Introduction:

Supply chain, inventory, and quality control management is increasingly important for
businesses as they can increase business efficiency, customer loyalty and satisfaction
and reduce costs, hence, they can benefit the business as a whole. The report covers
their definitions, five stages and three categories of supply-chain-management, reason
of keeping how or low inventory, and four measures to assure quality control.
1. Definitions:
<1> Supply-chain-management:
Supply-chain:
It is integration and alignment of firms that bring products or services to market. It is a
network of facilities and distribution options that perform functions of materials
procurement, material production into in-process and finished products, and
distribution of products to customers. The chain consists of not only manufacturer and
retailers, but also suppliers, transporters, warehouses, and customers, aiming to fulfill
customer needs.
Supply-chain-management:
SCM is systematic and strategic coordination of sourcing, procurement, production,
inventory, location, transportation among the participants in a supply-chain to achieve
best responsiveness and efficiency for the market.
It focuses on linkages in the chain that work together efficiently to create customersatisfaction, involving collaboration with suppliers, distributor, retailer, third-party
service providers, and customers. As a consequence, costs must be lowered
throughout the chain by cutting unnecessary costs, increasing efficiency and removing
bottlenecks.
In essence, supply chain management integrates efficient supply and demand
management within and across companies, aiming to distribute products at right
quantity, to right locations, at right time, and minimize costs while improve customer
service.
<2> Inventory management:
Inventory:
It is raw materials, work-in-process goods and finished goods held that are considered
ready or will be ready for sale to meet future demands. Inventory is one of the most
important business assets because the gain on sale of inventory represents primary
revenue generation ability and future earning ability. Inventory can be kept on the
premises or distant warehouse for future use.
Inventory Management:
Inventory management is supervision of delivery, availability, and utilization of
inventory in order to ensure adequate supplies, find a balance between supply and
demand, and minimize ordering and holding cost of inventory and expenses caused by
theft, spoilage. It is a process of continuously overseeing the flow of inventory-in and
inventory-out, managing inventory investment, preventing inventory from becoming
too high or reducing to running-out levels.
It covers functions of keeping accurate records of goods ready for shipment,
forecasting demand and future inventory price, and calculating how long it takes
supplier to make a delivery and it takes materials to be transferred to finished goods,
which helps know when and at what quantity to place an order, to ensure smooth
production. Effective inventory management is all about knowing what is on hand,
where it is in use, and how much finished product.

<3> Quality control:

It is a process that a business tries to ensure the product quality is maintained or
improved and manufacturing errors and defects are reduced or eliminated, aiming to
make the product meets quality standards and customer requirements. Usually, QC
emphasizes arranging an inspector at the end of production line looking for defects
and screen out them. It also requires businesses to create a concept that both
management and employees pursue best quality, which involves planning carefully,
training employees to properly use equipment, creating quality benchmarks, testing
quality, compare with benchmarks, and continuous error correction.
The quality of outputs is guaranteed only when all these tasks are implements
effectively.
Modern QC is often related to Total quality management, which is a quality-control
concept that beyond traditional quality-control views. It emphasizes contribution of all
parties efforts, from suppler, manufacturer to retailer, rather than only considers
changeable factors related to a products quality. For instance, the design of a mobilephone
should not only include
the material,
appearance and dimensions, but also operating, safety, reliability and durability.
2. Five stages of supply-chain-management (SCM).
The process of SCM involves 5 stages; these stages clarify exact procedures to be
taken from start to finish.
(1) Plan.
SCM starts with a comprehensive, specific, measurable, and actionable plan.
Comprehensive and specific means the plan should outline primary organizational
goal in the SCM area, specify how to establish a profitable supply chain (this is very
important because a sound supply-chain can add large efficiency and value to
businesses while a poor supply-chain can make businesses inefficient, unable to
satisfy customers or even lose competitive advantage), and detail how our goods
should be distributed in order to best meet customer needs.
Measurable and actionable means company executives should make strategic plans to
manage and coordinate all resources available for product and service delivery,
aiming to deliver timely to customers. Meanwhile, a standard or benchmark should be
developed to monitor and evaluate the progress and compliance of the plan. Such
progresses include effectiveness, cost reduction and timely delivery.
Businesses need to know a good plan is the foundation of an efficient supply chain.
(2) Develop:
The next stage is development. This process aims to establish a strong relationship
with suppliers and keep improving the relationship. This is important because
suppliers are persons who provide raw materials needed in making our final product;
their materials decide the quality of final product to larger extent. Therefore managers
should choose a reliable and possibly stable supplier to ensure the quality and
continuous supply of materials.
After selection, potential suppliers are contracted, and manager should negotiate and
confirm with the supplier about delivery conditions, purchasing price, terms of
payment, methods of shipping, and transportation.
After acquiring materials from supplier, manager should also arrange the materials to
be transported to manufacturing factory for production.

(3) Make/Manufacture:
At this stage, the manager coordinates all resources and activities for production. This
production process is very intense as products are being physically manufactured and
tested. Such testing includes worker productivity, product quality, efficient use of
equipment, etc, all factors related to physical product are being monitored. If the
testing is successful, products will be packaged and prepared for delivery to
warehouses or wholesalers or retail shops for sale. All preparations related to making
products launch in the market are also finished in this stage.
(4) Delivery/Logistic:
At this stage, customer orders are received and delivery of goods is planned.
Managers should coordinate customer orders receipt, develop a network of
warehouses and choose appropriate carriers or distributors.
An invoicing system should be developed in order to ensure the receipt of payment of
customer orders. Other information software or system may be used to automatically
and efficiently process and translate customer orders.
This stage involves the use of various distribution-channels to transfer products to
intermediaries and finally transfer into the hands of ultimate customer.
(5) Return:
The last stage is return. During this stage, business may receive defective products
from customers, and extra products may be delivered to customers for compensation
of the defects.
Besides, at this point, managers should regularly review customers who have
problems with the delivery of goods or services. The enquiries and complaints from
customers should also be handled effectively, this is difficult but very important
because many customers are still willing to make repeat purchase if their complaints
of the first time purchase are valued and solved effectively.
Businesses can try to decrease product return by improving product quality; this can
be achieved through cooperation with a reliable supplier or other quality control
measures, which would be discussed in the last part of the report.
The five processes are necessary as the success in each stage brings large advantages
to business. The most obvious is cost reduction brought by an effective supply chain
system, for example, just in time system. With reduced cost, there is increased
profitability. Besides, effective supply chain can reduce waste of resources such as
time and materials, achieve more accurate information for better sales forecasting,
help to balance supply and demand, predict transportation requirements, and create
streamlined
inventory
management.
However, some variables of business may vary SCM strategy, such as size of business
and nature of products. Therefore, to build a sound supply chain, understanding the
primary business discipline is essential as it helps manager to control bottom line.
Moreover, business leadership during the processes is crucial because improving
supply chain means employees and suppliers have to alter the way they work. This is
difficult as people are usually unwilling to change the way they used to work,
therefore leaders should guide and help them to implement the five-stage process.
3. Three categories of supply-chain-management.
The all management activities in SCM can be classified into three categories:

strategic, tactical and operation categories.

(1) Strategic
At this level, business management focuses on high level strategic decisions that plan
for whole organization, such as cooperation strategy with suppliers, size and location
of manufacturing factory, products to be manufactured, sales target markets,
partnership with distributors or retails shops, information acquiring system
establishment, etc.
Strategic activities aim to build relationships with suppliers and customers, and build,
integrate and improve information technology (IT) system throughout supply-chain so
that in the following business operation, more accurate information can be acquired to
make more accurate demand forecast, to know when to produce and deliver goods to
retail shops and know more customer feedback. For example, manager can apply
barcode, just-in-time or point-of-sale information transmission to realize timely
reporting of sales and inventory information.
The strategic activities establish overall goals and strategies in whole supply-chain
management, guide and lead employees to work towards strategy attainment.
(2) Tactical
Tactical decisions focus on applying measures that will produce cost benefits and
improved efficacy. Such measures include:
Applying the cutting-edge commercial practices or best industry concept.
Negotiating discount for bulk purchase and confirming the purchase terms with
favored suppliers.
Collaborating with logistics companies to develop cost-effective and timely delivery.
Establishing warehouse or distribution center strategies that aim to reduce holding,
managing and ordering cost of inventory.
Evaluating competitors, making production and delivery schedule decisions are also
included in tactical categories. For example, evaluating competitors can be done by
conducting competitor breakdown analysis or researching industry average situation,
and making production and delivery decisions can be done by communicating with
first line worker about production matters or communicating with logistic company.
(3) Operational.
Operational decisions are made everyday to keep daily production and operation on
normal course. Operational decisions consider how products will be physically
manufactured and delivered (for example, manager may consider what equipments
need updating or repairing and what factory layout are needed for efficient
production, and by what vehicles products are transported between manufacturing site
and inventory warehouse ) and how products will move along supply-chain.
Operational decisions also involve making production plan changes, making regular
purchasing payment to suppliers, receiving orders from customers, physically
collecting sales information from retailers, etc.
Generally, the operational category includes all daily management of supply-chain
and specific management of production and delivery matters.
To maximize function of three categories, managers should pay attention to some
important flows in the process: product flow, finances flow, and information flow.
Product flow includes movement of goods from initial supplier to final customer via a
series of distribution channels and intermediaries. It also includes any customer

returns.
Financial flow refers to all flows of money, including credit terms, payment
schedules, cash receipt and invoicing system.
Information flow involves transmitting customer orders information between retail
shops and manufacturer, transfer of purchasing order information between supplier
and manufacturer, keeping track and updating the status of delivery of products. All
information during supply-chain should be transferred immediately and accurately
because inaccurate or delayed information add costs to each part of business. For
example, if retail shop did not give sales information of the month before last month
to manufacture until this month, then this delayed sales information may cause
manufacturer make inaccurate demand forecast due to obsolesce of information,
therefore it loses some value in assisting manufacturer to evaluate customer needs,
thus there may be over-procurement and overproduction, which increases ordering
cost, inventory management cost, marketing and promotion cost, employee wages
cost, thus inefficient information flow increases cost to whole business.

4. Why particular companies keep high or low level of inventory.

Different businesses may have different goals of keeping high or low inventory level.
Businesses may keep high level of inventory due to:
<1> Meet demand: sometimes customers may suddenly have huge demands towards
particular product due to changing market trend, seasonal factors, or unexpected
events. Businesses may keep high level inventory as a reserve, therefore when there is
sudden large demand, businesses have enough inventory to satisfy customers, and will
not run out inventory.
<2> Hedge : sometimes there may be a sudden large increase in price of particular
raw material, for example, nuclear leakage in Japan polluted sea and made a increase
in price of salt. Therefore manufacturers may keep high level of materials in advance.
When price of raw material increases, they still have materials to use and dont need
to buy materials at higher prices.
<3> Bulk discount: businesses with high inventory mean they make fewer times of
purchase from supplier, but quantity of every purchase is large. Therefore, businesses
may get bulk discount from suppliers.
<4> Lead time: when inventories level is high, businesses can directly and
immediately deliver products to customer, therefore reduces lead time, increases
customer satisfaction.
Businesses may keep low level of inventory due to:
<1> Reduced holding costs: when there is low level inventories, businesses have less
holding cost and storage cost as there is smaller warehouse needed to rent.
<2> Easier management: smaller inventory levels are easier to manage. It takes less
time cost and labor cost to organize and count inventory, which makes management
faster and more efficient. This is especially important for companies with high
inventory turnover rates whose products are sold out quickly because they need to
make products on shelf as faster as possible; therefore they require faster and efficient

inventory management.
<3>More Cash: less inventory means businesses spend less cash purchasing materials
in each time period, therefore they have more cash available for use in other operation
areas such as marketing or R&D.
<4> Quicker market response: if the products become obsolete or it is more difficult
to sell inventories due to customer preference changes, businesses with less
inventories can sell inventories at lower price ; or scrap them, exit current market and
change to other industries quickly. But businesses with large inventories are difficult
to make the response due to large previous investment.

Particular business examples:

(1) Shandong Huangjin Inc, and Chenzhou Kuangye Inc, are two businesses
running in metal industry. They prefer to keep high level of metal inventory
such as gold and copper, because they believe metals are limited natural
resources, which become fewer and fewer as human keeps exploiting,
therefore metals will appreciate, the price of them will keep increasing over
time. Thus if they keep high level of metal, they can get more revenue in
future. Besides, metals are inventory that can be hold for long time. Unlike
fresh fruit, metals will not decay or deteriorate. Therefore, the two companies
keep high inventory.
(2) Toyota production system (TPS) is famous for low inventory, which achieved
by successful use of just-in-time (JIT), automation, and Kanban
management. Unlike traditional production that former production step
delivers components to later step, under TPSs JIT and Kanban, the later step
goes to former step to take components needed therefore former step only
produces the amount of components required by later step, thus, the pull
production leaves no excessive components produced and realizes zero
inventory. The accurate information of what type and how much components
are required by later step and at what exact time later step needs the
components are all labeled on cards named Kanban, both former and later
step look at Kanban to finish their production. Besides, Toyota builds strong
and long-term relationship with suppliers. There are few inventories on
Toyotas premises because once a production is needed, suppliers can
immediately deliver materials to Toyota, which also helps to reduce inventory.
Moreover, under JIT, Toyotas retail store informs minute to minute sales
information to Toyota therefore Toyota knows when and at what quantity to
produce and ship more products to stores.
The reason why Toyota keeps low inventories is that keeping too much vehicle
inventories are very difficult and expensive to manage and store as they take large
space therefore huge warehouse expense, and many vehicles are difficult to sell
quickly.

5. Four measures help to assure quality control.

Good products quality can bring businesses exemption of legal standard check, more
customer loyalty, good reputation, more competitive advantage and financial growth,
while bad quality can totally make a business lose its customers. Therefore,
businesses have to think effective ways to ensure quality. Some QC measures are
listed below:
(1) Inspections or tests by labor and automation.
Inspections mainly focus on concurrent control or feedback control. Businesses can
hire a professional live inspector to give the audition of quality of goods being
producing or already produced. The professional inspector may walk around the
factory, check if material quality meets predetermined standards, assist and guide
workers who have problems in producing high-quality products by giving them
professional advices.
However, checking quality by professional inspector hired is time-consuming and
costly. Therefore, businesses can use automated inspection and screening
technologies; such technologies can screen out defects and report the progress of each
manufacturing team. For example, laser measurement technology can scan an object
in three dimensions, it helps compare dimension of a product with designers or
customers requirement and can eliminate products that dont meet requirements.
Thus, technology performs QC faster and cheaper than labor inspection. Moreover,
businesses can also appoint an existing experienced worker as inspector. In this way,
the worker is not only responsible for producing goods, but also checking the goods
produced by other workers. The worker perform two duties at same time, which saves
cost as businesses do not need spend money hiring additional inspector.
However, the option of using labor or automated inspection depends on nature of
products and particular testing the business is doing. For example, for consumer
goods such as clothes, both labor and automated inspection can be used. But for
precision instruments such as navigation instrument, rulers, or for medicines, whose
quality cannot be measured by human eyes, businesses have to use cutting-edge
technology for quality inspection and testing.

(2) Information technology and computer software.

Information analysis and computer software also focus on concurrent and feedback
control. For information technology, during quality control, all information should be
maintained because they are valuable data gained from past manufacturing
experience. All scanning, testing and inspection date is stored in a computer database.
Based on those data, reports are formed and analyzed automatically to identify which
points in manufacturing process defects often occur. Information analysis helps
businesses to better plan for future quality, and can reduce quality problems in future
manufacturing because workers know which points in past manufacturing they are
more likely to make quality mistake so they can improve manufacturing skill at
particular point to ensure future quality.
For computer software, it helps businesses to reach quality standard easier and faster.
For example, SigmaQuest Company is one of the leading software providers whose
software helps to manage product quality. It is especially helpful in increasing product
performance. The software helps manufacturers check quality of products that must
follow Restriction of the use of Hazardous Substances (RoHs). If businesses
manufacturing involves hazardous substances and need to control quantity of those
substances, SigmaQuest's software is helpful because after manager set a maximum
quantity of hazardous substance, the software controls the quantity automatically.
(3) Charts and graphs.
Charts and graphs help measure whether products meet quality specifications. They
are often drawn after having an inspection, test, or quality experiment. For example,
manager can make a line chart after testing, including a line showing current product
quality and performance, and another line showing target goal of quality. By looking
at lines, manager can know how far current quality is from target goal, and can divide
a wide gap into several small gaps and narrow all small gaps one by one. Therefore,
when dividing a big goal into several small goals, it is easier to achieve the next small
goal, and in long term, all goals can be achieved. Meanwhile, by realizing gap
between actual and target, manager know clearly about what should be improved to
achieve target.

There are also companies helping to draw up graphs, for example, Stat Soft Company.
These graphs help businesses to continuously ensure quality-control, as they can be
constantly referred to, compared and modified over time.
(4) Preventative training to workers.
Apart from above methods which mainly focus on concurrent or feedback control,
there are also proactive& preventative measures, such as preliminary training given to
workers. Workers should be trained how to distinguish good or bad quality material
and check whether machine works properly. In some particular industry, for example,
food industry, workers should also be taught how to keep personal hygiene, such as
clean hands and comb hair, to ensure there is no foreign body in food. When workers
are trained before manufacturing, they know more about how to ensure quality during
manufacturing, and also increase their awareness of quality-assurance.
Conclusion:
For businesses to survive in long-term, all management including SCM, inventory and
quality-control should be implemented perfectly. Businesses should find management
methods that fit their product best, they can learn managements from existing
successful businesses and adapt those to their own businesses rather than pure
copying, therefore differentiation and long-term success can be achieved.

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