The concept of supply chain management has taken off in recent years, as the manufacturing process becomes more complex and companies face unique legal and liability challenges. Supply chain management classes are now standard college fare, not only for MBA candidates but for undergraduates as well.

Most young entry-level managers today are intimately familiar with supply chain management concepts. They understand how what they have learned in school can be applied to their jobs, and they are anxious to get started. The challenge is integrating the examples they learned in school with the corporate culture in which they now find themselves.

One of those challenges is finding the right balance when managing the supply chain. The days when a manufacturer controlled every aspect of the manufacturing process are largely gone. Ford may have invented the assembly line and controlled every component when it first started, but modern Ford cars are conglomerations of parts manufactured around the world and assembled in hundreds of factories and fabrication plants.

In-House vs. Outsourced

There is a temptation among supply chain managers to focus on outsourced products and components, while leaving the quality of in-house components to existing staff. It is easy to understand the rationale behind that decision. The company has far more oversight into the quality and manufacturing process used to make its in-house components.

Outsourcing manufacturing necessarily requires a degree of stepping back and losing control. Focusing a disproportionate share of supply chain efforts on those outsourced components seems to make good sense. Even so, it is important to look at the original impetus for outsourcing and focus supply chain management efforts accordingly.

The Impetus for Outsourcing

Small businesses in Calagary have many reasons for outsourcing their manufacturing processes. Some firms choose to have components manufactured overseas to save money, while others find that foreign sources already possess the infrastructures they need. Still others manufacture products globally for tax reasons.

It is important for employees involved in supply chain management to research and understand the original reasons for the current manufacturing split. The company may have outsourced some of its manufacturing to save money, but that was not always the only reason. In some cases the company may have simply been dissatisfied with the quality of its in-house manufacturing. This happened a lot, and it was the catalyst for many companies to outsource their operations.

If the company originally outsourced component manufacturing due to quality concerns with in-house staff, it makes sense to focus a great deal of scrutiny on the components the company still makes. Changing the corporate culture is hard, and it is too easy for old habits to return, especially in the absence of oversight.

If the main incentive for outsourcing is a financial one, focusing the majority of supply chain management efforts on external suppliers and putting a good quality control infrastructure in place are critical.

Weighing the Risks

No matter where supply chain management efforts are focused, risk management is an essential part of the picture. Companies are responsible for the safety and performance of the products they manufacture, no matter which suppliers create the components they use. The failure of even the smallest component could put the firm at risk of lawsuits, government oversight and costly recalls.

Supply chain management is designed to address these risks and improve the overall quality of the finished product. Whether the result is a smartphone or a jumbo jet, a good supply chain management program is essential.