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How To Manage Operations Across The Supply Chain
Managing operations across the supply chain seems to get harder every day. Purchasing and supply chain management hasn't been easy, especially since the pandemic.
But it's important to remember that quality and costs are critical to any purchasing manager in any industrial sector. The value of producing or manufacturing quality end-products can never be over-emphasized, and it's highly hinged on the quality and cost of raw materials or parts you purchase.
Managing Operations Across The Supply Chain
For instance, the stability of OEM products like car wheels depends on the quality of bolts and lugs an automaker's procurement manager selects. Quality comes at a price, and in their bid to cut down costs, they lower the quality. That begs the question: Should you sacrifice quality over cost?
Finding a balance between quality and cost is one of the significant challenges businesses face. So, let’s take a look at why choosing quality over price is the right choice to ensure sustainability.
Understanding the Correlation Between Quality and Cost
Many consumers equate the quality of products based on their price. They assume that high-quality products come at higher costs, and the reverse is true for low-quality products. That's an inaccurate approach because high price tags might also mean low value, just like low-cost products may mean great value.
One of the primary purchasing manager responsibilities in the assembly sector is to satisfy internal and external customers' need for quality products and solutions while ensuring mutually profitable transactions with a bolt or nut supplier. They're mandated to ensure they procure quality fasteners, bolts, and rods, to deliver high-quality end-products, which come at a price.
Conformance to high production standards results in a higher cost of quality (COQ). Conformance costs typically involve the expenses incurred to prevent poor quality end-products. These include the higher prices of top-quality products, inspections, and quality appraisals. Failure to budget for conformance costs eventually leads to product and service failure, lowering customer satisfaction and user experience.
The Cost of Poor Quality
While the existing accounting systems may not accurately measure the cost of poor quality (COPQ), it's easy to notice it during the production process and after deliveries to external customers. Typically, that's chronicled by both internal and external product failures.
Internal Failure Costs
Internal failure costs are those failures experienced during the production process before the final product reaches the customer. With poor quality parts or raw materials, you incur costs due to spoilage, wasted labor, product reworks, re-inspections, and material wastage. It also leads to downtime caused by the quality issue.
External Failure Costs
Choosing to cut down purchase prices over quality also costs companies once the consumer purchases the end-product. You may not foresee it, but you'll incur losses in the form of warranties or defect liability period. Your customers will start filing warranty claims because of various failures, including rapid deterioration of the product or executed work, dissatisfaction in repairs, complaints about frequent device malfunctions, and replacements of the poor quality bolts. Furthermore, you'll have to incur travel expenses to assess the consumer's complaints, labor costs, and repairs.
Incorporating Quality into Your Budget
Every purchase manager works within a budget, and it is their objective to acquire high-grade parts for their projects. If you're confined to a budget, the best direction to take is to go for the best quality you can afford instead of considering cheaper options.
However, that calls for flexibility and compromise. For instance, you may have a budget of only 70% of the price tag attached to the quality you want to meet your production standards. In that case, you might want to consider purchasing an alternative product without sacrificing the consumers' perceived quality. Doing that guarantees the achievement of production goals and alleviates both internal and external failure costs.
Quality or Price: Which One Should You Sacrifice?
You shouldn't sacrifice one for the other, especially when you're managing operations across the supply chain. If you need to alter the budget or quality, focus on finding a balance between the two. It would be best to consider higher quality for a higher price because you won't have to incur failure costs.
Still, a purchase manager must conduct further conduct quality research to understand the product beyond the price. A part manufacturer might supply bulk/larger products at high-end prices or significantly low costs. In that case, it would help to research more on quality. That way, you'll understand and identify the characteristics and properties you desire. Afterward, you can compare the prices from other manufacturers to see the products' real value. You might find some products with a greater value despite their low prices.
If you're a purchase manager working in the bolt-reliant assembly industry and are having trouble balancing quality and cost, contact Big Bolt today! We are a professional bolt supplier, ready to work with you to achieve the right product price without compromising quality.