Case Study “Digitex Corporation”
- To support the JITQC initiative, Digitex renamed purchasing “Supplier Manufacturing.”What is the significance of this change?
It was considered as a very significant change. it can be seen that this change was made only in name. but the reflection was seen in changing the digital’s sourcing paradigm. The suppliers were seen only as the vendors whose duty is to ship the material but things have changed as they were seen as external manufacturing resources, which prove the fact that they are also the part or extension of the organization. the other fact is that purchasing is also seen as responsible for organizing this external resource .It is also seen as responsible for managing all the capabilities as well as expertise .It is not limited to purchasing material from them. Supplier integration is included in it for the managing inventories, new product development, and supplier co lotion as well as an integration of the information system.
- How does Digitex’s sourcing strategy link directly to the corporate goals and objectives oF JITQC?
The strategy of the company was focusing on using the time .it was the main competitive weapon so that the product reaching at the marten time could be reduced. The competition could be improved as well as improving all of the main measures of the business. This thing was also translated when the focus was shifting to simplicity, quality, waste elimination, flexibility as well as employee effectiveness and self-controlling mechanism and awareness. These were the core objectives and all of them were integrated into to the company’s strategy in which the JIT concepts were combined with the TQM concepts. It was the primary driver for the company’s purchasing strategy.
- Digitex argues that once the objective of “achieving theoretical time” is clear, the challenge of achieving theoretical values becomes obvious and the necessary tools and approaches can be aggressively applied. Discuss the tools and approaches used in purchasing to help reach the corporate goal of achieving the “theoretical time.”?
MrP driven 12 months forecast for the purpose of reducing the time which is required to communicate the order requirements .construction of the contracts for reducing the time which is required for sourcing the parts. The releases, as well as forecasts, are provided through EDI for eliminating the time, which is required to make the mail, paper and fax etc. With the help of blanket orders, the approvals are also eliminated. The suppliers are also encouraged that they improve their process. The remote supplier’s shipments are also shipped with the help of forecasting them. It helps in eliminating the delays when the order is placed.
- Digitex details its quality expectations directly in supplier contracts, including Cpk/parts per million (ppm) target levels or other definitions that define the required level of quality. Why do you think Digitex spells out the expected supplier quality performance levels in the contract?
The performance levels of the quality suppliers are clear in the contracts to get the continuous improvements in the processes to the suppliers. The PPM and CPK metrics are measurable as well as specifics .they are not something to be argued with. Moreover, if the levels of cpk are acceptable, then the need for the inspection of the parts is reduced because of the fact that the supplier process can produce the parts. If the cpk requirements are not met by the suppliers, then the company has a legal escape clause, which allows them to break the contract and find the new supplier.
- What types of costs are included in the PONC? What does the PONC% represent? What is the theoretical performance target of this figure?
The cost of quality is included in the PONC which attributes to the poor performance of the suppliers. Defects in production, inventory cost all are included int which happens because of the supplier nonperformance. The example can be that in the given quarter, the supplier is delivering the 200 parts $50 piece .$10000 is inventory spending as well as including the additional cost which is $500.and 5% are also included as defective in which 10 defective parts are mentioned from which the 5 were scalped and the other three needs to rework and they cost $15 per piece and the other two were seen to be acceptable after doing the test which cost $2. the PINC will be
PONC = (5*50) + (3*$15)+(2*$2)
theoretical performance for this target is proving to be zero it is not seeming to be possible that all the defects will be removed so the company is expecting from the supplier that they will improve it by 30%
Target improvement = 2.8% -(.3 *2.8%)=1.96%
so the supplier must have no more than 1.96% PONC
- The case presented six total quality principles emphasized at the corporate level by Digitex. Discuss how suppliers, through their performance, can impact each of these principles.
Suppliers have a chance to contribute to the company as follows
Quality first they should focus on improving quality continuously. Orientation towards customer they should make the effort to understand the requirements of the company. View of the next process as the customer. They should train their people for understanding the supply chain. Use of statistical methods and fact-based decision-making. They should integrate the seven quality tools within their process. For employee involvement in a problem, solving-they should train their important employees who are involved in the company for improvement. Broader more flexible management perspective they should try to align the company objectives with the supplier’s objective.
- Digitex aggressively establishes local sources of supply using long-term contracts (from a life of a product to two to four years) where appropriate. What are the advantages of using local sources of supply? Why does the company rely on longer-term contract agreements?
The sources that are local possess the short lead times. They also require the less inventory. they also possess personnel who are ready to cast the company’s facilities when there is a need for the corrective action .the result would be that the total cost which is required for using the local suppliers is seen less than using the international suppliers. For establishing the better relationships, there is a need for the longer-term contract with the suppliers. It gives the continuous cost as well as improves the quality, which may be not possible in the adversarial binding scenario.
- When needed, the company uses site, group, or corporate assistance teams to help suppliers adopt JITQC principles. Discuss the advantages to Digitex of using cross-functional specialists to help develop supplier capabilities.
The suppliers who are at their developing stage are often aided by the cross-functional specialist. It starts with finding the key suppliers who prove beneficial to the company. The main aim o the cross-functional team is to focus on the team building and to define the roles as well as responsibilities, developing the skills of the group and commodity goals. In philosophy, concepts, language providing the common linkages training may also be given some different people who are in the team could be the engineer, preproduction planner as well as material specialist.
- Discuss the different types of supplier development support that a buying company might be able to provide to a supplier.
There are some of the different types of supplier development support, which could be used to help the suppliers. These can be Quality engineering, value analysis, problem solving easy of buyer-supplier, providing training to the supplier personnel, giving reward as well as recognition to the superior suppliers, supplier council participation, development and integration of the information system, initiatives of the cost reduction, involvement of the suppliers in the design team in on order to become more familiar with the requirements of the customers. Arranging meeting with the suppliers of the suppliers in order to encourage the integration as well as the improvement the reward as well as recognition od the superior suppliers.
- Distant suppliers use the forecast and agreed-upon shipment authorization windows to schedule their shipments to Digitex. Local supplier shipments are triggered by Digitex consumption using release mechanisms such as a kanban process and flow directly to the production point of use. What is the advantage to Digitex of having shipments triggered by consumption (i.e., a JIT system) versus using forecasts to schedule shipments?
With having the shipments which are triggered directly through consumption, the inventory is also minimized. It also helps in providing the important cost savings to the company. The problems related to the quality can also be discovered quickly, and there is no need to wait and checking the existing inventory levels to find the other parts which have same problems. Moreover, there is a reduced cycle time which will help in improving the responses related to the requirements of the customers. Then the lower inventory levels will decrease the chances of obsolescence, which will also help in saving the cost of the company.
- Information systems are a major part of Digitex’s sourcing strategy. Discuss how Digitex uses information technology when executing its sourcing strategy.
The company provides the external suppliers a tool, which is MRP driven twelve-month forecast which is done through EDI .it also helps in triggering the orders from the local suppliers. It is also helping in integrating the suppliers more closely through the company’s production process. The suppliers have the direct link to the material requirements.It also gets them to plan how many capacity is needed by them .it also helps in intensifying the changes which are in the demand pattern. The performance of the supper is also monitored through information system, and they receive feedback on their performance on the system daily.
- With JITQC, Digitex works to integrate suppliers directly into its JIT, total quality control, and employee involvement strategies. The company then measures each supplier’s progress and shares the results during supplier performance reviews. What benefit does the measurement of supplier performance provide to Digitex? What benefit does performance measurement provide to the supplier?
With the help of performance measurement of the suppliers, the company can identify the problems, which are related to the suppliers. It can approach them and can take the necessary action. In some of the cases in which the suppliers are performing very poor, the supplier measures are seen as the important negotiating tool. In some cases, it also helps in finding the new sources. The suppliers whose record if excellent can also be rewarded and certified. They can also be allowed to ship directly in the line. The suppliers can get benefit from the performance measurement. It is an important tool for feedback. The suppliers sometimes may not be aware of the problems when they are receiving the performance measurement.
- What is the value of regularly scheduled performance reviews between suppliers and Digitex?
If the performance reviews are done regularly, they help the suppliers and the company to understand that how they can improve their interaction. It will make the supply chain more reliable. With the help of total cost approach, the parties can identify that which areas of the supply chain like the process capability, employee involvement, distribution, manufacturing process work is requiring the improvement or maintaining. Moreover, these meetings will prove to ve a valuable opportunity for sharing the customer requirement, future technology as well as an opportunity for getting the advantage in the relationships.
- How does Digitex promote continuous supplier improvement through its performance measurement system?
The company is using the measurement system for the purpose of promotion so that there could be improved supplier responsiveness. It could help in driving the continuous improvement in the result of the customer satisfaction as well as help in generating the employee ideas, which will be within the supply base. Through tracking the measures like the cycle time, a cost of quality as well as some employees who are involved in the small group activities and the number of ideas which are submitted and how much implemented. The company is deriving for the continuous improvement of the suppliers. The suppliers who are not responding in these areas are thought that they will drop.
- Explain the statement “Performance measurement supports the supplier selection process at Digitex.”
When the decision is about to select the suppliers, the company reviews the performance of the suppliers which is based on the measures of cost of quality, customer satisfactions, the cycle time, also, employee suggestion. If the record seems to be favorable for the supplier in this area, then there is a high possibility that there will be selected over another supplier in which there is a less favorable record. Moreover, in those cases, when the suppliers have not used before, the employees of the company could look for the potential evidence of the performance in the areas of the measurement that is based on the detailed supplier evaluation.
2. What are three major challenges in creating and maintaining a supplier base in the next 5 to 10 years? Cite your research.
could be many challenges that the company can face in future, regarding
managing the supplier, as if the company fails in Managing the inventory. If the company cannot be able to manage the
clients and the services, or order if not deliver at the given time, there
could be the issues. Maintains the
safety and quality, if the products which are made in the other countries,
and do not meet the regulatory standard, then issues can be created. Risk mitigation, if the suppliers do
not meet the demand of the company and the consumers, then there could be
problems, the things and appropriate strategies need to be following so there
could be no problems with the suppliers in future (Simangunson, Hendry, & Stevenson, 2016).
Simangunson, E., Hendry, L. C., & Stevenson, M. (2016). Managing supply chain uncertainty with emerging ethical issues. International Journal of Operations & Production Management , 36 (10), 1272 – 1307.