customers. Component manufacturers may be involved by receiving orders and specifications form their customers and then they sell intermediate components. The final product manufacturers focus on assembling finished products and market them to wholesalers or distributors and they may resell to retailers or final customers (Wisner and Leong, 2005, p. 5). As far as Oil and Gas operator is concerned, it does not need various and complicated channels for distributing oil and gas products. It can either market directly to the retailers or even to the final customers. Selling directly to the retailers and customers will be an effective strategy because it will be helpful to avoid middle men expenses and profits as well as to minimize inventory handling that too will be expensive especially in case of oil and gas products. Moreover, supply chain management will enable Oil and Gas operator design and develop oil and gas products ultimately conforming to customer requirements. Quality and the Supplier in Supply Chain Customer expectations are rising and therefore quality is demanded at each levels of supply chain as well. Company requires high quality from the suppliers, customers expect high quality goods or services from the company and any other intermediary channel, if so is involved, requires that only quality products or services are to be distributed. As described by National Research Council- US (2000), supply chain integration requires that quality must be more than a set of standards and it must be a systematic way of doing business which is instilled in all channels involved in the supply chain (p. 51). By adopting quality as a competitive strategy, Oil and Gas operator will be capable of managing changes and risks associated with business operation and products and services handling through channels in the supply chain. A well organized supply chain management system requires that all participants must have a carefully reasoned and executed quality plan including strategic efforts to provide levels of quality appropriate to the customers that the company targets (National Research Council, 2000, p. 51). The strategic plans of quality objectives and organizational visions should be communicated with participants, in mutual trust so that all participants in the supply chain can ensure quality at each and every aspects of supply chain. As far as Oil and Gas operator is concerned, when it purchases machines or raw-material to use in its oil and gas production, it should consider the quality plan of the supplier. It is because, Oil and Gas operator would never be able to deliver high-quality end products effectively with low-quality components acquired from its supplier. More specifically, Oil and Gas operator cannot achieve six-sigma quality with three- sigma suppliers. Quality and the Customer in Supply Chain One of the very basic concepts of quality, mainly in its integration with supply chain, is that the goods and services being offered to the customers must conform to their specific requirements. When goods and services fail to meet reasonable quality and values, it can never be effectively marketed. Oil and Gas operator basically requires identifying customers’ attitude, changing behaviour, expectations and perceptions of value as they are critical to achieving quality. These are basic elements of value management as well. Once it identified the specific quality and value perceptions of its customers, it should concentrate on designing, developing and manufacturing goods and services perfectly conforming to customers’ needs. An organizations that targets customers worldwide or customers of certain countries require further intensive research and studies of customer attitudes, value percept5ion and their expectation pertaining to the goods And services they propose to offer to the customers. Gattorna (1998) emphasized that customers, since 1990s, will no longer tolerate with unresponsive suppliers and will ruthlessly switch brands so that they can obtain what they want (p. 157). Competition plays vital roles in rewarding some organizations to be able to provide their customers with quality, value and convenience as well as with goods and services tailored exactly to their needs and delivery requirements. With an effective supply chain management, Oil and Gas operator would be able to provide differentiated level of customer services by ensuring rights products to be available to the customers at right place and at convenient times (Gattorna, 1998, p. 158). Many organizations have been found themselves effective to achieve customer loyalty, customer satisfaction and better customer relationship management with the help of focusing on ‘quality’. Lean Six-Sigma of Quality Management Six-sigma, often refereed as new TQM, is a highly thorough, systematic, scientific and analytical approach to quality and sustaining development with an objective to improve earnings by reducing defects, improving customer satisfaction and achieving high performance (Pearson and Robinson, 2004, 376). Total Quality Management and its theoretical concepts play significant roles in six-sigma concept. It considers various TQM strategies like management leadership, continuous education and employee training and customer focus. With six-sigma approach, the Oil and Gas operator would be able to design a whole system approach to improve the quality and customer services. The six-sigma at Oil and Gas Company would require a total culture throughout the company whereby everyone at all levels and departments have a passion for continuous improvement with the specific goal of achieving virtually an organizational perfection (Basu and Wright, 2003, p. 3). Lean six-sigma focuses on delivering value as seen by the customer. The primary goal of lean six-sigma is to eliminate any possible non-value adding activities like wasted efforts, wasted material and non-beneficial plans, for each and every products and services (Basu and Wright, 2003, p. 4). The lean six-sigma will be helpful to the Oil and Gas Company to deliver increased value and quality as perceived by its customers throughout the value chain which starts with the supplier and flows through the distribution process to reach the final customer. Theory of constraint is another quality approach, in contrast, a problem solving approach that focuses on the weakest link in a chain of processes, to say, a particular chain in the supply chains (Munro, 2007, p. 34). The theory of constraints takes five steps in system improvement. As part of achieving quality through supply chain process, if the Oil and Gas company finds that a particular chain is not performing well or not meeting the desired the quality requirements, the company is advised to take certain measures to find solution for it. These measures include:- 1) identification of a particular process that limits the effectiveness of the system, 2) use kaizen or other useful method to improve the rate of constraining process, 3) adjust the rate of other processes in order to match with others chains, 4) extensive revision by adding further equipments and technology and 5) repeating the above processes where so is required (Munro, 2007, p.) In a research conducted in some leading companies like Motorola and Seagate that have adopted six sigma, Ron Basu found that the main driver leading to the adoption of six-sigma to those companies is basically cost saving rather than the customer satisfaction (Basu and Wright, 2003, p. 3). It shows that the Oil and Gas company can certainly enjoy cost benefits and thus to maximize profit potential by adopting six-sigma approach. The six-sigma being adopted by the Oil and Gas Company would be a method to strategically and tactically manage the total capability of the company in its basic forms and operation. Gordon (2002) emphasized that six-sigma implemented in a company will eventually enjoy benefits of delivering both the supplier and customer a higher degree of business satisfaction and business commitments that may not be attainable before at a reasonable cost and input of efforts to fulfill the tasks being assigned (p. 4). Quality across sectors and cultures An organization consists of various sectors and people from different cultures as well. Quality is a matter of concern at all levels of management, sectors of the organization and departments of the company. For instance, Oil and Gas operator has various sectors like manufacturing, refinery, purchasing, marketing, warehousing, floating production storage, distribution, loading and off-loading vessels. When the firm takes strategic decision of achieving quality, it should keep in mind the significance of ‘quality’ through all these sectors. If the oil and Gas Company has to deliver quality products, then every organizational process must produce quality output, such as: Market research sector must assess market demand and customer behavior correctly, Personnel department must provide workers with appropriate skills and training, Manufacturing department must make quality gas and oil products, Refinery unit must concentrate on refining oil in maximum quality possible, Quality assurance and quality control unit must ensure that defective products are discovered and prevented their marketing or corrected, Warehousing, floating production storage and off-loading vessel departments must ensure quality in inventory handling, machine use in loading or unloading, and warehousing activities. An organization comprises of people from various cultures and it may be based in various cultures of the world as well. Workers, no matter what cultures they belong to, are entitled to receive personal satisfaction and reward from the efforts that they put forth for the company (Burril and Ledolter, 1999, P. 12). A number of factors have been found to have profound influence on the satisfaction of workers in the workplace and therefore the organization can improve the performance of its workers, increase the productivity and achieve high performance working environment by providing such factors to them. Human capital is perhaps the most powerful assets of a company and hence better utilizations of these resources is highly critical to the success of the organization. Considering the values and dignities of various cultures of the people of an organization is critical to promote ‘quality’ among its people. A company that values various cultures of the people will be very less likely to have legal or regulatory issues of discrimination or employment related issues. This not only helps to create quality among the employees, but also helps the organization communicate its objectives of achieving quality effectively to its employees. Leadership, People and Knowledge Management Leading is stimulating people to become high performers by directing, motivating and communicating with the people involved in the organizational activities. The basic role of leadership is to promote adaptive or useful changes (Schermerhorn, Hunt and Osborn, 2005, p. 4). When organizations adopt strategic management and the organizations try to achieve competitive advantages through various strategies like customer-focus, it is highly important that the strategies must be well communicated to the people involved in the organizational processes. The leaders are required to direct, supervise and motivate their subordinates to perform well in relation to achieve its specific goals like customer-focus, value chain, quality improvement etc. In order to bring employees to the forefront of the organizational activities that aim to achieve quality, sustainable competitive advantages, and quality improvements, employees are to be influenced by the leaders. Leadership involves a complex interaction between the leader, followers and the contexts. Leaders should be able to convince the ideologies behind a particular organizational goal and motivate them to work for it. For instance, when the Oil and Gas Company takes strategic decisions regarding customer-focus, there must be sufficient and appropriate follow-ups from each and every sector of the organizations. People in the organization will have a specific goal in mind only when it was effectively communicated, convinced and directed to the employees in order to motivate them to become high performing workers. Knowledge Management Knowledge management is a systematic process that enhances business performance by designing and implementing tools, processes, systems, people, structures and cultures so as to improve the creation, sharing and use of the knowledge (Noe, 2002, p. 168). Knowledge management has recently become one of the significant interdisciplinary of strategic management and human resource management practices. The key elements included in the knowledge management are creating, sharing and using of the knowledge in order to enhance the organizational performance. Knowledge is an intangible asset and is available in all the organizations, but, many organizations fail to manage it for the overall benefits of the organization. By implementing and focusing on knowledge management, for instance in the oil and Gas company, it would be able to create knowledge, share it among its people and use it for the further benefits of the company. This encompasses the processes by which the experiences, knowledge, expertise and skills of the people in the organization are gathered, shared and used and then converted in to a collective organizational learning process in a way that can improve organizational performance and effectiveness (Forster, 2005, p. 397). Knowledge management incorporates various elements like in formation, data, learning, theory, knowledge, wisdom and experience, as detailed in the figure below. Retaining older workforce has been considered to be an effective way of knowledge management because by retaining older, experienced and skilled workers, even by spending more on their incentives, organization can enhance better sharing of knowledge among its people. The key element that plays in this is experience and knowledge, because, older employees are more experienced and knowledgeable. Knowledge transfer from older, experienced, knowledgeable, skilled and qualified to those who are new or less experienced is highly critical to the success in knowledge management. A better knowledge management ultimately helps to establish organizational learning environment. When it comes to the example of Oil and Gas operator, it will be able to enhance its employee performance, improve employee productivity, improve knowledge of employees and create an organizational learning culture by implementing an effective knowledge management system. Evaluative Conclusion and Recommendations This paper has highlighted various theories and literatures in relation to the strategic management and quality concepts in the business. The present day business contexts are highly complicated mainly due to various factors like rigorous and therefore organizations are required to think strategically, plan strategically and operate strategically in its business landscape. One of the very basic success keys is ‘quality’ which not only ensures achieving competitive advantages but also creating customers who, due to the loyalty, would remain positive for long run. Value chain, six-sigma and knowledge management are some of the recent development in strategic management that help management ensure high quality and increased performance. This paper has presented brief theoretical and empirical analysis of lean six-sigma, quality management and supply chain management. This paper recommends that further research is required to find how strategic management and quality improvement could profoundly impact a particular business, like multinationals, to become highly successful in its market. References Alkhafaji, A. F (2003), Strategic management: formulation, implementation, and control in a dynamic environment, Illustrated edition, Routledge Basu, R and Wright, J. N (2003), Quality beyond Six Sigma, Illustrated edition, Butterworth-Heinemann Bateman, T.S and Snell S.A. (2003), Management: The New Competitive Landscape, Sixth Edition, McGraw Hill Irwin Burril, C. W and Ledolter, J (1999), Achieving quality through continual improvement, First edition, John Wiley and Sons, Reprinted by University of Phoenix Dobson, P, Starkey K and Richards, J, (2004), Strategic management: issues and cases, Illustrated second edition, Wiley-Blackwell Forster, N (2005), Maximum performance: a practical guide to leading and managing people at work, Illustrated Edition, Edward Elgar Publishing Gattorna, J (1998), Strategic supply chain alignment: best practice in supply chain management, Illustrated sixth edition, Gower Publishing, Ltd Gordon, M. J (2002), Six Sigma quality for business & manufacture, Illustrated edition, Elsevier Hitt, M. A, Ireland, R. D and Hoskisson, R. E (2009), Strategic management: competitiveness and globalization : concepts & cases, Illustrated eighth edition, Cengage learning Munro, R. A (2007), The Certified Six Sigma Green Belt Handbook, Illustrated edition, American Society for Qualit National Research Council (2000), Surviving supply chain integration: strategies for small manufacturers, Illustrated edition, National Academies Press Noe, R.A and Hollenbeck, J.R (2004), Fundamentals of Human Resource management, McGraw Hill Irwin Pearson, J. A and Robinson, R.B (2004), Strategic Management, Formulation, Implementation and Control, Ninth Edition, McGraw Hill Irwin Schermerhorn, J. R, Hunt, J. G and Osborn, R.N, (2005), Organizational Behavior, Ninth Edition, John Wiley and Sons Simchi-Levi, D, Kaminsky, P and Simchi-Levi, E, (2004), Managing the supply chain: the definitive guide for the Business Professional, McGraw Hill Companies Small, C.T and Sage, A.P (2006), Knowledge management and knowledge sharing: A review, Information Knowledge Systems Management 5th edition, Information Technology Center, The MITRE Corporation, McLean, VA, USA, retrieved from http://web.ebscohost.com.ezproxy.apollolibrary.com Sower, V. E (2010), Essentials of Quality with Cases and Experiential Exercises, Illustrated edition, John Wiley and Sons Wisner, J.D and Leong, G.K (2005), Principles of Supply Chain Management: A Balanced Approach, Thomson Corporation, South Western Read More