Ravi Anupindi / Univ. of Michigan SCRLC Panel Discussion

Ravi Anupindi / Univ. of Michigan Lessons from Quality Movement* Quality assurance through final product inspection is the last resort. –Inspection does not improve quality. Screening is expensive, and it is susceptible to two kinds of statistical errors known as Type I (labeling a conforming item as nonconforming) and Type II (missing a nonconforming item). Assuring that the process is functioning in an in-control state is preferable to final product inspection. –A process that is out-of-control will produce many more nonconforming items. Detecting the out-of- control state, identifying the causes, and restoring the process to an in-control state in a timely fashion will always improve quality. * Source: Hau Lee

Ravi Anupindi / Univ. of Michigan Lessons from Quality Movement Quality assurance requires total organizational focus. –Everyone should be aware of the quality imperative. Quality is not just the responsibility of the quality control department or quality inspectors. Prevention is always the preferred strategy. –Companies should strive to install processes that ensure nonconforming items cannot be made or, if they are made, that can immediately identify and correct them before they turn into defects. Quality should be designed in. –Products need to be designed so that they are less likely to be produced with defects. Processes must be designed so that the process variation is at a minimum.

Ravi Anupindi / Univ. of Michigan Managing sub-tiers Managing sub-tiers is critical. Issues: –How to build sub-tier visibility? –How far back in the supply chain do you go? –What actions do you as “OEM” take and what you leave your tiers to manage? Supplier Relationship Management in a “risky” world –Can you still play by the old rules? Squeezing suppliers & then expecting them to be resilient Developing structural flexibility –Supply base flexibility on technology / process rather than product

Ravi Anupindi / Univ. of Michigan Organizational Issues Preoccupation with failure –Treating any lapse as a symptom that something may be wrong with the system Reluctance to simplify –Necessary but caveats Sensitivity to Operations –Cannot develop a big picture of operations if symptoms of those operations are withheld; developing situational awareness Commitment to Resilience –Premium on training, imagine worst-case conditions and practice equivalent fire-drills Deference to Expertise –vs. deference to authority

Ravi Anupindi / Univ. of Michigan Metrics Related How do we take into account competitive reaction during a disruption? –Do our present metrics capture this effect? –And what if the disruption is in “their” supply chain?