VAULT CAREER GUIDE TO SUPPLY CHAIN MANAGEMENT by BrahimGacem

VIEWS: 44 PAGES: 78

More Info
									The media’s watching Vault!
Here’s a sampling of our coverage.

“For those hoping to climb the ladder of success, [Vault’s] insights
are priceless.”
– Money magazine

“The best place on the web to prepare for a job search.”
– Fortune

“[Vault guides] make for excellent starting points for job hunters
and should be purchased by academic libraries for their career
sections [and] university career centers.”
– Library Journal

“The granddaddy of worker sites.”
– U.S. News and World Report

“A killer app.”
– New York Times

One of Forbes’ 33 “Favorite Sites”
– Forbes

“To get the unvarnished scoop, check out Vault.”
– Smart Money Magazine

“Vault has a wealth of information about major employers and job-
searching strategies as well as comments from workers about their
experiences at specific companies.”
– The Washington Post

“A key reference for those who want to know what it takes to get
hired by a law firm and what to expect once they get there.”
– New York Law Journal

“Vault [provides] the skinny on working conditions at all kinds of
companies from current and former employees.”
– USA Today
VAULT CAREER GUIDE TO
SUPPLY CHAIN
MANAGEMENT




? 2005 Vault Inc.
VAULT CAREER GUIDE TO
SUPPLY CHAIN
MANAGEMENT




JAVED KHAN
AND THE STAFF OF VAULT




? 2005 Vault Inc.
Copyright ? 2005 by Vault Inc. All rights reserved.

All information in this book is subject to change without notice. Vault makes no claims as to
the accuracy and reliability of the information contained within and disclaims all warranties.
No part of this book may be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without the express written permission of Vault
Inc.

Vault, the Vault logo, and “the most trusted name in career informationTM” are trademarks of
Vault Inc.

For information about permission to reproduce selections from this book, contact Vault Inc.,
150 W. 22nd St., 5th Floor, New York, NY 10011, (212) 366-4212.

Library of Congress CIP Data is available.

ISBN 1-58131-391-8

Printed in the United States of America
ACKNOWLEDGMENTS

We are extremely grateful to Vault’s entire staff for all their help in the editorial,
production and marketing processes. Vault also would like to acknowledge the
support of our investors, clients, employees, family, and friends. Thank you!
            Wondering what it's like to
            work at a specific employer?
 M | A.T. Kearney | ABN Amro | AOL Time Warner | AT&T | AXA | Abbott Laboratorie
 Accenture | Adobe Systems | Advanced Micro Devices | Agilent Technologies | Alco
  c. | Allen & Overy | Allstate | Altria Group | American Airlines | American Electr
 ower | American Express | American International Group | American Manageme
         Read what EMPLOYEES have to say about:
 ystems | Apple Computer | Applied Materials | Apria Healthcare Group | AstraZenec
 utomatic Data Processing | BDO Seidman | BP | Bain & Company | Bank One | Bank
             •   Workplace culture
 merica | Bank of New York | Baxter | Bayer | BMW | Bear Stearns | BearingPoin
 ellSouth | Berkshire Hathaway | Bertelsmann | Best Buy | Bloomberg | Boeing | Bo
             •   Compensation
 llen | Borders | Boston Consulting Group | Bristol-Myers Squibb | Broadvie
  ternational| Brown Brothers Harriman | Buck Consultants| CDI Corp.| CIBC Wor
             •   Hours
Markets | CIGNA | CSX Corp| CVS Corporation | Campbell Soup Company| Cap Gem
 rnst & Young| Capital One | Cargill| | Charles Schwab | ChevronTexaco Corp. | Chiqui
             •   Diversity
 rands International | Chubb Group | Cisco Systems | Citigroup | Clear Channel | Cliffo
 hance LLP | Clorox Company | Coca-Cola Company | Colgate-Palmolive | Comcas
             •   Hiring process
 omerica | Commerce BanCorp | Computer Associates | Computer Science
 orporation | ConAgra | Conde Nast | Conseco | Continental Airlines | Corning
 orporate Executive Board | Covington & Burling | Cox Communications | Credit Suis
  rst Boston | D.E. Shaw | Davis Polk & Wardwell | Dean & Company | Dell Compute
 eloitte & Touche | Deloitte Consulting | Delphi Corporation | Deutsche Bank | Dewe
 allantine | DiamondCluster International | Digitas | Dimension Data | Dow Chemica
 ow Jones | Dresdner Kleinwort Wasserstein | Duracell | Dynegy Inc. | EarthLink
 astman Kodak | Eddie Bauer | Edgar, Dunn & Company | El Paso Corporation
  ectronic Data Systems | Eli Lilly | Entergy Corporation | Enterprise Rent-A-Car | Ern
   Young | Exxon Mobil | FCB Worldwide | Fannie Mae | FedEx Corporation | Feder
 eserve Bank of New York | Fidelity Investments | First Data Corporation | FleetBosto
  nancial | Ford Foundation | Ford Motor Company | GE Capital | Gabelli Ass
Management | Gallup Organization | Gannett Company | Gap Inc | Gartner | Gateway
  enentech | General Electric Company | General Mills | General Motors | Genzyme
  eorgia-Pacific | GlaxoSmithKline | Goldman Sachs | Goodyear Tire & Rubber | Gra
 hornton LLP | Guardian Life Insurance | HCA | HSBC | Hale and Dorr | Halliburton
 allmark | Hart InterCivic | Hartford Financial Services Group | Haverstick Consulting
 earst Corporation | Hertz Corporation | Hewitt Associates | Hewlett-Packard | Hom
 epot | Honeywell | Houlihan Lokey Howard & Zukin | Household International | IBM
KON Office Solutions | ITT Industries | Ingram Industries | Integral | Intel | Internation


            Read employer surveys on
 aper Company | Interpublic Group of Companies | Intuit | Irwin Financial | J. Walt
 hompson | J.C. Penney | J.P. Morgan Chase | Janney Montgomery Scott | Janu
 apital | John Hancock Financial | Johnson & Johnson | Johnson Controls | KLA-Tenc

          THOUSANDS of top employers.
 orporation | Kaiser Foundation Health Plan | Keane | Kellogg Company | Ketchum
 imberly-Clark Corporation | King & Spalding | Kinko's | Kraft Foods | Kroger | Ku
 almon Associates | L.E.K. Consulting | Latham & Watkins | Lazard | Lehman Brother
 ockheed Martin | Logica | Lowe's Companies | Lucent Technologies | MBI | MBNA
Manpower | Marakon Associates | Marathon Oil | Marriott | Mars & Company | McCan
 rickson | McDermott, Will & Emery | McGraw-Hill | McKesson | McKinsey & Compan
 Merck & Co. | Merrill Lynch | Metropolitan Life | Micron Technology | Microsoft | Mill
 rewing | Monitor Group | Monsanto | Morgan Stanley | Motorola | NBC | Nestle | New
 ubbermaid | Nortel Networks | Northrop Grumman | Northwestern Mutual Financ
 etwork | Novell | O'Melveny & Myers | Ogilvy & Mather | Oracle | Orrick, Herrington
 utcliffe | PA Consulting | PNC Financial Services | PPG Industries | PRTM | PacifiCa
                                              Go to www.vault.com
 ealth Systems | PeopleSoft | PepsiCo | Pfizer | Pharmacia | Pillsbury Winthrop | Pitne
 owes | Preston Gates & Ellis | PricewaterhouseCoopers | Principal Financial Group
Table of Contents

INTRODUCTION                                                                                                             1



THE SCOOP                                                                                                                3


           Chapter 1: Supply Chain Basics                                                                                 5

           Manufacturing Nuts and Bolts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
           Production Process Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
           What is the Supply Chain? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

           Chapter 2: Making it Run Smoothly                                                                           15

           Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
           Critical Skills and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

           Chapter 3: Trends in Supply Chain Management 25



GETTING HIRED                                                                                                         29


           Chapter 4: Supply Chain Hiring                                                                              31

           Skills and Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
           Getting In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

           Chapter 5: Resumes and Interviews                                                                           35

           Sample Supply Chain Resumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
           The Supply Chain Interview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
           Sample Interview Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                                                     ix
                                                        Vault Career Guide to Supply Chain Management
                                                        Table of Contents




    ON THE JOB                                                                                              41


       Chapter 6: Job Responsibilities                                                                       43
       Job Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
       Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
       The MBA in Supply Chain Management . . . . . . . . . . . . . . . . . . . . . . . . . .45

       Chapter 7: Our Survey Says                                                                            49



    APPENDIX                                                                                                55

       Supplier Audit Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57




x                                                                                             ? 2005 Vault Inc.
Introduction

           Supply chain management is the coordination of efforts of a network of
           vendors that provides materials and components for a company’s products.
           Supply chain management primarily takes place in manufacturing companies
           such as Chrysler, Sony, and Boeing. Of course, no two companies operate the
           same way, so supply chain management practices vary greatly — even for
           companies in the same industry. For example, a company at the cutting edge
           of technology tends to look for a supply chain that has very short lead times
           (the time to make and deliver a product), whereas a company whose products
           have many competitors needs a supply chain that focuses on cost reduction.
           The methods described in this book are representative of many companies,
           but there are always exceptions to the rule. One of the exciting aspects of
           Supply Chain Management is that it is a dynamic field. There are constant
           innovations being made such as RFID (Radio Frequency Identification) and
           Vendor Managed Inventory, and the globalization of the economy continues
           to have a significant impact on the industry.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                1
THE MOST TRUSTED NAME IN CAREER INFORMATION

                                     “Fun reads,
                                     edgy details”
                                     – FORBES MAGAZINE



  Vault guides and employer
  profiles have been published
  since 1997 and are the premier
  source of insider information
  on careers.

  Each year, Vault surveys and
  interviews     thousands      of
  employees to give readers the
  inside scoop on industries and
  specific employers to help them
  get the jobs they want.




  “To get the un-
 varnished scoop,
 check out Vault”
 – SMARTMONEY MAGAZINE
        THE SCOOP

          Chapter 1: Supply Chain Basics
          Chapter 2: Making it Run Smoothly
          Chapter 3: Trends in Supply Chain Management




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.
4   ? 2005 Vault Inc.
Supply Chain Basics
 CHAPTER 1


Manufacturing Nuts and Bolts

           Components and Material

           “Components” are products made by a supplier and purchased by your
           company and then assembled in your company’s plant, while “material”
           refers to a product that your company uses to manufacture a part in your
           company’s plant. The easy way to remember this is that components get
           assembled and material gets converted. For an automobile plant, a tire would
           be a component (or part) and a large sheet of steel that would be used to
           fabricate the hood of a car would be material.

           You have probably seen an automobile assembly line on television. A car
           door would be called a component. A car door with a window already
           installed, a motor to open and close the window already wired, and the
           upholstery on the inside of the door already attached is referred to as a
           subassembly. A subassembly is an intermediate step between a part (a door)
           and a completed product (an automobile). Picture an automobile chassis
           progressing on a horizontal conveyor, fender panels arriving from overhead
           hangers, assemblers aligning the fender into the correct position, and robots
           welding the fender to the chassis. Note that these are called assembly lines,
           not manufacturing lines.

           Car companies do most of the final assembly of their products themselves,
           but do not actually manufacture the thousands of components that go into
           these cars. Instead, they choose to purchase components and subassemblies
           from suppliers. This is done because of cost and quality reasons. It would be
           very expensive for an automobile company to purchase all of the equipment
           and gain the expertise to be able to make the different types of components
           (sheetmetal, plastic, electronics, fabric, etc.) that go into a product.
           Therefore, it makes sense to partner with companies (suppliers) that
           specialize in specific types of manufacturing (CNC, injection molding,
           upholstery, stamping, etc.) and have those companies supply the parts and
           subassemblies for the cars. The automobile suppliers typically have multiple
           customers (i.e. Ford, Dodge, and Honda), which makes it easier for them to
           justify the research and equipment expense involved in making a part (like a
           spark plug) to sell to the car companies. Coordinating the efforts of these
           numerous suppliers is a full time job. This is what supply chain management


Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                5
                                        Vault Career Guide to Supply Chain Management
                                        Supply Chain Basics




    is. Supply chain management practitioners have to find suppliers, get them
    to agree to make the desired components for a competitive price, and then
    coordinate with the suppliers to make sure the components are available for
    the assembly lines as needed. Supply chain managers also have to take action
    when a supplier sends parts late or sends parts that do not meet the
    requirements. Car companies hire many supply chain managers. Most of the
    time, managers work in the plant for which they purchase components, but
    this is not always the case. The supply chain manager acts as the main
    customer to the supplier.


    What goes on in a factory?

    In a manufacturing plant, raw materials are converted into components,
    which are then assembled into products. If the value added by this process is
    greater than the cost required to conduct it, profit can be earned by a company
    wishing to undertake this task. The first step is to create a forecast of how
    many products will be sold, which is done by the plant’s Sales Department.
    After determining the time required to make one unit of product, the
    engineering department will calculate the number of machines and people
    required. Since machines are usually capitalized (which means the cost is
    distributed over a few years instead of all at once), the machines will
    depreciate (the portion of the cost of the capital equipment that is taken
    annually) whether they are used are not. Similarly, factory workers are paid
    by the hour for being at the plant regardless of whether or not they are making
    product. One can argue that their supervisor (part of the Production
    Department) should send the workers home if there is nothing for the factory
    workers to do. For this reason, factory workers are called a variable cost –
    the expense of labor to make the product should be proportional to the
    number of units produced. In actuality, direct labor (factory workers) is
    correlated with but not directly proportional to the number of units produced.

    Economies of scale and economies of volume affect the amount of labor
    required to make a product. Economy of scale means that costs per unit
    decrease as volume increases. For example, if 100,000 square feet of space
    is required to make 100,000 units annually, the required space to make
    1,000,000 units annually is most likely less than 1,000,000 square feet.
    Economies of volume refers to the cumulative effect of making a product, and
    is also known as learning curve effects. For example, the time that it takes to
    make a product in the third year of production should be a lot less than in the
    first year of production. Understanding the economics of a manufacturing
    plant will help a supply chain manager perform his/her job better by being
    able to see how poor supplier performance (something a supply chain

6                                                                  ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supply Chain Basics




           manager is expected to control) affects the factory.

           In addition to factory workers, raw materials are also a variable cost.
           Obviously, there should be a known number of components that go into a
           product. If more units are to be made, more components are required. On the
           other hand, most costs of a manufacturing plant are fixed costs. These costs
           are not dependent on the number of units produced. In addition to
           depreciation mentioned above, employee salaries (indirect labor), and rent are
           examples of fixed costs. These fixed costs are also known as fixed overhead.
           Manufacturing plants are motivated to maximize the number of units
           produced because this reduces the fixed overhead cost per unit. For example,
           if the rent on a building is $10,000 per month and the production is 5,000
           bicycles per month, then the amount of rent that would be allocated to each
           unit is $2. However, if there was a 50% increase in production, this cost
           would be reduced to $1.33 per bicycle. Again, the desire is to maximize the
           utilization of a company’s assets. If a company is running 24 hours a day, 7
           days a week, the assets are being 100% utilized. If a company runs only 40
           hours per week, the assets are used only 24% of the time. On the other hand,
           if a company has the assets and the factory workers but does not have the raw
           materials, money is lost every minute.

           The fixed overhead costs are only one factor that drives the urgency to always
           have raw material available. Another is customer satisfaction. In this age of
           instant gratification, customers do not tolerate out-of-stock situations. The
           expectation is that a customer should be able to receive a product the day after
           they place the order. If one provider cannot meet that requirement, the
           consumer will find one that can.


Production Process Issues

           What happens when parts arrive late?
           In order to keep the production process running smoothly, raw materials must
           always be available. When raw materials are not available when they are
           needed, the production department is forced to investigate, notify, reschedule,
           and setup to make a different product. A novice supply chain manager might
           conclude that the solution lies in purchasing extra material, beyond what the
           forecast calls for, to be safe. This may prevent having to shut down a
           production line due to a raw material shortage, but there are risks associated
           with that also. Imagine if someone who strongly dislikes going to the grocery
           store decided to buy one year’s worth of groceries at once. Would this action

Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                           7
                                        Vault Career Guide to Supply Chain Management
                                        Supply Chain Basics




    prevent this person from having to go to the grocery store for a full year?
    Would this person not run out of food for a full year? There are obvious
    disadvantages to this strategy. Some groceries are perishable, groceries take
    up a lot of space, they would have to be paid for upfront even though some
    of them would not be used for an entire year, some groceries might not be
    found in their storage location because they are under a big pile of other
    groceries, unexpected guests could come and consume groceries faster than
    expected, the person’s tastes could change and they could get tired of some of
    their purchases, the person could develop a fondness for a new grocery item
    that they did not buy on their annual trip, or the price for a grocery item could
    come down significantly. The list could go on and on.

    Thus, every manufacturing plant has to find a balance between buying
    enough raw material to keep the production lines going, and not buying so
    much raw material that it becomes a burden. There is no optimal inventory
    level that applies to all plants. A common inventory goal is 12 inventory turns
    per year. This is a metric that supply chain managers are expected to
    contribute toward improving. Inventory turns are defined as the revenue of a
    company divided by the dollar value of the inventory. Reducing inventory
    results in a higher number of inventory turns. Inventory levels are important
    in any organization, but in publicly traded companies they are even more
    critical because high inventory values can make investors think that a
    company’s products are losing popularity and cause the stock price to
    decrease. Supply chain management jobs exist in both public and private
    companies, but more so in public ones.

    Some plants operate under Just-In-Time principles (JIT). In this scenario,
    raw materials are delivered when they are needed, and go straight to the
    production floor instead of being warehoused first. The automotive industry
    is famous for practicing JIT. Truckloads of seats for cars arrive at defined
    intervals (often hourly) and connect to the conveyors that carry one seat at a
    time to their assembly area. The desire to be on the JIT bandwagon is
    overshadowed by the risk factor of running out of parts on the production line
    for most manufacturing plants. Many plants claim to operate under JIT
    principles just to impress customers and competitors, even though they
    actually receive weekly shipments of raw materials.


    Avoiding defects
    Avoiding part shortages and increasing inventory turns are not the only goals
    for a supply chain manager. The parts that arrive have to meet certain
    specifications. This may sound trivial, but if a supply chain manager orders


8                                                                    ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supply Chain Basics




           an aluminum plate 8 inches long, 8 inches wide, ? inch thick, with purple
           anodizing, what are the chances that is what they will actually receive? The
           chances are less than 100%. A manufacturing industry novice might think
           that if a company has given a supplier a detailed drawing specifying what
           they want, the supplier will provide products that meet those specifications.
           But if this were the case, companies would not have incoming quality
           inspection, first articles (a thorough inspection of a part the first time it is
           received), MRB (Material Review Board) locators, and supplier quality
           engineers just to verify that the supplier is meeting the specifications that
           have been outlined for them. Wanton disregard by suppliers to the
           specifications is not what is being implied here, but the fact of the matter is
           that sometimes parts are received in manufacturing plants that do not meet the
           specifications. Of course, cost is always part of the issue. Some companies
           require a certificate of compliance with each shipment of product. This
           definitely adds to the cost of the raw material and it does not guarantee that
           100% of the material in the shipment will be per the specifications, but it
           helps. A supply chain manager is under perpetual pressure to reduce costs.
           Some companies gamble and try out a cheaper supplier because they have
           decided that the cost savings outweigh any quality compromises. Some
           suppliers can be both cheaper and higher-quality than others, but the general
           rule is higher quality carries a higher price.




    A factory’s employees
    The common perception is that factory workers are blue-collar,
    predominately male, unskilled laborers who run huge machines. This is
    really not the case. Not only are there plenty of females in factories,
    there are plenty of jobs that are semi-skilled labor, skilled labor, and
    white-collar. All factories maintain a management staff to direct the
    work of the factory workers. The white-collar jobs of a factory take care
    of product quality, computer systems, manufacturing engineering,
    purchasing, safety, human resources, inventory management, and
    planning. Some of the job titles are Engineer, Planner, Business Analyst,
    Manager, Controller, and Supervisor.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                           9
                                         Vault Career Guide to Supply Chain Management
                                         Supply Chain Basics




 What is the Supply Chain?

     Suppliers and vendors
     A simple definition of supply chain is the network of vendors that provides
     materials for a company’s products, but in reality, the supply chain is more
     complicated. There is a stream of flows from supplier to supplier until a
     product reaches an end user. For example, oil is rigged from the ground, sent
     to a refinery, plastic is made, an injection molding shop buys plastic pellets,
     makes plastics components, ships the components to a customer, the customer
     assembles the plastic parts into their machine, and then sells the machine to
     their customer. The further away from the customer, the farther “upstream”
     a supplier is considered to be.

     The network of vendors in a supply chain often includes tiered suppliers
     (meaning a company does not receive materials directly from the supplier, but
     is involved in getting materials or parts from an upstream supplier to a
     downstream supplier). The more complex a product, the more significant the
     upstream supplier’s roles are. From a supply chain manager’s perspective,
     his suppliers are primarily responsible for managing their own supply chain
     but he should have some involvement.

     Oftentimes, a manufacturing facility acts as a supplier to a downstream
     manufacturing facility. For example, a company could have their
     manufacturing plant in the U.S. and their assembly plant in Mexico. The U.S.
     plant would be considered an internal supplier, since it’s part of the same
     company. The transportation of materials throughout the supply chain is
     often called logistics. This includes air, land, and sea shipping as well as
     customs processing to allow materials to cross borders. The supply chain
     does not end until the product reaches the consumer. For this reason,
     distribution centers, distributors, and wholesalers are all part of the supply
     chain. It is not rare for a supply chain to involve a dozen parties.

     The relationship between a supplier and a manufacturing company is not as
     simple as a supply chain manager ordering parts and the supplier shipping
     them. There are continuous flows between the supplier and the customer.
     Figure X below shows these flows in chronological order from top to bottom.
     (Note that this figure is for an already established supplier and material.) In
     the case of a new supplier, a supplier audit (a verification that a supplier has
     the potential to meet the manufacturer’s needs) should be conducted first to
     determine if the supplier is appropriate for the work.



10                                                                   ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supply Chain Basics




           In the case of new material, the customer must first supply the anticipated
           number of units required, along with all of the drawings and specifications, to
           the supplier to get a quotation of unit price and lead time. After the quotes
           are received and a supplier is chosen, a purchase order should be done for the
           setup costs and samples. Setup costs can be a few hundred to hundreds of
           thousands of dollars (mostly tooling costs). A supply chain manager should
           always present the setup costs along with the piece price quote when working
           with engineers (so manufacturing methods are not specified solely on unit
           cost). For example, making a simple part by thermoforming would cost about
           $50 each, whereas making it by injection molding would cost $5 each.
           However, injection molding requires a $10,000 mold. If you only need 20
           pieces annually, you are better off using thermoforming.

           Depending on whether prototypes or the component have already been made
           or not, the samples ordered may be just to verify the ability of the supplier to
           make the parts, or to verify the design of the finished product. In other words,
           the supplier may fabricate a part correctly, but a manufacturer’s engineering
           department may determine that the part needs to be redesigned. This would
           start the process over. Once samples have been approved, the flow of Figure
           X can be followed.

           A manufacturing company has to furnish a forecast (usually annually) so the
           supplier can then go through his supply chain and make sure that all the
           materials needed (i.e. material, lubricant, machine capacity, labor resources)
           for the component the supplier provides will be available. A manufacturer
           then issues a purchase order, which serves as a commitment to purchase a
           defined number of units. A purchase order must have terms and conditions
           accompanying it to protect your company. Usually, a customer will not want
           to receive the entire forecast amount at once. Instead, a manufacturer could
           issue multiple purchase orders throughout the year, or do what is called a
           blanket purchase order for a large amount and then make releases against that
           purchase order for small amounts when they actually want it.

           For example, a company uses 1,000 rods of aluminum in a year. They may
           lock into a price for the entire year (the price of aluminum changes daily), but
           not take delivery of all 1,000 rods at once. Instead, the supply chain manager
           would request economic order quantity (EOQ) releases. An EOQ is the
           optimal balance between taking delivery for the entire 1,000 rods at once and
           paying for material that will not be used for months, and paying
           transportation, inspection, and transaction costs for receiving frequent smaller
           shipments. The formula for EOQ is



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          11
                                           Vault Career Guide to Supply Chain Management
                                           Supply Chain Basics




       where the Order Completion Cost is the total cost of placing the purchase
       order, paying for a setup at the vendor (if applicable), and paying the
       transportation and in-house handling to get the components to the production
       floor. The unit carrying cost is the cost of holding inventory (insurance,
       warehouse lease, shrinkage costs, security, cost of capital, etc.)

       Customers can do releases to the supplier at specific time intervals or specific
       inventory intervals. With inventory intervals, when a customer gets to a
       certain number of rods left, they would issue a release for the next shipment
       of rods.

       A supplier should send a confirmation to the customer acknowledging they
       have received the purchase order and agreed to the terms and conditions
       described therein. The supplier sends the material per the purchase order and
       then sends an invoice for the amount shipped. Once the goods have been
       accepted by the customer, a payment is sent to the supplier equal to the
       amount of the invoice.



             Figure 1: The Supply Chain Flow Process

                                     Forecast


                                 Purchase Order


                                      Release

     Supplier                                                        Customer
                                   Confirmation


                                      Material


                                      Invoice


                                     Payment




12                                                                     © 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supply Chain Basics




           OEM suppliers
           There are basically three types of suppliers. In the first, or most conventional
           scenario, a company provides a design for what they want the supplier to
           furnish and the supplier makes it to the company’s specifications. The second
           is the Original Equipment Manufacturer (OEM) supplier. In this case, the
           company does not specify the design for a custom product, but in fact buys a
           product that the supplier sells to many customers. These products are called
           off-the-shelf (a screw is an example of a component that is usually purchased
           as an off-the-shelf product rather than being custom designed).


           Contract manufacturers

           Contract manufacturers are the third type of suppliers, in which formal
           contracts between the supplier (the contract manufacturer) and your
           manufacturing company are relied upon. The contract manufacturer
           purchases or makes all of the components, assembles the product, tests it, and
           ships the finished product either directly to the customer or to a warehouse.
           Companies that want to get out of the manufacturing aspect of their products
           turn to contract manufacturers. The supply chain manager finds suitable
           contract manufacturers and manages the relationship after a contract has been
           signed. A company has to put a huge amount of trust into the contract
           manufacturer, since the customer does not have the same level of visibility or
           control over the manufacturing of the product as they do when they are
           making the product themselves. Contract manufacturing is an option in
           almost every industry from food processing to semiconductors.


           Freight forwarders and transportation providers

           Transportation providers and freight forwarders are also controlled by a
           supply chain management practitioner. Transportation providers pick up
           product from one location and deliver them to another. Obviously, it is very
           costly to pick up some cargo in Los Angeles and drive it all the way to New
           York for delivery. For this reason, these companies consolidate shipments
           from different places in a departing hub (whether it be a port, a warehouse, or
           an airport), send them to an arriving hub, and then deliver them to their final
           destination. It is quite common for a transportation provider to hand off a
           shipment to another company to carry out some or all of the transportation.
           This is called subcontracting or third party carriers. Specialty transportation
           providers also exist (i.e. for transporting explosive materials, refrigerated
           cargo, etc.). Some manufacturing companies have traffic, transportation, or


Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          13
                                       Vault Career Guide to Supply Chain Management
                                       Supply Chain Basics




     logistics departments that take care of most of this work so a supply chain
     manager can concentrate on suppliers only.

     Freight forwarders specialize in transportation across borders. They
     coordinate the paperwork, book the space with a transportation provider, and
     track the goods from pickup to delivery. Because of the complexity of
     customs requirements, tariff codes, and language barriers for different
     countries, it is better to have freight forwarders involved if a company is
     dealing with more than a few countries or commodities.




14                                                                ? 2005 Vault Inc.
Making it Run
Smoothly
 CHAPTER 2


Systems

           ERP Systems

           Most manufacturing and service companies use an Enterprise Resource
           Planning (ERP) system. ERP is a large database that links the entire
           organization (i.e. accounting, purchasing, shipping, manufacturing, and sales)
           all together. Popular ERP providers include SAP and Oracle. Some small
           “mom-and-pop” shops do not need ERP because there are so few people
           involved in the administrative work of the factory.


           MRP

           The sales group of a company enters a forecast of how many of each product
           they expect to sell into the ERP system. One part of ERP is Materials
           Requirements Planning (MRP), which takes this forecast and breaks it down
           into all of the components and materials that are necessary to make each
           product, using the Bill of Materials (BOM). A BOM is similar to a recipe for
           making a product. It lists all of the components, materials and quantities
           required to make a product. A BOM usually has multiple levels. For
           example, a BOM for a car would have two front doors, an engine, etc. The
           engine BOM would have pistons, a crankshaft, etc. MRP has four inputs and
           four outputs. The four inputs are the forecast, the BOM, the current inventory
           levels, and the MRP parameters. A supply chain manager would most likely
           only be responsible for the MRP parameters and not the other three inputs.

           Imagine if the sales group at Boeing plans to sell 400 airplanes this year. This
           would mean that the supply chain manager should buy enough components
           and materials to make 400 airplanes, right? Wrong! There may be 100
           airplanes sitting outside in inventory. Thus, only enough components and
           materials need to be purchased for 300 units. See the formula below:


     Amount to be manufactured = Amount to be sold – Amount already in stock



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.               15
                                          Vault Career Guide to Supply Chain Management
                                          Making it Run Smoothly




     But what if ERP shows that there are only 50 airplanes in inventory? This
     complicates it even more. The inventory levels must be accurate (what is
     physically on hand must match what ERP shows is on hand) in order for the
     MRP results to be meaningful. For this reason cycle counting is very
     important. Cycle counting is a verification that the inventory that is shown in
     the ERP matches the physical quantity. Advanced ERP systems have cycle
     counting programs in them. They can issue a report of parts that need to be
     physically counted, the counter counts them, enters the amount counted, and
     any discrepancy is rectified. Despite such preventive measures, discrepancies
     between the actual inventory and the ERP inventory still pop up from time to
     time. Some of the causes are incorrect BOM’s, missing inventory
     transactions, human error, and employee theft. Let us go back to the car
     example. If a car has four passenger tires but the BOM shows a car uses five,
     every time a car gets made, there would be five tires deducted from inventory
     when only four are actually used. Over time, this would result in a huge
     positive inventory variance (there would be more physically on hand than
     ERP shows).

     Materials Requirements Planning (MRP) parameters vary depending on the
     ERP system, but the most important parameter is lead time. This is the
     number of days that normally elapse between the day a component is ordered
     from the supplier and the day it is delivered or made available for use on the
     production floor. Lead times depend on many factors, the most common of
     which are the location of the company (transit time is correlated with
     distance), what types of products the company makes (i.e. metal, plastic,
     circuit boards, etc.), and the company itself (some companies specialize in
     rapid turnaround and some companies are slow compared to others that make
     the same commodity). Other common MRP parameters are related to
     minimum purchase amounts, minimum on-hand quantity desired, delaying
     orders instead of canceling them, and expediting orders instead of issuing
     additional ones.

     MRP generation (the frequency with which MRP is regenerated would be
     determined by a supply chain manager’s boss, the procurement manager)
     results in a computer report that tells supply chain managers which parts or
     materials to buy, how much to buy, when to buy them, and when they need to
     arrive. It is common for MRP to generate a result that shows a component
     should have been ordered two weeks ago. This is typically caused by an
     inventory adjustment, a surge in production output, a BOM change, or a
     change to the MRP parameters. One might think that two dates on the MRP
     output for each line item are redundant since the difference between the two
     is the lead time. This is correct if there is no flexibility in the lead time, but


16                                                                    ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Making it Run Smoothly




           in fact there usually is. The two components of lead time are supplier lead
           time and transit lead time. The supplier can be asked to expedite an order to
           decrease the lead time, or use an express shipping method to decrease the
           transit lead time.

           In the end, MRP is just a computer algorithm – if the inputs are flawed, the
           outputs will be also. If a supply chain manager’s job was just to execute what
           MRP instructs, the job would be quite easy. But there are always
           considerations that have not or cannot be input into MRP. For example, if the
           power supply of a product will be replaced with a different one in a few
           months, MRP will not know about this by looking at the current BOM. The
           supply chain manager will have to second-guess the demand that is generated
           by MRP for the current power supply, knowing that only enough power
           supplies should be ordered to cover the period before the new power supply
           goes into effect and the primary BOM changes. Some more advanced ERP
           systems use Engineering BOMs and Planning BOMs to mitigate some of the
           shortcomings of MRP, but unfortunately, these systems are not foolproof
           either.

           A supply chain practitioner needs to question every line of MRP output and
           understand what is driving the prescribed action. In addition, a supply chain
           manager needs to look at what is not showing up on MRP output. There may
           be parts that require action but are not in the MRP reports. As a supply chain
           manager becomes more familiar with the hundreds of parts he manages and
           the dozens of engineering projects in the works, he will become better at
           catching items that are not in the MRP. In the power supply example above,
           the demand for the new power supply would not show up, even though it still
           needs to be ordered. MRP is merely a tool to assist in managing the supply
           chain, not a catch-all solution to supply chain management.


           Kanbans

           Kanban, the Japanese word for signal, is one of those buzzwords that
           everyone in manufacturing caught on to, but unlike most other buzzwords,
           kanbans have not quickly faded into the past. A kanban is a signal from the
           production floor to the warehouse, supplier, and/or supply chain manager that
           a part is close to running out and needs to be replenished. Kanbans usually
           take the form of a piece of paper/card, an empty bin, or a bar code scan, but
           the word kanban is also used to describe the number of parts that comprise
           one signal (also known as kanban size) and the space on a shelf or floor where
           parts should reside. For example, assume an assembly line uses 1,500 springs
           per hour, the EOQ for the spring is 60,000, and the springs are kept in bins of

Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          17
                                         Vault Career Guide to Supply Chain Management
                                         Making it Run Smoothly




     30,000 each. This means two bins are ordered at a time. When the bins are
     empty, they are moved from production to receiving, so the bins can be
     refilled by the shipment arriving from the supplier. This empty space offers
     a visual cue. A supply chain manager can simply walk on to the floor, see
     which kanbans are empty, and check on their status.


     Supplier scorecards

     Supplier scorecards have become an effective tool in managing suppliers. At
     specific intervals determined by the procurement manager (monthly or
     quarterly are usually the most valuable), supply chain managers provide
     feedback to their suppliers on their performance. The feedback can be done
     in the form of stars (like restaurant ratings) or grades (like in school). There
     should be a rating for quality, on-time delivery, “other,” and a total grade
     which is a weighted average of the first three ratings. A company would
     decide the weightings based on what is most important to them. The “other”
     category would take into consideration other important factors, such as cost
     reduction, ability to expedite orders, responsiveness in new
     products/engineering changes, and customer service. Supply chain managers
     should get input from other departments when determining these ratings. For
     example, there may be a supplier that usually forgets to send a packing list
     along with the shipment. The receiving department has to then contact the
     supplier’s shipping department and ask them to fax a copy of the packing list
     so they can receive the shipment. This information might never get
     communicated to the supply chain manager unless he asks.


     Supplier audits

     Supply chain managers should also conduct supplier audits to verify that a
     supplier has the ability to make good quality products. Although most supply
     chain managers are too busy to conduct as many supplier audits as they would
     like, they will probably also agree that supplier audits are one of the most
     valuable tools a supply chain manager has. There are two types of audits –
     one for existing suppliers and one for prospective suppliers. For existing
     suppliers, the audit can be less thorough because the supply chain manager
     already has experience with the supplier’s performance. For prospective
     suppliers, however, a full audit must be conducted to be able to make a
     judgment on the potential of the supplier to fulfill the needs of the company.

     A complete audit will take about four hours. It might be helpful to send a list
     of items you will be asking about ahead of time, though some supply chain


18                                                                   ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Making it Run Smoothly




           managers prefer to ask to see things “on the spot” so the supplier has not
           rehearsed the audit ahead of time. But most supplier audits are quite similar,
           so a supplier already knows what to expect. The complete audit should not
           be completed in a conference room. It is important to walk around and see
           the supplier’s facility; see the production area and the quality assurance area.
           Ask some questions directly of the workers. See the appendix for a thorough
           list of supplier audit questions.

           If supply chain managers only had a handful of suppliers to manage, the job
           would be a lot easier. Even though supply chain managers try to consolidate
           the number of suppliers they manage, it is almost always not feasible to
           reduce the number. How does a supply chain manager make the time to audit
           all suppliers? The likelihood that you would be able to audit every one of
           your suppliers annually is low. Instead, you have to prioritize based on “bang
           for your buck.” The first priority is problem suppliers; the ones with quality
           or delivery problems need to be audited. This will help you determine if they
           are trainable. In other words, do they have the potential to become great
           suppliers or do you need to start looking for other sources? The second
           priority is high-dollar-value suppliers. Even if they are fully meeting your
           needs, it is important to get some face time with them and keep the
           relationship strong. The final priority is low-dollar-volume suppliers that are
           performing well.


           Corrective action reports

           Of course, there will be times when suppliers make mistakes. The most
           common supplier errors are shipping parts late, and sending parts that do not
           meet the specifications. For late deliveries, the approach is to talk to the
           suppliers and let them know that late deliveries are unacceptable. Suppliers
           know it is their duty to have parts arrive to the customer on time. Your
           feedback will cause them to investigate, determine what is causing parts to
           arrive late, and take the proper action to correct it. When parts arrive that do
           not meet the specifications (usually a drawing), this requires a more formal
           approach. A corrective action report should be requested from the supplier on
           the symptom, the root cause, the corrective action, and what will be done to
           prevent reoccurrence. A supply chain manager should create a form that can
           be serialized, stored, and sent out to supplier when a quality issue arises. It
           is also acceptable to instruct the supplier to send a corrective action report
           (based on their own format), but you must give them enough information for
           them to be able to do a thorough analysis. The information involved: the
           quantity of defective parts found, the lots that that those components were
           part of (if lot control is not practiced, then the receipt dates of the rejected

Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          19
                                         Vault Career Guide to Supply Chain Management
                                         Making it Run Smoothly




     batches is sufficient), the discrepancies, and the effects of those
     discrepancies. It is always good to send back some samples to the supplier
     so they can see for themselves what the defect was. In some cases, a digital
     picture is enough. If only some of the parts in a lot are defective, it is
     advisable to return the entire lot to the supplier so they can sort out the good
     and bad parts. Depending on the cost of the defective part and the costs of
     processing them, it usually does not make sense to initiate corrective action
     for “one-off” types of incidents.


     Second sourcing

     Second sourcing is finding a backup supplier to provide materials or
     components in the event the primary supplier has extended downtime (i.e.
     their building burns down). There are a lot of setup expenses (mostly at the
     secondary supplier) in getting a second source up and running, such as paying
     for fixtures, tools, pilot runs, etc. For this reason, you have to pick and
     choose which parts you will get second sources for. Also, once you get a
     second source, it makes sense to occasionally buy parts from them even if the
     primary source does not have a hiccup. This keeps the job fresh in the minds
     of the second supplier. A good balance might be to have 10-20% of your
     volume coming from the second source. If you do not get periodic shipments
     from the second supplier and only wait until your primary supplier has a
     major incident, you run the risk of finding out that the second supplier has
     issues that prevent them from providing parts (i.e. lost tooling, lost know-
     how, etc.) too. Since you are buying a much smaller volume from the second
     source suppliers, expect to pay a much higher price. In critical situations, you
     will be happier to pay a higher price from a secondary source than have to
     shut down the production lines for an extended amount of time while you are
     at the mercy of your primary source. The amount of second sourcing you do
     depends on how much risk your company is willing to take in terms of the
     primary supplier never having an extended down period. Your manager can
     provide guidance on your company’s philosophy on second sourcing.




20                                                                   ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Making it Run Smoothly




    NDAs
    It is often necessary to create Non-Disclosure Agreements (NDAs) with
    suppliers. This written agreement specifies that the supplier will not
    share trade secrets related to the parts they make for you to other
    companies. Confidentiality Agreements and Non-Compete Agreements
    are also common, but less so. For contract manufacturers, an NDA is
    an essential part of the contract. Your legal department can provide
    guidance on which of these, if any, are needed for your suppliers.




Critical Skills and Practices

           Teamwork

           Even though it seems trite, teamwork is the key to success. Supply chain
           managers should view themselves as customer service representatives for the
           manufacturing operations of the plant. Sitting at one’s desk and just
           executing orders is the work of a mediocre supply chain manager. High-
           performance supply chain managers go beyond that by practicing internal
           (inside the company) teamwork as well as external (outside the company)
           teamwork.

           It is critical for a supply chain manager to build rapport with employees. A
           supply chain manager relies on the receiving department to promptly process
           deliveries, so urgent parts can be sent to the manufacturing floor within
           minutes rather than hours. Setting up a “hot” board in the receiving area,
           where supply chain managers can list urgent parts, can help, but building a
           close relationship with the receiving department employees (not just the
           supervisor) is a lot more valuable. For parts that need to be inspected for
           quality before they are sent to the floor, the receiving inspection department
           is involved, so a supply chain manager needs to build a good relationship with
           this department as well. A mediocre supply chain manager considers their job
           done when the parts are delivered, but a conscientious manager is not
           satisfied until the parts are on the manufacturing floor. The material handlers
           who move the parts around the factory should be made into allies as well. If
           you have a good relationship with them, they will go out of their way to help
           you without feeling that you owe them something in return.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          21
                                          Vault Career Guide to Supply Chain Management
                                          Making it Run Smoothly




     Production supervisors are in charge of the manufacturing and assembly
     lines, as well as the people who work on the lines. In this sense, they occupy
     a different place in the manufacturing chain-production supervisors rely on
     supply chain managers, whereas supply chain managers rely on the other
     internal departments (receiving, inspection, material handlers) discussed
     above. Open communication is key to successful relations with the
     production group. Letting them know why the parts are late and when they
     will arrive helps them better understand a supply chain manager’s job. Spend
     time on the production floor. Know the parts you manage beyond just the part
     number, supplier, and lead time. Talk to the assemblers, understand how the
     parts you purchase are assembled, learn what challenges they face, and try to
     see things from your customer’s perspective (internal and external
     customers).

     A supply chain manager should build alliances with suppliers. The more
     information a supply chain manager shares with a supplier, the higher the
     likelihood that the supplier will feel that they are valued by the customer
     (your company). If a supplier feels he has a stake in the success of your
     company, he will be a lot more motivated to help achieve that success.
     Ideally, suppliers will be rewarded if the company succeeds. One tactic that
     can help motivate suppliers is to suggest that there will be consolidation in the
     coming years, i.e. work will be transferred from the lower-performing
     suppliers to the high-performing suppliers, resulting in the same pie being
     split into larger pieces. But a supply chain manager has to be aware of the
     line between the benefits of reducing suppliers and the risk of putting all of
     one’s eggs in one basket. The companies chosen as key suppliers must be
     evaluated beyond their on-time delivery and quality. For example, a supplier
     could have 100% on-time delivery and a superior-quality product, but if 50%
     of their business is serving an industry that is rapidly declining, there is a high
     chance that this company may fold. Or a similarly satisfactory supplier may
     be run by one person. The risk of something happening to that one person
     needs to be seriously considered.

     A supply chain manager should let suppliers know about new products in the
     pipeline or new avenues his company would like to explore. This can also
     motivate a supplier to perform well, because they know that good suppliers
     get chosen to make parts for new products. Suppliers have tons of
     competition – especially offshore – so the supply chain manager is in the
     position of power here. Have key suppliers give input during the design
     phase of a new product to help make the product cost-effective from the start,
     instead of implementing cost reductions after the fact. After all, they are the
     experts at what they do. An example: a supplier might suggest making a part


22                                                                     ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Making it Run Smoothly




           out of a different material, which may be more expensive but is easier to
           machine and results in a net savings.


           Follow-up

           Another critical trait that separates good supply chain managers from
           exceptional ones is follow-up. A supply chain manager should let suppliers
           know a due date for quotes when quotes are sent out. A few days before the
           deadline for the quotes, follow up with the suppliers that have not sent in
           quotes. Ask them to give something in writing, even if they are not interested
           in quoting the specific job. Also, after a purchase order is issued, ask the
           supplier to send a confirmation, which is a signed or stamped affirmation that
           the purchase order was received, confirming that the quantity, due date, and
           price are acceptable, and the terms and conditions of the purchase order are
           agreed to. This does not guarantee there will not be any problems, but it goes
           a long way to catching issues (such as missing faxes) early, instead of after
           the due date.

           In addition to following up, keep in communication with the people who
           make the MRP forecast (either planning, master scheduling, or marketing).
           The sooner you know about changes, the sooner you can make them happen.
           Secondly, keep in touch with the engineers. Ask them about projects in the
           works and how those will affect existing parts on order. Thirdly, stay in
           communication with the quality assurance department. Ask them which of
           the components you manage they are having problems with, if any. Share this
           information with the respective suppliers. Finally, keep in touch with
           production. They use the stuff you buy. They can also let you know about
           any significant inventory adjustments so you can change your orders
           accordingly.



    Reducing costs
    Some companies focus on cost reduction more than others. For a
    company whose customers are price sensitive (i.e. customers for
    economy cars, personal computers, grocery items, etc.), the need to
    reduce costs to increase sales is paramount. On the other hand, some
    companies, particularly high tech companies, focus on innovation. This
    means that new products are constantly displacing old products, and for
    this reason, the effort required to reduce costs on products that have a
    short life span doesn’t make as much sense.



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          23
                                        Vault Career Guide to Supply Chain Management
                                        Making it Run Smoothly




     Change
     Finally, change is good. Many people fear change and enjoin the “if it ain’t
     broke, don’t fix it” mentality. In today’s world, change is inevitable and
     companies that do not adapt get left behind. Keep this in mind in your supply
     chain. Once you have your supply chain running smoothly, do not feel you
     can sit back, relax, and ride your success. Stay tuned to your customer’s
     needs, the direction in which your company is going, and the trends in supply
     chain management is undergoing.




24                                                                ? 2005 Vault Inc.
Trends in Supply Chain
Management
 CHAPTER 3

           Offshore outsourcing

           As you are probably aware, many manufacturing jobs are being relocated to
           places outside of the United States. The labor rates in countries like China
           are much lower than those in the United States. Years ago, quality was
           inferior in these low-cost countries, but now that is no longer the case. As a
           supply chain manager, it is important to always keep offshore (any country
           outside of the United States, even Mexico, is considered offshore in supply
           chain circles) sources for parts and materials an option. Although cost
           savings is the major advantage of offshore suppliers, there are some risks
           involved. There are uncontrollable delays due to customs, communication
           barriers with non-native English speaking suppliers, time differences that
           hinder quick responses to inquiries, extended lead times for transit, additional
           transportation costs, difficulties in enforcing contracts, and foreign policy
           concerns (for example, if you start buying parts from Poland, and then
           relations between the U.S. and Poland go sour and the two countries stop
           trading, your supply chain will be affected due to no wrongdoing on behalf of
           your supplier). But the savings gained by the lower labor rates overshadow
           the risks in most cases.


           Vendor-managed inventory

           Another trend in supply chain management is vendor-managed inventory.
           You may have been in the grocery store and noticed that the person stocking
           the bread shelf was not an employee of the store. This is a good example of
           vendor-managed inventory. Not only can you have the supplier deliver the
           parts to the point of use, you can put the onus on them to keep the shelf full.
           This may mean giving them read-only access to your ERP, or some other
           method so they can keep track of your inventory levels for the parts they
           supply and take the steps necessary to keep the shelves stocked. Of course,
           they will not know if there is an unexpected change in the works (like a
           marketing promotion that will triple the requirements for their parts). For this
           reason, you still have to stay involved and keep in constant communication
           with the supplier.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.               25
                                         Vault Career Guide to Supply Chain Management
                                         Trends in Supply Chain Management




     Supplier consolidation
     Supplier consolidation is becoming more popular as organizations become
     more productive or “right-sized.” In other words, as people in your
     department get laid off, you will have to do more work. Having fewer
     suppliers to manage makes this easier. Also, the more work you give to a
     supplier, the larger the percentage of their work you provide. Suppliers are
     most responsive to their main customers. Therefore, you have more leverage
     with them when you need to expedite parts. Another benefit of supplier
     consolidation is that you get more competitive pricing because you are a main
     customer and the supplier does not want to lose you.


     Sarbanes-Oxley Compliance

     The Sarbanes-Oxley Act (SOX) has affected supply chain management by
     creating more “checks and balances” requirements. The intent of this act is
     to force publicly traded companies to implement sufficient internal controls
     so that companies are no longer able to report high revenues and profits when
     that is not actually the case. For a supply chain manager, this means that it is
     even more important to document instructions to suppliers, get the proper
     signatures every time a purchase order is changed, and make efforts to control
     inventory write-offs. As with most federal regulations, SOX is written in a
     general enough manner that every company has to interpret and decide how
     to make their operation compliant to it. Speak to the appropriate employees
     in Accounting to understand your employer’s requirements for SOX as it
     pertains to supply chain management.


     ISO

     The International Organization for Standards (ISO) came up with
     requirements similar to SOX years before SOX was implemented. ISO
     applies mainly to manufacturing and service organizations and is more
     related to operations, so SOX can be considered ISO for the rest of the
     company. ISO-certified suppliers are not necessarily better than non-ISO-
     certified suppliers, but it is more likely that a certified supplier will have
     documented traceability, procedures, and processes. Recently, there’s been
     more of an emphasis within the industry of requiring suppliers to be certified
     (or only working with ISO-certified suppliers). This is based on the
     philosophy that the higher prices charged by ISO-suppliers (because they
     have to have staff to create and control all of their documentation) are worth
     the improved quality.


26                                                                   ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Trends in Supply Chain Management




           Barcoding
           Barcoding has helped to increase the productivity of warehouse workers.
           When a supplier sends a shipment and it arrives on your receiving dock, the
           receiving department has to find the packing list, read it, and enter all of the
           necessary information into ERP so the parts can get put into inventory and the
           supplier can get paid. With barcoding, all of the information the receiving
           department needs can be put in a series of barcodes on the packing list or on
           the box itself. The purchase order number, part number, quantity, etc. can all
           be entered into ERP by scanning the bar code instead of manually entering the
           information. This saves time and reduces human error. Barcoding is also
           used to update ERP when parts are moved from the warehouse to the
           production floor and when they are consumed into a subassembly.


           RFID

           Radio Frequency Identification (RFID) is different from barcoding because it
           does not require a line-of-sight scan. (Imagine if there were a doorway
           between the warehouse and the manufacturing area. If a cart full of parts with
           RFID tags on them were to pass through the doorway and that doorway had
           an RFID reader on it, it could process all the parts that go through that
           doorway and update ERP accordingly. The warehouse worker would not
           have to transact each type of part on the cart (either manually or by barcode)
           and the orientation of the parts on the cart would not matter.)




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          27
            Wondering what it's like to
            work at a specific employer?
 M | A.T. Kearney | ABN Amro | AOL Time Warner | AT&T | AXA | Abbott Laboratorie
 Accenture | Adobe Systems | Advanced Micro Devices | Agilent Technologies | Alco
  c. | Allen & Overy | Allstate | Altria Group | American Airlines | American Electr
 ower | American Express | American International Group | American Manageme
         Read what EMPLOYEES have to say about:
 ystems | Apple Computer | Applied Materials | Apria Healthcare Group | AstraZenec
 utomatic Data Processing | BDO Seidman | BP | Bain & Company | Bank One | Bank
             •   Workplace culture
 merica | Bank of New York | Baxter | Bayer | BMW | Bear Stearns | BearingPoin
 ellSouth | Berkshire Hathaway | Bertelsmann | Best Buy | Bloomberg | Boeing | Bo
             •   Compensation
 llen | Borders | Boston Consulting Group | Bristol-Myers Squibb | Broadvie
  ternational| Brown Brothers Harriman | Buck Consultants| CDI Corp.| CIBC Wor
             •   Hours
Markets | CIGNA | CSX Corp| CVS Corporation | Campbell Soup Company| Cap Gem
 rnst & Young| Capital One | Cargill| | Charles Schwab | ChevronTexaco Corp. | Chiqui
             •   Diversity
 rands International | Chubb Group | Cisco Systems | Citigroup | Clear Channel | Cliffo
 hance LLP | Clorox Company | Coca-Cola Company | Colgate-Palmolive | Comcas
             •   Hiring process
 omerica | Commerce BanCorp | Computer Associates | Computer Science
 orporation | ConAgra | Conde Nast | Conseco | Continental Airlines | Corning
 orporate Executive Board | Covington & Burling | Cox Communications | Credit Suis
  rst Boston | D.E. Shaw | Davis Polk & Wardwell | Dean & Company | Dell Compute
 eloitte & Touche | Deloitte Consulting | Delphi Corporation | Deutsche Bank | Dewe
 allantine | DiamondCluster International | Digitas | Dimension Data | Dow Chemica
 ow Jones | Dresdner Kleinwort Wasserstein | Duracell | Dynegy Inc. | EarthLink
 astman Kodak | Eddie Bauer | Edgar, Dunn & Company | El Paso Corporation
  ectronic Data Systems | Eli Lilly | Entergy Corporation | Enterprise Rent-A-Car | Ern
   Young | Exxon Mobil | FCB Worldwide | Fannie Mae | FedEx Corporation | Feder
 eserve Bank of New York | Fidelity Investments | First Data Corporation | FleetBosto
  nancial | Ford Foundation | Ford Motor Company | GE Capital | Gabelli Ass
Management | Gallup Organization | Gannett Company | Gap Inc | Gartner | Gateway
  enentech | General Electric Company | General Mills | General Motors | Genzyme
  eorgia-Pacific | GlaxoSmithKline | Goldman Sachs | Goodyear Tire & Rubber | Gra
 hornton LLP | Guardian Life Insurance | HCA | HSBC | Hale and Dorr | Halliburton
 allmark | Hart InterCivic | Hartford Financial Services Group | Haverstick Consulting
 earst Corporation | Hertz Corporation | Hewitt Associates | Hewlett-Packard | Hom
 epot | Honeywell | Houlihan Lokey Howard & Zukin | Household International | IBM
KON Office Solutions | ITT Industries | Ingram Industries | Integral | Intel | Internation


            Read employer surveys on
 aper Company | Interpublic Group of Companies | Intuit | Irwin Financial | J. Walt
 hompson | J.C. Penney | J.P. Morgan Chase | Janney Montgomery Scott | Janu
 apital | John Hancock Financial | Johnson & Johnson | Johnson Controls | KLA-Tenc

          THOUSANDS of top employers.
 orporation | Kaiser Foundation Health Plan | Keane | Kellogg Company | Ketchum
 imberly-Clark Corporation | King & Spalding | Kinko's | Kraft Foods | Kroger | Ku
 almon Associates | L.E.K. Consulting | Latham & Watkins | Lazard | Lehman Brother
 ockheed Martin | Logica | Lowe's Companies | Lucent Technologies | MBI | MBNA
Manpower | Marakon Associates | Marathon Oil | Marriott | Mars & Company | McCan
 rickson | McDermott, Will & Emery | McGraw-Hill | McKesson | McKinsey & Compan
 Merck & Co. | Merrill Lynch | Metropolitan Life | Micron Technology | Microsoft | Mill
 rewing | Monitor Group | Monsanto | Morgan Stanley | Motorola | NBC | Nestle | New
 ubbermaid | Nortel Networks | Northrop Grumman | Northwestern Mutual Financ
 etwork | Novell | O'Melveny & Myers | Ogilvy & Mather | Oracle | Orrick, Herrington
 utcliffe | PA Consulting | PNC Financial Services | PPG Industries | PRTM | PacifiCa
                                              Go to www.vault.com
 ealth Systems | PeopleSoft | PepsiCo | Pfizer | Pharmacia | Pillsbury Winthrop | Pitne
 owes | Preston Gates & Ellis | PricewaterhouseCoopers | Principal Financial Group
        GETTING HIRED

          Chapter 4: Supply Chain Hiring
          Chapter 5: Resumes and Interviews




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.
30   © 2005 Vault Inc.
Supply Chain Hiring
 CHAPTER 4


Skills and Education

           Education requirements

           Most job openings for a supply chain manager require a bachelor’s degree,
           but as with many types of jobs, significant experience in the job can substitute
           for a degree (usually this is about ten years of experience). Although all
           majors will typically be considered for a supply chain manager position,
           business and engineering majors are definitely preferred. There are few, if
           any, schools that offer bachelor’s degrees in supply chain management.
           Business majors are desired because they have learned how to do financial
           analysis and how to provide numerical substantiation for their decisions (i.e.
           whether it makes sense to invest in a $10,000 stamping die). Engineering
           majors are recruited because they are able to more easily understand the
           technical aspects of the parts and materials they buy as well as the
           complexities of the processes the supplier uses to make those parts and
           materials. Written and verbal communication skills are very important also.
           The ability to persuade suppliers to act with urgency is extremely useful as
           well.


           Negotiation skills
           Supply chain employers also prize strong negotiation skills. A supply chain
           manager has to be able to effectively negotiate with suppliers over price and
           lead time, and not just during the quotation process. When an assembly line
           has been shut down and the supplier says they will not be able to supply for
           two weeks, a supply chain manager has to be able to persuade the supplier to
           improve that date.


           Foreign languages

           Candidates with foreign language skills are also sought by employers. As the
           supply chain becomes more and more global, being able to communicate with
           suppliers in other countries in their language becomes even more and more
           useful.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.               31
                                         Vault Career Guide to Supply Chain Management
                                         Supply Chain Hiring




     Technical savvy
     Business-related computer skills such as advanced Excel and Access
     manipulations will impress employers. If you haven’t had a lot of exposure
     to these applications in school, check out local adult education programs that
     offer short courses on business computer applications.

     Technical knowledge is also very valuable to employers. Manufacturing is a
     technical process, and if a supply chain manager is not able to understand the
     technical aspects of those processes, he will only have limited success. It is
     also important for a supply chain manager to understand the technical
     complexities of the parts and materials they purchase, so they can engage in
     constructive dialogue with the suppliers when there are issues that need to be
     resolved.


     Integrity

     A supply chain manager has a lot of opportunity for unethical behavior.
     Kickbacks is the term used to describe material benefit (in the form of money,
     gifts, etc.), in this case from a supplier to a supply chain manager, in exchange
     for giving work to that supplier. Conflicts of interest also abound, i.e. sending
     work to a friend or family member even though the price they charge is
     unreasonable. Employers want to be sure that the person they hire will avoid
     these types of activities. A general rule of thumb is that if you or your
     employer would be embarrassed if something you did showed up on the front
     page of the newspaper, you’d best avoid those situations.


 Getting In
     Don’t choose your first career out of college cavalierly. The difference
     between having a job one loves and having a job that pays the bills is
     immeasurable. One or two years very quickly turns into five to seven years,
     and then the natural progression is to get pigeon-holed into a vocation that is
     very difficult to transition out of. Similarly, you shouldn’t approach a job
     search with a slot machine philosophy – the more resumes sent out, the higher
     the likelihood of finding a job. The purpose of the resume is to get an
     interview. This may seem trivial, but it has a profound impact on how the
     resume should be written. The goal of the resume is not to get the reader to
     say, “I want to hire this person,” it should be to get the reader to say, “I want
     to talk to this person.” Most recent graduates will not have relevant work



32                                                                    © 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supply Chain Hiring




           experience and their resumes will all look basically the same. This is why
           companies focus on GPA or the reputation of the school.

           Most companies can see right through mass resume submissions, and they
           will question the applicant’s interest level in the specific opening. A
           customized resume for every job applied for is much more valuable.
           Customized does not mean just stating the name of the position and the
           source where the opening was found in the cover letter. Customized means
           writing a resume and cover letter after pondering over the description of the
           job, doing research on the company, and making some reasonable inferences
           (based on the industry the company is in, the state of maturity of the company,
           etc.). Doing all of this preparation before sending out a resume is part of the
           reason why looking for work is a full-time job. Spending 10 to 15 hours
           applying to 10 companies with customized resumes has a higher likelihood of
           success than spending 10 to 15 hours applying to 100 companies.


           Networking

           The most common advice given by career counselors (which also happens to
           be the least followed advice by job seekers) is that networking is the best way
           to get a job. It is a lot easier to stay at home, surf online job boards, and send
           out resumes “anonymously” than to ask friends for possible contacts,
           approach these strangers, and risk having a door slammed in your face.
           However, the likelihood of uncovering this “hidden job market” is much
           higher through networking than searching online. People get job offers every
           day for positions for which they submitted resumes online. For recent
           graduates with little or no experience, there are only a limited number of
           openings on job boards and the supply of interested candidates far exceeds
           the number of openings available.

           One worthwhile approach is to target job openings not posted on online job
           boards. Not every company posts every opening on online job boards. A
           good place to find “untapped” jobs is on company web sites. Also, avoid
           sending your resume to the e-mail address in the job posting. Usually the e-
           mail address is hr@(insert company name here).com. The chances of your
           resume getting to the hiring manager are slim, unless you are able to find out
           who it is and send it directly to them. This is not easy, but it is effective. An
           almost surefire method to get your resume looked at is to send it in a next day
           air envelope (i.e. UPS Red or FedEx P1). Networking websites like
           www.linkedin.com are good places to build up industry contacts. If you do
           not hear anything two weeks after sending your resume to a company, send it



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          33
                                         Vault Career Guide to Supply Chain Management
                                         Supply Chain Hiring




     again. Add in your cover letter that you are resubmitting your resume and
     reiterate how perfect you are for the position.

     Once you have passed the resume hurdle and scheduled an interview (there is
     usually a phone screen as an intermediate step), the onus is on you to
     convince the employer that you are better suited for the position than the
     other candidates. Do your homework before the interview. Study about the
     position, the company, and the industry. For public companies, Yahoo
     Finance is a great place to get the scoop on a company. After the interview,
     send a thank you note. A handwritten note on quality paper is the epitome,
     but an e-mail will suffice. Be sure to include something in the note that will
     remind the reader of your interview (without paraphrasing the whole
     interview) and emphasize how excited you are about the position and how
     interesting it was to learn about (insert something you learned in the interview
     here). When salary questions come up, be prepared. Do your homework
     ahead of time. Just looking at one web site (i.e. www.salary.com) is not
     sufficient. You need to be able to justify what a reasonable salary is for the
     position. Depending on the state of the economy, the employer or the
     employee will have greater leverage when it comes to salary negotiations.


     Career paths in supply chain

     Unlike at other employers where there are very structured career paths (for
     example, at law firms, where attorneys move from associate to partner to
     senior partner), supply chain management career paths can take a variety of
     directions. Recent college graduates can be hired directly into a supply chain
     manager role or may start as a junior buyer and move into a supply chain
     position. Supply chain managers can move laterally into other positions both
     within and outside of procurement or they can move up into management
     positions.




34                                                                   © 2005 Vault Inc.
Resumes and
Interviews
 CHAPTER 5


Sample Supply Chain Resumes


                                         Joseph Smith

      200 Shell Parkway                                                  Phone: 650-322-7921
      Redwood Shores, CA 94065                                           E-mail: joseph.smith@gmail.com
      OBJECTIVE
      Seeking a position in supply chain management where I can use my varied
      technological, finance and problem-solving skills to help a company improve its
      operations
      QUALITIES
      Hard-working, entrepreneurial, resourceful, flexible, open-minded, creative
      EDUCATION
      San Francisco State University – San Francisco, CA
      BS Business Administration – June, 2005
      Focus Area: Management
      Courses in Business, Economics, Global Strategic Management, Statistics,
      Financial Accounting, Calculus, Micro/Macroeconomic Analysis
      PROFESSIONAL EXPERIENCE
      Bank of America – San Francisco, CA, 2004, Intern
      • Worked across all departments to provide seamless transition to new computer
        system; recognized for computer savvy and adaptability
      • Provided general business support and financial analysis
      Fairmont Hotel – San Francisco, CA, 2002-2005, Desk Clerk
      • Maintained and ensured smooth running of front desk at Five-Star hotel
      Own House Painting Business, 2001-2005
      • Painted over 50 houses, generated new business through strong word-of-mouth;
        developed and honed strong negotiation skills in quoting rates
      OTHER DATA
      • Working knowledge of Spanish language and culture
      • Proficiency in car repair; strong mechanical abilities




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                               35
                                         Vault Career Guide to Supply Chain Management
                                         Resumes and Interviews




     Joseph’s resume
     Above is an example of a supply chain jobseeker resume: Joseph is a soon-
     to-graduate Business major who is seeking a position in supply chain
     management. Joseph completed an internship last summer with a bank, and
     during college, he worked at the front desk of a hotel and painted houses.
     Joseph highlights his education near the top of the resume because this is
     what has prepared him for a new career. That is the easy part. But how
     should he take banking, hospitality, and painting and creatively (but not
     dishonestly) package those into a resume that would make the recipient want
     to call Joseph and invite him for an interview? Remember that the goal of a
     resume is an interview. The goal of the interview is a second interview. The
     goal of the second interview is a job offer.

     Joseph studied Spanish for two years and loves Latin culture. In his research
     about Company X, Joseph learned that Company X is setting up an operation
     in Mexico. Joseph deduces that a factory in Mexico will most likely require
     some suppliers in Mexico as well. Based on this, Joseph decides to add a few
     lines about his knowledge of basic Spanish and his understanding of the
     culture.

     During his bank internship, the bank implemented a new computer system
     across the entire company. Joseph picked up how to use the new system
     quickly and became the “go-to” person when others had problems with it. In
     addition to briefly describing his duties at the bank in his resume, Joseph
     recounted some of his achievements at the bank during his short internship
     and emphasized how computer savvy and adaptable he was.

     Joseph knows that negotiation skills are a core competency that hiring
     managers look for in recruiting supply chain management professionals.
     Joseph remembered during his house painting days how he would give an
     estimate and then the homeowner would try to get a lower price. Joseph
     always managed to get a higher price for the job than the minimum he would
     be willing to take. He was very proud of his negotiation skills and added a
     few lines to his resume quantifying how effective he was at negotiating those
     painting jobs.

     Joseph works on cars in his free time. This is a relevant addition to his
     resume because he can use this to demonstrate he has mechanical abilities.
     Since his degree is not in a technical field, it is good to show that he is not
     afraid of technology. Joseph’s resume reflects the enjoyment he gets from
     delving into a problem, finding the cause, and fixing it.




36                                                                  © 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Resumes and Interviews




           Below is an example of another promising supply chain candidate’s resume.



                                   John Jacob Gage
      4000 Piedmont Ave.                                               Phone: 510-876-5309
      Oakland, CA 94611                                                E-mail: johnjacobgage@gmail.com
                                                                    Get a "grownup" sounding e-mail address


      OBJECTIVE                          Tell them what's in it for them
      Seeking a challenging position in supply chain management where I can use my
      technical and non-technical skills to help a company improve their operations
      QUALITIES
      Detail-oriented, forward-thinking, open-minded, logical, meticulous, efficient,
      mature, cost-conscious, devoted, culturally sensitive, results-driven, well-balanced,
      and well-liked
      PROFESSIONAL EXPERIENCE                                  Put your education first, if your experience is irrelevant
      Chiron – Emeryville, CA, 2004
      Associate Process Engineer (Internship)
      • Worked with purchasing dept. to create specifications for capital equipment
        purchases       Show accomplishments, not just duties
      • Devised a method to streamline a process saving the company $150,000 annually
      • Conducted a make vs. buy analysis for a new product
      • Collaborated with technicians and made their data entry screens more user-
        friendly
       Each bullet should start with an action verb

      EDUCATION
      University of California Berkeley – Berkeley, CA
      BS Mechanical Engineering – June, 2005
      Focus Area: Manufacturing Processes
      Courses in Statics, Dynamics, Fluids, Thermodynamics, Chemistry, Physics,
      Differential Equations, Drafting, Computer Programming, and High-Tech Product
      Design and Rapid Manufacturing
      OTHER DATA
      President of Amnesty International – UC Berkeley Chapter; Knowledge of Six
      Sigma (formal training in DOE and SPC); Volunteer with Redi-Wheels,
      coordinating transportation for the disabled

       Try to keep it to one page. Don't leave large blank areas on the resume. Use up the
       valuable real estate without making it too busy.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                                             37
                                         Vault Career Guide to Supply Chain Management
                                         Resumes and Interviews




 The Supply Chain Interview
     Situational questions are quite popular in supply chain interviews. Trick
     questions are rare. Sometimes interviewers ask inappropriate questions (i.e.
     what country are you from?) but they are usually making small talk or are
     inexperienced interviewers rather than people with discriminatory intent. It
     is up to you to decide whether to answer these questions or not.

     It is important to look professional and serious about the job. The proper
     dress for a new college graduate job interviews is more dependent on the
     region of the country than the job title. In Massachusetts, a suit is probably
     expected for a male whereas in California, a suit might be considered
     overkill. A rule of thumb is to dress conservatively (overdressed is better than
     underdressed) and not to use fragrance (because your interviewer might be
     allergic).

     If the interviewer is doing all of the talking, politely interrupt and share some
     of your accomplishments. Make sure you add some meat to your responses
     (without digressing off topic).

     The hiring manager decides whether interviews are one-on-one or in a group
     format. Panel interviews are more efficient because in one hour, four people
     can ask all of their questions instead of making you sit through four different
     interviews in which you answer the same questions over and over. Although
     panel interviews are more efficient for the interviewee (you finish in half the
     time), they are less efficient for the interviewers (they have to sit twice as
     long). In panel interviews, keep eye contact with all interviewers, not just the
     one asking the question. Remember the names of everyone you meet. Ask
     for their business card.

     If you are called in for an interview, you can assume that the hiring manager
     already feels you have the potential to be successful in the job. The important
     part now is to convince the interviewer that you are the best candidate for the
     position, compared to the other candidates. Since you have little or no
     information about the other candidates, you have to go with what you do
     know – yourself. Sell your skills, knowledge, and personality. Show genuine
     enthusiasm about the position and the company. Many qualified candidates
     get passed over for jobs because they do not convey their interest in the
     position well.




38                                                                    © 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Resumes and Interviews




Sample Interview Questions

           Why should we hire you?
           Do not answer this question by stating how you meet the requirements of the
           position. The hiring manager already knows that. Accentuate your soft skills
           (communication, negotiation, presentation, etc.). You are trying to stand out
           among the other candidates. They probably also meet the requirements for
           the position, so dwelling on this does not gain any yardage for you.


           What do you do in your free time?

           It is common for successful teams to enjoy activities together outside of work.
           Since you probably do not know what your co-workers do in their free time,
           honestly tell the interviewer what you do. Keep it general though (i.e. say
           you like to play sports instead of saying you play basketball). If the hiring
           manager wants more detail, s/he will ask.


           What do you know about our company?

           Spend time doing research about the company you are interviewing with
           before you show up. In addition to looking at the company web site to learn
           about the company’s products or services, also visit other web sites that might
           give industry information, product reviews, or financial information on the
           company. A good interviewer will give you an opportunity to ask questions
           before the end of the interview. It would be good to ask a question on the
           order of, “While I was looking at your web site, I saw (insert company name
           here) just introduced a new model called the X. Do you expect this model to
           increase sales in new markets or take away sales from existing products in the
           current markets?” This shows more preparation than, say, “How many people
           work in this company?”


           What attracts you to this position?
           It makes an interviewer feel special if they think that this is the only job you
           applied for. Without being dishonest, play along with this concept. Your
           response should draw a connection between your ideals and the ideals of the
           company, your career aspirations and the opportunities available with this
           company (a growing company will have numerous opportunities for
           advancement for an ambitious person once he has demonstrated his abilities),

Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          39
                                       Vault Career Guide to Supply Chain Management
                                       Basics




     in addition to the obvious attraction (geographic area, ranking as a great
     company to work for, etc.)


     Give an example of a time when you had to deal
     with someone difficult.

     Even someone with no work experience has had to deal with someone
     difficult. Supply chain management requires strong persuasive and
     negotiation skills. Be sure to give an example that highlights these skills.
     Maybe you were able to get a professor to change your grade or maybe you
     were able to buy a car significantly below blue book value. Examples that
     include loved ones would most likely not be appropriate here because in
     business you rarely deal with loved ones.


     Give an example of a time when you were faced
     with an ethical dilemma.

     Be sure the example you give shows you made proper moral judgment and
     include enough details so there is no ambiguity about whether the decision
     you made was the right one.




40                                                                © 2005 Vault Inc.
        ON THE JOB

          Chapter 6: Job Responsibilities
          Chapter 7: Our Survey Says




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.
42   ? 2005 Vault Inc.
Job Responsibilities
 CHAPTER 6


Job Responsibilities

           Supply chain management occupations

           Below are brief summaries of the duties for supply chain management
           occupations. Not every organization will have all of these positions and the
           duties of the positions will not be limited to those described here.

           Buyer: Buyers do purchasing just like supply chain managers. The
           difference is that supply chain managers buy parts and materials for the
           company’s products, whereas buyers purchase everything else. Some
           examples of items that buyers procure are desktop computers, office supplies,
           and hand tools.

           Planner: A planner takes the forecast from marketing/sales and breaks that
           into a build schedule of what products should be built and when they should
           be built to meet inventory goals. Planners also work with supply chain
           managers to control inventory of parts and materials.

           Purchasing Administrative Assistant: A purchasing administrative assistant
           takes care of the filing of paperwork for the purchasing department. S/he will
           also coordinate travel arrangements.

           Logistics Manager: A logistics manager is responsible for the traffic of
           goods coming to and going from the factory. This encompasses air, land, and
           ocean traffic, both domestic and international.

           Supply Chain Engineer: A supply chain engineer works on technical issues
           with the supplier. This involves working with suppliers to improve their
           quality, helping them to analyze failures, and developing new products.

           Commodity Manager: A commodity manager is similar to a supply chain
           manager. Some companies separate the ownership of parts and materials for
           the supply chain managers by product line. For example, if a company makes
           binoculars, telescopes, cameras, and microscopes, and they have four supply
           chain managers, they might assign one supply chain manager for each
           product family. Another approach is to distribute the work by commodity.
           One supply chain manager would be responsible for the optics on all of the
           product families and one supply chain manager would be responsible for the



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.             43
                                         Vault Career Guide to Supply Chain Management
                                         Job Responsibilities




     plastic parts on all of the product families. When this is the case, the supply
     chain managers can be called commodity managers.

     Receiving Inspector: A receiving inspector is responsible for checking the
     quality of the parts and materials that come from the vendor before they get
     moved to the production floor for consumption and before the supplier gets
     paid. There are statistics charts that define the number of samples from a
     shipment that need to be checked to meet the desired confidence level that the
     entire lot received is acceptable, so a receiving inspector does not check
     100% of the incoming items.

     Procurement Manager: A procurement manager is in charge of the buyers
     and supply chain managers. The procurement manager sets the goals for the
     department and provides a level of escalation when a supply chain manager
     is having trouble managing a supplier.

     Receiving Coordinator: The receiving coordinator processes the parts and
     materials delivered. This includes doing a receiving transaction in ERP,
     moving the parts to their location, and making sure the paperwork the
     supplier sends matches what was received.

     Receiving Supervisor: The receiving supervisor is responsible for the
     receiving department. Besides supervising receiving department workers,
     the receiving supervisor is in charge of creating and improving department
     processes.

     Accounts Payable Coordinator: The accounts payable coordinator works in
     the accounting department and processes the invoices from the suppliers.
     After verifying the invoices match what was actually received, the accounts
     payable coordinator sends a payment to the supplier.


 Organization Chart
     A company organization chart (or “org chart”) shows graphically where the
     supply chain managers are, who they report to, and who their peers are. Some
     companies have supply chain managers reporting to a procurement manager,
     a purchasing manager, or a sourcing manager. Here’s an example of a typical
     org chart of a manufacturing company, showing where the supply chain
     manager fits in the scheme of things.




44                                                                  ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Job Responsibilities




                    Figure 2 – Condensed Organization Chart


                                                        President


                   VP of Sales                          VP or HR                        CFO


                   VP of R&D                       VP of Operations             VP of Marketing


                 Mfg. Director                    Materials Director            Quality Director


                  MRO Buyers                     Supply Chain Mgrs.                  Asst. Buyers




The MBA in Supply Chain
Management
           MBA graduates seeking opportunities in supply chain management usually
           pursue either a Project Manager or Director of Materials position. Both of
           these vocations require previous experience in supply chain management, so
           the likelihood of a new graduate landing one of these positions is low.

           A Project Manager is responsible for large transitions related to supply chain
           management. One example of these transitions is a plant shutdown. A
           company may decide that it is more cost-effective to stop manufacturing their
           products themselves, and instead have a vendor do it for them. The
           management of a plant shutdown project requires cross-functional teamwork
           between accounting (working out the costs), engineering (helping the vendors
           get up and running), human resources (laying off the production workers),
           and manufacturing (managing the inventory to make a seamless transition).
           Another example of a transition is a large scale vendor change. A company
           may have a contract manufacturer in Mexico making its products. In an effort
           to reduce costs, the company may want to partner with a contract
           manufacturer in Vietnam instead. Making this transition can be even harder
           than a plant shutdown, because the existing supplier may become bitter and


Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          45
                                         Vault Career Guide to Supply Chain Management
                                         Basics




     refuse to cooperate. Most often, these transitions are done without notifying
     the existing supplier until the new supplier is running at the required capacity.

     A Director of Materials is responsible for the strategy of the purchasing
     group. He does not get involved in the details of the day-to-day operations of
     the supply chain management department, but will assume the reins when
     issues get out of control or need upper-management attention. A Director of
     Materials also sets the practices of his departments and approves large dollar
     item purchases. Similarly, the Director of Materials participates in vendor
     relationship management for the suppliers with whom the company spends
     the most money. In addition to providing strategic direction to the purchasing
     group, the Director of Materials spends significant time meeting with the
     other executives in the company, sharing expertise, championing causes, and
     staying abreast of issues facing the company. A Director of Materials also
     spends a lot of time networking with people outside of the company (i.e.
     industry experts, competitors, and prospective vendors).




46                                                                    ? 2005 Vault Inc.
Use the Internet’s
MOST TARGETED
job search tools.




Vault Job Board
Target your search by industry, function, and experience
level, and find the job openings that you want.


VaultMatch Resume Database
Vault takes match-making to the next level: post your resume
and customize your search by industry, function, experience
and more. We’ll match job listings with your interests and
criteria and e-mail them directly to your inbox.
48   ? 2005 Vault Inc.
Our Survey Says
 CHAPTER 7


           Salary and benefits
           It is typical for manufacturing companies to offer medical and dental
           coverage. Some offer vision insurance also. Although pensions are
           becoming less common, 401k plans are offered by most employers, with
           some form of company matching as well. Bonuses and profit sharing are
           quite popular, but stock options are rather rare. Paid vacation is usually two
           or three weeks per year, and there are also holidays and personal absence
           (sick time). The base salary range for a recent college graduate in supply
           chain management is between $30,000 and $50,000 per year.


           Work environment

           The work environment for a supply chain manager is basically a cubicle.
           There is significant time on the phone, communicating with suppliers (over
           an hour per day). A lot of communication is through e-mail, so there can be
           a paper trail. There are also meetings regarding new products in the pipeline
           and part shortages that are affecting the production lines. As with most
           cubicle jobs, there is heavy computer use (over four hours per day)-mostly e-
           mail, ERP work (placing purchase orders, checking receipts, reviewing MRP,
           etc.), and other project work such as Excel spreadsheets.


           Moving laterally
           It is standard practice to wait at least one year before you start making efforts
           to change positions. This gives others in your organization a comfort level
           with your skills and abilities. But you might consider other opportunities
           unrelated to supply chain management. For example, you might feel that you
           have learned so much about customer wants (from being a customer to your
           suppliers) that you are interested in joining the your company’s customer
           service team. Let your manager know what your interests are and ask him to
           help you round out your experience. You can talk to managers in other areas
           and let them know what types of opportunities you are interested in. They
           know what positions are opening up before the positions get posted in your
           company’s job board. This includes talking to your boss’s boss.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                49
                                         Vault Career Guide to Supply Chain Management
                                         Our Survey Says




     Training
     There are two types of training for a supply chain manager – general and
     specific. General training includes guidelines about what your signing
     authority is (how big of an order you can place without getting your
     manager’s approval), the philosophy of the company with respect to
     inventory, cost reduction, air freight, etc. Specific training deals with
     learning which parts or materials are your responsibility, how parts get to the
     floor, which reports need to be run in ERP, how to place a purchase order, etc.
     Many employers like to shorten this training time by hiring people who
     already have some experience with the same ERP system or experience
     managing the same commodity already. If you can show them that you pick
     up new things quickly, your employer may realize that hiring an experienced
     supply chain manager does not have significantly greater benefit than hiring
     a recent college graduate.


     Culture

     The culture of a company is driven more from the corporate level rather than
     the vocational level. In other words, there is not really a supply chain
     management culture. The culture of a company is usually driven by the
     industry or geographical region. Having said this, it is worth mentioning
     again that supply chain managers are often looked at suspiciously by other
     departments because supply chain managers have such major opportunities
     for unethical behavior. And although actions you take may not be in violation
     of company policies, if other perceive that you are engaging in unscrupulous
     conduct, they are going to treat you poorly. For example, if you move
     $500,000 worth of business from one supplier to another supplier and then
     take a trip to Jamaica, people might assume that the new supplier paid for
     your trip. Also, if your boss and coworkers drive Hondas and Toyotas and
     you buy a new BMW, people will be suspicious. This is not to say that you
     cannot go to Jamaica and cannot buy a BMW, but supply chain managers are
     often under the scrutiny of others in their organization. The more people get
     to know you, the more they will begin to accept and trust your character. You
     should avoid lavish dinners with suppliers (no matter who pays), very
     frequent visits to or by suppliers, and going out with suppliers (i.e. golfing).
     Some companies allow suppliers to take supply chain managers out to lunch.
     Check with your manager for clarification.




50                                                                   ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Our Survey Says




    A Day in the Life: Supply Chain Manager
    The best way to get a realistic understanding of supply chain
    management is to spend a day with a practitioner. The following is an
    account of an especially hectic day in the life of a supply chain manager.
    Gerard Steele is a 34 year old Supply Chain Manager at Prolific Products,
    a consumer products company that makes flat panel displays (mostly for
    automobile multimedia systems). One of Gerard’s co-workers is on
    disability for six months and her work has been distributed among the
    remaining co-workers. Gerard has been with Prolific Products for five
    years and has been practicing supply chain management for twelve
    years. Gerard got into purchasing right out of college as a junior buyer
    and moved up to his current position. Gerard specializes in purchasing
    metal and fabricated metal components.

    8:00 a.m.: Check mailbox, fax machine, voicemail, and e-mail. Zeus
    Manufacturing is asking for orders earlier because they expect to do a
    plant shutdown for two weeks. The MRP report did not print. Send an
    e-mail to the IT department asking what happened. Check if the laser
    diodes that were due from Germany came in yesterday. They did not.
    Call Germany before they go home for the day. The parts shipped on
    time but are stuck in customs. Run the Kanban report to see if any parts
    have multiple empty bins. There are two, a bracket made by a local
    company, WSB Sheet Metal, and a housing made by Shaker
    Manufacturing in Ohio. Investigate to make sure there was not an error
    in-house before calling the suppliers. Ralph at WSB claims to not have
    gotten the signal and Jeff at Shaker say he can have parts delivered on
    Monday. Tell both suppliers to deliver on Saturday.

    9:00 a.m.: In the Part Shortage Meeting, one supervisor, Leilani, says
    she is out of 1.250” X 0.030” stainless steel stock. The system shows
    there is two weeks worth on hand. Further discussion uncovers that the
    material was rejected and moved to MRB last night and has not yet been
    transacted. The supervisor needs a delivery date for more material to
    plan overtime.

    10:00 a.m.: Lucky Manufacturing, the offshore contract manufacturer,
    sent their delivery plan that shows all open purchase orders and the
    planned ship dates for each. But a comparison with what the system
    shows open reveals that purchase order 8675309 is not reflected. Send
    a fax with an explanation and a copy of the purchase order confirmation
    from the supplier.

    10:30 a.m.: Place purchase orders for non-kanban items that showed up
    on MRP. Service wants a gear that has not been purchased in two


Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          51
                                         Vault Career Guide to Supply Chain Management
                                         Our Survey Says




     years. Explain that the lead time is three weeks and suggest buying
     more than one.

     11:00 a.m.: Meet with Larry from Adaptive Manufacturing about
     another supplier, Stud Metalworks, that appears to be on its last legs
     and will probably go out of business soon. Formulate a plan to transition
     all of the Prolific work from Stud Metalworks to Adaptive Manufacturing.
     Explain the urgency of getting up and running quickly and the necessity
     to be discreet with Stud Metalworks until Adaptive Manufacturing is
     fully up and running all needed components.

     1:00 p.m.: Go to the production floor to check the shortage board.
     Receive a complaint that shafts are coming in dirty and have to be
     cleaned. Ask Supplier Quality Engineer to intervene and communicate
     back to the supplier, Just Shafts.

     1:30 p.m.: Attend a meeting about a new product being introduced
     (codename Galapagos). The project is on a fast track. Report that the
     lead time for most parts is three to four weeks but some components
     are eight weeks. Asked by the team to try to expedite the items that
     are longer than four weeks’ lead time.

     2.30 p.m.: Sales wants to obsolete a product (the MPX3109) that
     Marketing said would be sold for one more year. The inventory write-
     off would be about $800,000. Need to try to have vendors take some
     of the inventory back. Follow up with suppliers on deliveries and quotes.
     Ask Accounts Payable to look into an invoice the supplier, Mack Cold
     Rolling, says is one year old. Walk by the Receiving Department to see
     what has come in. Equitable Manufacturing wants a forecast for the
     next 12 months so they can lock in a rate for the raw material. Freight
     forwarder needs a copy of the commercial invoice to clear a shipment of
     LCDs that has come in a week early. Negotiate with Bella from Versatile
     Extrusions on the price of a new frame. She accepts the price.

     4:00 p.m.: Engineering wants to tighten the specifications on the die
     cast chassis. Javier from Zenith Manufacturing says the cost will be
     50% higher. Sigma Optics called to inform that they received a bad
     batch of raw material and will be one week late on their shipment.
     Called back Sigma Optics to inform that current stock is down to four
     days and they have to do better.

     4:30 p.m.: Check which blanket purchase orders are getting close to
     running out. Check MRP to determine how many more parts are needed
     for the quarter. Adjust orders accordingly and send updates to suppliers.




52                                                                ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Our Survey Says




    5:00 p.m.: Teleconference with Penang Production and Prototypes, a
    supplier in Malaysia. The tooling for the bodies is complete and is being
    validated in-house. First articles will be sent in one week. Supplier feels
    the assembly time was probably underestimated and the quotation will
    need to be revised. Supplier suggests black anodizing the bodies instead
    of black powder coating. Told supplier would check with Engineering.
    Marketing probably wants a glossy finish rather than the matte finish
    that anodizing gives.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          53
   Losing sleep over your job search?
   Endlessly revising your resume?
   Facing a work-related dilemma?


                                “We got the best revamp      “I have rewritten this resume
     Named the                   from Vault.com. Our         12 times and in one review
                                   expert pronounced         you got to the essence of
 “Top Choice” by                   the resume ‘perfect.’”    what I wanted to say!”
                                                             – S.G. Atlanta, GA
The Wall Street Journal            The Wall Street Journal
     for resume                                              “It was well worth the price! I
                                                             have been struggling with this for
     makeovers                                               weeks and in 48 hours you had
                                                             given me the answers! I now
                                                             know what I need to change.”
                                                             – T.H. Pasadena,CA
   Vault Resume Writing
   On average, a hiring manager weeds through 120            “I found the coaching so
   resumes for a single job opening. Let our experts write   helpful I made three
   your resume from scratch to make sure it stands out.      appointments!”
                                                             – S.B. New York, NY
   • Start with an e-mailed history and 1- to 2-hour phone
     discussion
   • Vault experts will create a first draft
   • After feedback and discussion, Vault experts will
     deliver a final draft, ready for submission


   Vault Resume Review
   • Submit your resume online
   • Receive an in-depth e-mailed critique with
     suggestions on revisions within TWO BUSINESS
     DAYS


   Vault Career Coach
   Whether you are facing a major career change or
   dealing with a workplace dilemma, our experts
   can help you make the most educated
   decision via telephone counseling sessions.

   • Sessions are 45-minutes over the
     telephone




   For more information go to
   www.vault.com/careercoach
        APPENDIX




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.
56   ? 2005 Vault Inc.
Supplier Audit
Questions

           Many of the questions below do not have a right or wrong answer. The
           answers provided by the prospective supplier should assist you in coming to
           a conclusion about the business fit between your company and theirs.
                • How long have they been in business? Just because a company is a
                  year or two old does not mean they are not capable of making customers
                  happy. At the same time, there is a lot to be said for a company that has
                  been in business for a few decades.
                • Is the company owner-operated? Companies run by the owner are
                  operated differently than those run by an outsider. One is not
                  necessarily better than the other. The owner has a lot more emotional
                  attachment to the company than a hired general manager. If the owner
                  is in his 60s, it is not inappropriate to ask about the future of the
                  company (i.e. retirement plans).
                • Ownership (sole proprietorship, subsidiary of larger company,
                  etc.)? Companies that are part of a large conglomerate have to heed
                  direction from the parent company. Few large corporations resist the
                  urge to standardize practices or “create synergies” by meddling with the
                  operations of an acquired company. This can result in corporate
                  mandates that make customers dissatisfied. Companies run by a sole
                  proprietor usually are very heavily dependent on that person. If the
                  owner does not have a capable backup person to run the show in his
                  absence, there will definitely be some ugly situations over the years.
                • Number of locations? Some companies keep business offices in the
                  U.S. and have their manufacturing done in other parts of the world. If
                  you are writing “Made in USA” on your products, you need to know
                  where the components are being made.
                • Number of employees at each site? If a company has 30 employees in
                  New Hampshire and 150 in Poland, you should find out if the work you
                  are having them quote will be eventually made in Poland even if they
                  told you they have manufacturing in New Hampshire.
                • Web site? Many small, old-fashioned companies (commonly referred
                  to as mom-and-pop shops) do not have web sites. This does not mean
                  they cannot make quality products. It may mean that they are not quick
                  to adopt new technologies though.



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.               57
                                    Vault Career Guide to Supply Chain Management
                                    Supplier Audit Questions




     • Names of key contacts and their positions? It is important to know
       who to contact when your primary contacts are unavailable or not able
       to meet your needs. Going over someone’s head is not a very flattering
       thing to do but sometimes it is necessary to do your job.

     • Key competencies? What is this company really good at? You may be
       looking for a supplier that does stamping work, but the company you are
       talking to has 20 years of experience doing sheet metal fabrication and
       only started doing stamping six months ago. They may only have one
       machine to do stamping and 30 machines to do sheet metal work.
       Although the supplier may be very serious about getting into the
       stamping business and planning to expand in that area, you have to ask
       if you want to be part of their learning curve.
     • Do they subcontract any work? Suppliers are trying to become more
       and more of a “one-stop shop” and offer turnkey manufacturing
       (meaning they make entire products, not just components). But most
       suppliers find it does not make sense for them to do all the work
       themselves, so they subcontract some of it. For example, a
       manufacturer may make a product out of aluminum, send it to one
       subcontractor (commonly referred to as job shops) for chemical
       washing, another subcontractor for powder coating, and another
       subcontractor for printing.
     • Which countries do they subcontract to? Many companies in
       southern California send work to Mexico to take advantage of the
       cheaper labor rate. Some companies find that it makes business sense
       to send work offshore for the same reason. There are cost savings
       associated with this, but risks as well (i.e. customs holdups,
       transportation delays, foreign relations, etc.)
     • Industries they serve? By knowing which industries a supplier serves,
       you can make a judgment about whether or not they would be a good fit
       to do business with your company. For example, if a supplier primarily
       caters to medical device and semiconductor companies and you are in
       the toy industry, this supplier might not be a good choice for you. Toys
       usually are high volume, low cost, and the quality requirements are
       usually minimal compared to medical devices.
     • What percentage of their work is with their top 3 customers? This
       will expose a high reliance level. If more than 30% of their business is
       with one customer or more than 70% with the top three customers, this
       company could have some stability issues if one of those customers
       changes suppliers or has a significant change in demand for their
       product (up or down). When more orders come in than the supplier has
       capacity for, the biggest customers get the higher priority.



58                                                             ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supplier Audit Questions




                • What percentage of their work is in their top industry? The top
                  industry this company serves should be a rather stable one. For
                  example, if 50% of the supplier’s work is in the defense industry, think
                  about what will happen if the defense budgets get drastically reduced. If
                  the top industry is less than 20% of their work, this is not a large
                  concern.
                • Are they ISO certified? The International Organization for Standards
                  (ISO) has guidelines for running high-quality manufacturing operations
                  (there are also ISO standards for service companies). When a company
                  meets these standards, they pay an outside party to come and audit their
                  operations. Once they pass this audit, they become ISO certified. Most
                  suppliers not ISO certified will say they are ISO compliant. Learn about
                  ISO standards if you do not know about them by reading an ISO
                  handbook. Many suppliers say it is too costly to get certified, but these
                  costs pay for themselves, since ISO certification opens to the door to
                  many new customers who only use ISO-certified suppliers. If low cost
                  is more important than high quality, using ISO certified suppliers is
                  probably not a good idea.
                • What type of ERP do they use? It is good to know what system a
                  supplier is using because there may be opportunities for electronic data
                  interchange (purchase orders, confirmations, tracking numbers,
                  invoices, and payments get automatically entered in the respective ERP
                  systems rather than having to be typed in by a person) between your
                  ERP and theirs. The wrong answer to this question is, “We don’t need
                  a computer system.”
                • How do customer orders flow through their system? Look for holes
                  in their process. The order fulfillment process should be robust enough
                  that errors are minimal. For example, if a purchase order gets confirmed
                  after the production manager analyzes the capacity but there is no check
                  to see if raw material to run the order will be available when needed, that
                  is a hole. If there is no documentation of customer-specified packaging
                  requirements in the shipping department, the chances that your order
                  will show up packaged incorrectly is high.
                • How are special instructions communicated to the production floor?
                  If the supply chain manager orders part number 605-149 (a white part)
                  but marketing would like some samples of the same part in yellow, how
                  would the supplier require this information be communicated to them?
                  Afterwards, how would this information get sent to the production floor
                  to make sure they paint some of the parts yellow? Creating a new part
                  number with new color specifications may be a waste of effort if
                  marketing ultimately determines the yellow is not something they would



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          59
                                      Vault Career Guide to Supply Chain Management
                                      Supplier Audit Questions




      like to go forward with. The point here is to find out if they have a
      surefire method to handle special requests for you.

     • How do they prevent defects from occurring? Although many
       suppliers like to boast they do not have a Quality Assurance (QA) or
       Quality Control (QC) department because they have “driven quality into
       their processes,” this is often just a cost savings measure. Is the person
       making the parts trained as to what is acceptable and not acceptable to
       the customer? Is the person making the parts trained to use the
       instruments required to determine if the parts being made are within
       specifications? Statistical Process Control (SPC) is a common tool used
       to identify trends in the features of a part over time, to signal correction
       before a feature goes out of specification. SPC is not a must for every
       part produced, but it is helpful for many parts. Process Control Plans are
       instructions that tell an operator what features of the parts they are
       making need to be checked and at what frequency. Ask the supplier if
       they use SPC or have Process Control Plans.
     • What do they do when defects are found? If a machine operator finds
       that one surface of a part is not as smooth as it used to be, does that
       operator stop the process, wait for someone to come by so they can ask
       that person, or just keep running the parts? What kind of written records
       are created when defects are found? Who reviews these records?
     • How do they prevent defects from reoccurring? Everyone makes
       mistakes, but how one reacts is of greater import. A supplier should
       have a program in which to log defects, and corrective actions in place
       to prevent them from reoccurring. A supply chain manager will
       consider the probability of the defect reoccurring, as well as the severity
       of the defect. Not every defect is worth putting together a team to tackle
       it.
     • How do they reduce costs? Some companies say they strive hard to
       reduce costs. Some will say they keep their costs low from the start, so
       there is no reduction over time. Companies with impressive cost
       reduction programs have quantitative commitments to reducing costs
       over a time period and passing some of those savings to the customer.
       Most suppliers with over a million dollars in annual revenue should
       have a person responsible for improving processes to reduce cost,
       improve quality, and decrease lead time. If this person is not saving the
       supplier more than their annual salary every year, they should be
       replaced with someone who will.
     • What types of quality inspection tools do they have? Understand the
       commodities you are responsible for managing. Part of this is knowing
       the manufacturing processes that make these parts and the inspection
       equipment required to verify their quality. Do not be impressed when a

60                                                                ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supplier Audit Questions




                   prospective supplier tells you they have hundred-thousand-dollar laser
                   interferometers or coordinate measuring machines. If the parts you are
                   sourcing cannot be measured by those expensive machines, what value
                   do they provide to you?

                • How many engineers do they have on staff? There are plenty of
                  people without engineering degrees who can run circles around degreed
                  engineers in certain areas of specialization. However, a supplier does
                  need to have someone who can understand a customer’s engineering
                  level requirements, can give engineering level explanations to the
                  supply chain manager, and can approach problem solving in a
                  systematic fashion.
                • What types of documentation do they keep for each job?
                  Documentation can be soft or hard copy. Do they keep lot control for
                  each batch? (Lot control is segregation of material from different
                  batches, so if a defect is found in one batch, all the components in that
                  batch can be easily found.) Do they have traceability for the material
                  used to make the components? Do they have quality records for each
                  batch? Do they have a process to make sure a customer’s special
                  requirements (i.e. washing or packing) are fulfilled each time?
                • How much inventory do they hold for customers? Since you do not
                  want to carry any more inventory than you have to, it is always good to
                  have suppliers carry inventory for you, ready to ship at a moments
                  notice. There has to be an agreement upfront though, for how much of
                  the scrap cost will be absorbed by your company in the event a part the
                  supplier holds in inventory is no longer used by you (due to
                  obsolescence or lack of sales).
                • What size batches do they normally run? This is related to the
                  question above. Just like a supply chain manager has economic order
                  quantities (EOQ), the supplier has economic batch sizes. The supplier
                  has to balance batch expenses of each job (i.e. setup and outside
                  processing) and the lead time demanded by the customer with the
                  amount of inventory they want to be liable for in the event the supplier
                  stops ordering parts. Another risk here is that if a quality issue is found
                  during assembly of the part (at your facility), the supplier might find out
                  that they have a lot of inventory that is out of specification. This is one
                  reason why companies like to carry as little inventory as possible.
                • What is their typical lead time? Lead time is critical in determining
                  how much inventory you need to hold. There has to be enough
                  inventory in the pipeline (whether at the supplier or at the customer) to
                  cover the lead time to make more parts at the supplier. Understand the
                  components of this lead time.


Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          61
                                     Vault Career Guide to Supply Chain Management
                                     Supplier Audit Questions




     • Is all material on the floor labeled properly? Although the factory
       workers at the supplier’s factory probably know what they are doing,
       there will be instances in which a new person is getting trained or a
       person is running a particular job the first time. In order avoid mix-ups,
       all materials (raw materials, material in process, and finished goods)
       should be properly labeled.
     • Is the work area tidy? Tidy work areas are a sign of order. One cannot
       help but conclude that a factory that is untidy is in a state of chaos. An
       orderly work area is part of modern manufacturing practices.
     • How do they train new hires? It is very common for the root cause of
       a problem to be a new person working on the line. It is understandable
       that new people will make more mistakes than veterans, but a supplier
       must make as much effort as they can to train a new person properly.
     • Do they have jobs that only one person knows how to run? Even if
       a supplier has excellent documentation, they are better off if there is
       more than one person fully trained on every machine or job they run.
       This mitigates the risk of not being able to fill a customer order because
       an employee quit or is on vacation.
     • Are there computers on the production floor? There are still
       suppliers in the U.S. that have not integrated personal computers into
       their manufacturing floor. Without a computer, a production worker has
       to get all of their information by leaving their workstation to go ask
       someone else. With a computer, a production worker has all the
       information necessary at their fingertips. This reduces wasted
       downtime, prevents mistakes, and empowers employees to take more
       ownership of their production.
     • Do they have a preventive maintenance program for their
       equipment? A preventive maintenance program does not guarantee
       that a machine will never fail,, but the lack of a documented preventive
       maintenance program is a sign of myopic management. A supplier that
       takes actions to prevent disasters is superior to one who spends all of his
       time “fighting fires” that could have been avoided with some strategic
       planning.
     • Do they have calibration records for all other measuring
       instruments? If a supplier is using a caliper (a measuring tool) to
       measure the parts they are making to see if they meet your
       specifications, the caliper must be accurate. Depending on the
       environment and amount of use, measuring instruments should be
       calibrated about once per year. There should be a database that lists all
       of the measuring instruments and their calibration due dates. Each
       measuring instrument should either show the calibration due date or


62                                                                ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supplier Audit Questions




                   have some sort of identifier that can be used to look up the due date in
                   the database.

                • Are employees using proper personal protective equipment? At a
                  minimum, a supplier should meet federal Occupational Safety and
                  Health Administration (OSHA) requirements for the safety and health of
                  their employees. If the environment is noisy, employees should wear
                  earplugs. If the employees risk getting something in their eyes, they
                  should wear safety goggles. Obviously, it is not your job to be the
                  environmental, health, and safety auditor for your suppliers, but
                  negative publicity could result if a worker were seriously injured.
                • What types of continuous improvement efforts are in place? All
                  suppliers strive for quality, on-time delivery, and competitive pricing.
                  Exceptional suppliers also strive for excellent customer service and
                  continuous improvement over time. Continuous improvement is
                  making a product better, faster, and cheaper. Most suppliers do
                  continually improve, but not many of them pass the savings to
                  customers in the form of price reduction. You will have to ask for it.
                • How do they choose and qualify suppliers? Remember, it is called a
                  supply chain. That means you should know who your supplier’s
                  suppliers are. You should understand how developed their supply chain
                  is in terms of lead times, second sources, constraints, etc. It probably
                  does not make sense to trace your supply chain all the way to the
                  elemental level. In most cases, you should spend much less than 20%
                  of your time with your supplier’s suppliers, but there may be instances
                  where you have to help your suppliers manage their suppliers. A
                  supplier should have some logical approach to choosing suppliers. They
                  might not keep an AVL (Approved Vendor List), but they should have a
                  process of qualifying and disqualifying suppliers.
                • Do their suppliers send material certifications? If there is a certain
                  alloy of material you specify your parts need to be made out of, the
                  supplier should receive material certifications from their material
                  supplier that shows that the alloy is what was ordered. You can ask that
                  a copy of these certifications be sent to you with each delivery.
                • How many shifts do they run per day? A company that runs multiple
                  shifts has more flexibility than one that only runs one shift. For
                  example, you could find out that you are out of parts at 4 p.m. If you
                  call your supplier and ask them to start making parts right away, and if
                  they run two or three shifts per day, they would be more likely to be able
                  to have parts available for you first thing in the morning than a supplier
                  that only runs one shift.



Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          63
                                     Vault Career Guide to Supply Chain Management
                                     Supplier Audit Questions




     • Do they do consignment inventory? Consignment inventory is taking
       ownership of inventory not when it is delivered to you but when you use
       it. Consignment inventory is common for public companies because
       they have more pressure to have low inventory levels than private
       companies do. For example, a supplier delivers 30 drums of nitric acid
       to you. The receiving department signs the bill of lading (a shipping
       document) but the supplier does not send an invoice for the 30 drums
       and the receiving department does not do a purchase order receipt in the
       ERP. When a drum of nitric acid is taken from the storage to the point
       of use, then the receiving department does a purchase order receipt for
       one drum and the supplier gets paid for one drum. The other 29 drums
       are sitting in your building but are still owned by the supplier.
     • Do they support customer’s JIT programs? It is a lot easier to get a
       supplier who is already doing JIT for another customer up to speed on
       your JIT program than dealing with a supplier inexperienced with JIT.
       Be specific about the lead time and frequency of deliveries you are
       looking for.
     • Do they accept electronic purchase orders? Every time a human has
       to do a data entry task, there is a chance for error. Usually, a supply
       chain manager creates a purchase order, signs it, and faxes it to the
       supplier, who enters the blurry information into their ERP.
       Alternatively, problems with EDI (Electronic Data Interchange) are
       usually negligible after the initial bugs are worked out. With EDI, the
       purchase order information gets automatically entered into the supplier
       ERP system.
     • Do they send electronic invoices? Similar to electronic purchase
       orders, electronic invoices allow the supplier’s invoice to be entered into
       the customer’s ERP and paid. The matching of the packing list,
       purchase order, and invoice is oftentimes not perfect, so there is still a
       lot of human involvement in this area.
     • How do they do their quotes? One response: “Our owner has been in
       manufacturing for 30 years. He can look at a drawing for 30 seconds
       and tell you how much we can sell it to you for.” Or “Our estimator
       calculates how much volume of material is required for each part, gets
       a quote for the raw material, figures out how much machining time is
       required to make the part, adds in the labor for secondary operations,
       puts in a 30% margin, and comes up with the quote.” It makes a supply
       chain manager look bad if after he or she gets a quote from a supplier
       and gives them the job, they make the parts and then come back with a
       higher quote. You have to stress when you solicit quotes that the
       supplier should make proper effort to give an accurate quote from the
       beginning. Of course there are always unforeseen complications that


64                                                                ? 2005 Vault Inc.
                                                              Vault Career Guide to Supply Chain Management
                                                              Supplier Audit Questions




                   surface only after a part goes into production, but this does not make it
                   acceptable for a supplier to do a cursory analysis when quoting the part.

                • What is their shop rate? The shop rate is not what the supplier pays
                  their factory workers. It is the rate used to capture both the direct labor
                  and the overhead when quoting jobs. A higher shop rate could mean
                  higher overhead costs, higher labor costs, or higher profits for the
                  supplier. If a supplier has a large quality assurance staff and lots of
                  engineers, the shop rate will probably be higher than that of a smaller
                  supplier. The shop rate is used when quoting a component. For
                  example, if a supplier has a $50 per hour shop rate and it takes 12
                  minutes to make each part, the labor portion of the quote would be $10
                  (the material cost would constitute the remainder of the cost). Profit is
                  usually added separately from labor and material cost, but some
                  companies add the profit to the shop rate.
                • Do they make their tooling in-house? There are plenty of vendors for
                  “off the shelf” tooling (tooling that is commonly used by many
                  companies). But many jobs require custom tooling not available “off
                  the shelf.” Some suppliers make their own custom tooling, and some
                  have it outsourced. The lead time to replace tooling is usually shorter
                  when it is made in-house. If a supplier has custom tooling outsourced,
                  agree with them on a quantity of spare custom tooling that they will
                  always keep in stock for your jobs.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.                          65
66   ? 2005 Vault Inc.
About the Author

           Javed Khan has worked in manufacturing plants his entire career, from low-
           tech to high-tech firm, small business to Fortune 500 company. He has two
           engineering degrees and an MBA.




Visit Vault at www.vault.com for insider company profiles, expert advice,
career message boards, expert resume reviews, the Vault Job Board and more.         67
            Get the BUZZ on
              Top Schools
NYU Law | Stern MBA | Harvard | Williams | Northwester
   Kellogg | Amherst | Princeton | Swarthmore | Yale
 omona College | Wellesley | Carleton | Harvard Busines
    Read what STUDENTS and ALUMNI
 chool | MIT | Duke | Stanford | Columbia Law | Penn
CalTech | Middlebury | Harvard Law | Wharton | Davidso
    have to say about:
 Washington University St. Louis | Dartmouth | Yale Law
 Haverford | Bowdoin | Columbia | Boalt School of Law
       •    Admissions
Wesleyan | Chicago GSB | Northwestern | Claremon
McKenna | Washington and Lee | Geor getown Law
       •    Academics
University of Chicago | Darden MBA | Cornell | Vassar
Grinnell | Johns Hopkins | Rice | Berkeley - Haas | Smith
       •    Career Opportunities
 rown | Bryn Mawr | Colgate | Duke Law | Emory | Notr

       •    Quality of Life
Dame | Cardozo Law | Vanderbilt | University of Virginia
Hamilton | UC Berkeley | UCLA Law | Trinity | Bates
       •    Social Life
Carnegie Mellon | UCLA Anderson | Stanford GSB
Northwestern Law | Tufts | Morehouse | University o
Michigan | Stanford Law | Thunderbird | Emory | Boa
Hall | Pitt | UT Austin | USC | Indiana Law              | Penn State
 YU | U Chicago Law | Boston College | Purdue MBA
Wisconsin-Madison | Tulane | Duke - Fuqua | UNC Chape
Hill | Wake Forest | Penn | CalTech | NYU Law | Stern MB
 Harvard | Williams | Northwestern - Kellogg | Amherst
 rinceton | Swarthmore | Yale | Pomona College
Wellesley | Carleton | Harvard Business School | MIT
Duke | Stanford | Columbia Law | Penn | CalTech
Middlebury | Harvard Law | Wharton | Davidson
Washington University St. Louis | Dartmouth | Yale Law
Haverford | Bowdoin | Columbia | Boalt School of Law

    Surveys on thousands of top programs
Wesleyan | Chicago GSB | Northwestern | Claremon
McKenna | Washington and Lee | Geor getown Law
University of Chicago | Darden MBA | Cornell | Vassar
           College • MBA • Law School • Grad School
Grinnell | Johns Hopkins | Rice | Berkeley - Haas | Smith
 rown | Bryn Mawr | Colgate | Duke Law | Emory | Notr
Dame | Cardozo Law | Vanderbilt | University of Virginia
Hamilton | UC Berkeley | UCLA Law | Trinity | Bates
Carnegie Mellon | UCLA Anderson | Stanford GSB
Northwestern Law | Tufts | Morehouse | University o
                                          Th nderbird | Emory
M i c h i g a n | S t a n f o r d L a w | Gouto www.vault.com| B o a
Hall | Pitt | UT Austin | USC | Indiana Law              | Penn State

								
To top