A Quality Model for a Multi-layered Sourcing Supply Chain

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1 Poeedings of the 4 Intenational Confeene on Industial Engineeing and Opeations Management Bali Indonesia Januay A Quality Model fo a Multi-layeed Souing Supply Chain JJung Lyu and Chia-Wen Chen Depatment of Industial and Infomation Management National Cheng ung Univesity Tainan Taiwan ROC Abstat Unde globalization many fims ineasingly opt to blu thei oganizational boundaies to enhane the uality of both aw mateials and final poduts Manufatues typially puhase omponents o pats fom supplies to manufatue poduts fo ustomes Fist-tie supplies then puhase omponents fom seond-tie supplies in a multi-layeed souing supply hain The uality of omponents o pats puhased fom fist- and seond-tie supplies affets the uality of finished poduts In this study a uality model is poposed to ensue the yield ate of eah tie (seond-tie supplies fist-tie supplies and the manufatue This model an be applied to satisfy ustomes of manufatues in a multi-layeed souing supply hain eywods Multi-layeed souing supply hain uality model Intodution As ountless supplies ae available in the global maketplae identifying appopiate supplies via multiple souing to ensue podut uality in a global supply hain is extemely impotant Manufatues typially puhase omponents o pats fom supplies to podue finished poduts fo ustomes Fist-tie supplies then puhase omponents fom seond-tie supplies in multi-layeed souing supply hain The uality of omponents and pats is ental to supplie evaluation (Wu et al 8 Notably the uality of omponents and pats puhased fom fist- and seond-tie supplies affets the uality of finished poduts In a thee-ehelon supply hain podut defets ae epaied pio to delivey to ustomes Repai osts ae based on the numbe of finished poesses use to epai a defetive podut Repai ost ineases and has a signifiant effet on uality when a defet an be taed to the seond-tie supplie Theefoe only the onsideations of poessing yield ate of manufatue and fist-tie supplie ae unsatisfied and the seond-tie supplie is also onsideed As mentioned the existene of multi-souing and multi-layeed supply hains inease the diffiulty of geneating a uality model fo a supply hain that ensues that podut uality meets ustome needs In Fig F m means the fist-tie supplie poviding the same pat to a manufatue; howeve these pats have diffeent uality S mn puhases the euied omponents fom thei seond-tie supplies espetively Theefoe how to selet the best fist- and seond-tie supplies to ahieve podut uality with minimal ost beomes ineasingly omplex and diffiult 6

2 Seond-tie supplie S Seond-tie supplie S N Fist-tie supplie F Seond-tie supplie S Seond-tie supplie S N Seond-tie supplie S M Seond-tie supplie S MNm Fist-tie supplie F Fist-tie supplie F M Manufatue Figue A typial multi-layeed souing supply hain showing the elationships among the manufatue fist-tie supplies and seond-tie supplies In this study a multi-layeed souing uality model (MSQM is developed to addess this poblem in a supply hain The poposed uality model an be applied to impove yield ate fo eah laye (seond-tie supplie fist-tie supplie and manufatue using inspetion and epai to satisfy ustomes of manufatues The emainde of pape is oganized as follows Setion eviews elevant liteatue Setion 3 desibes the poposed uality model Setion 4 addesses the ase study of a motoyle manufatue Finally Setion 5 gives onlusions Liteatue Review Quality ost estimation an be utilized to help manufatues with diffeent levels of isk avesion selet supplies to onstut an appopiate uality model and satisfy ustomes in a multi-layeed souing supply hain In this ea of global ompetition supplies ae distibuted woldwide; thus souing mateial is a signifiant task fo global supply hains Manufatues typially pay lose attention to supplie seletion Chan et al (8 poposed a fuzzy-based analytial hieahy poess to geneate guidelines and dietions fo deision-makes when seleting appopiate global supplies An example fom a manufatuing industy seahing fo a global supplie of a itial omponent was employed to demonstate the effetiveness of the poess Abdel-Malek et al (5 developed a famewok fo assessing the pefomane of outsouing stategies in a multi-layeed supply hain Coope and Yoshikawa (994 developed a thee-phase supply hain famewok that has an automobile assembly plant fist-tie supplie and seond-tie supplie Inte-oganizational systems wee developed fo shaing infomation to edue the ost of poduts supplied by the hain Ghodsypou and O Bien ( geneated a mixed-intege non-linea pogamming model to solve the multiple souing poblem; this model aounts fo the total ost of logistis Quality ost an be utilized to estimate the elated osts between supplie and manufatue Feeman (995 divided uality ost into pevention ost appaisal ost intenational failue ost and 7

3 extenal failue ost Chang et al (996 developed a method fo detemining uality osts in multistage manufatuing systems by onsideing these fou osts Tagaas and Lee (996 developed a uality ost model that onsides uality ost input uality and impefetions duing supplie seletion A uality model an be onstuted that onsides uality ost Fom the viewpoint of supplies Stabid (994 applied numeial methods to examine how a isk-avese supplie eats to aeptane of the sampling plan used by a ustome Stabid demonstated that isk-avese supplies delive high-uality goods Notably manufatues also have diffeent levels of isk avesion Fom the manufatue pespetive Moskowitz and Plante (984 pesented an optimization algoithm that ombines Bayesian sampling and a isk funtion to obtain an optimal sampling plan while maximizing expeted utility In onsideing the viewpoints of both supplies and manufatues Reynies (99 indiated that uality ontol and a sampling plan ae impotant to eduing ost fo both supplies and manufatues 3 Multi-layeed Souing Quality Model (MSQM This study poposes a multi-layeed souing uality model (MSQM to impove the yield ate fo eah laye in a supply hain (seond-tie supplie fist-tie supplie and the manufatue using inspetion and epai fo manufatues To meet the uality euiements of ustomes the MSQM evaluates the total ost inluding uality ost (ost of epaiing defets and puhase ost fo eah supplie to help manufatues selet supplies A manufatuing opeation an be poteted against poo input uality by inspeting inoming mateials Conside a manufatue eeiving one type of input mateial fom a patiula supplie These mateials ae poessed and tansfomed into finished poduts Inoming mateials and the manufatuing poess may be impefet The simple module (SM makes the following assumptions - Defetive output is only identified in the inspetion poess - and ae independent - No inspetion of inoming mateial is pefomed Notably and ae the pobabilities that a unit of inoming mateial fom the seond- and fist-tie supplies is defetive espetively Additionally is the pobability that the manufatuing poess is poduing defetive output The esult of defetive output an be ewok sap and extenal failue osts The unit ost of defetive output when defets ae due to an impefetion is The unit ost of defetive output is and when defets ae podued fom impefet input fom the fist- and seond-tie supplies espetively and the manufatuing poess is impefet The unit ost of defetive output is when the defet was podued using inputs fom the fist- and seond-tie supplies and the manufatuing poess is impefet Both and ae the unit osts of a defetive output when the defet is due to defetive input fom the fist- and seond-tie supplies espetively Notably is the unit ost of defetive output when the defet is due to defetive input fom the fist- and seond-tie supplies Thus the pobabilities fo the inuene of osts and ae ( ( ( ( ( ( ( ( ( and espetively Hene fo a given and the expeted failue ost pe unit poessed is deived by E ( ( ( ( ( ( ( ( ( ( ( When the input mateial fom the seond- and fist-tie supplies is pefet the expeted failue ost pe unit is ( ( ( The aveage uality ost of finished podut with mateial fom the seond- and fist-tie supplies pe unit Q ( is deived by E ( Q( ( ( ( ( ( ( ( ( ( ( 8

4 9 To evaluate a patiula supplie both puhase and uality osts must be onsideed Geneally unit puhase ost depends on aveage podut uality ie on pobabilities and that a andom unit puhased fom a supplie is defetive Total auisition and uality osts elevant to supplie evaluation ae deived by E (3 Let be the unit ost of guaanteed onfoming podut ( = = the unit puhase ost is then ( ( ( C ( ( ( Q C (3 The elationship between and C( an be expessed in fomulas The optimal and (supplies satisfy the fist deivatives d d and d d as well as the seond deivatives and The fist deivatives of total ost with espet to and ae deived by Es (4 and (5 espetively (4 (5 The seond deivatives of total ost with espet to and ( ae deived by Es (6 (8 espetively (6 (7 4 (8 To seah fo the minimum total ost * must be lage than zeo When the output of E (9 exeeds zeo it means that and It indiates that the optimal solution * * ae exist esulting the minimum ( 4 4 (9

5 Let W and be epesented by Es ( and ( espetively The solutions of and ae auied using Mathematia W W ( ( 4 Case Study The ase in this study is the supply hain of a motoyle manufatue whih inludes the manufatue (assembly plant fist-tie supplie (eletial mahiney plant and seond-tie supplie (omponent plant The ase ompany s assembly plant puhases pats fom the eletial mahiney plant and sells motoyles to ustomes The fist-tie supplie the eletial mahiney plant puhases aw mateials fom the omponent plant and sells omponents to the assembly plant The seond-tie supplie the omponent plant povides aw mateials to the eletial mahiney plant fo pat podution The defet ate of the assembly plant ( is 4 The defet ates ( of the eletial B mahiney plants plants A and B ( A and ae 6 and 5 and defet ates ( of the B oesponding omponent plants ( A and ae 8 and The unit ost of a defetive output fom the assembly plant ( eletial mahiney plants A and B ( and omponent plants seondtie supplie fo fist-tie supplie A and B ( ae 8 and 3 The unit osts of a defetive output fom the assembly plant and eletial mahiney plant ( assembly plant and omponent plant ( and eletial mahiney plant and omponent plant ( ae 5 and 5 espetively The unit ost of defetive output fom the assembly plant eletial mahiney plant and omponent plant (denoted by is 5 The unit puhase ost of guaanteed onfoming pats fom the eletial mahiney plant ( is 8 Figue pesents an example of feasible solutions Figue shows all solutions of the total ost funtion when the manufatue selets supplie A The X-axis epesents the defet ate of the seond-tie supplie Y-axis epesents the poessing defetive ate of the fist-tie supplie and Z-axis epesents the total ost The SM an be used to detemine the optimal yield ates fo the fist- and seond-tie supplies by onsideing uality ost and puhase ost to minimize total ost Figue Numeial illustation 3

6 Afte the defetive ate and ost ae ead in the total ost of the assembly plant puhasing pats fom the eletial mahiney plant via E (3 Fo mahiney plant A total ost is Fo mahiney plant B total ost is 764 ( A A A A A A C( Q( B B B B B B C( Q( ( 5 Conlusions This study poposes a multi-layeed souing uality model (MSQM to help the manufatue selet the appopiate fist- and seond-tie supplies while onsideing uality ost In MSQM assume that all paametes ae fixed exept fo defet ate of the seond-tie supplie The oesponding defet ate of the lowest total ost yields the optimal uality level of the supplie esulting in the lowest ost fo the manufatue when onsideing both ost and manufatue defet ate Unde globalization an appopiate uality model that onsides uality ost is impotant fo assuing podut uality in a multi-layeed souing supply hain In addition to impoving manufatue apabilities uality impovement in supplie podut is euied This study poposes MSQM to impove the yield ate fo eah laye (seond-tie supplie fist-tie supplie and manufatue in multi-layeed souing supply hain A motoyle supply hain whih has a manufatue (assembly plant fist-tie supplie (eletial mahiney plant and seond-tie supplie (omponent plant is used as a ase study to assess the pefomane of the poposed uality model The poposed MSQM an help manufatue adjust thei uality plans to edue uality ost and impove ustome satisfation Aknowledgement The authos would like to thank the help of M Jiang-Wen Lin Refeene Abdel-Malek L ullpattaaniun T and Nanthavanij S 5 A Famewok fo Compaing Outsouing Stategies in Multi-layeed Supply Chains Intenational Jounal of Podution Eonomis Vol 97 pp Chan FTS uma N Tiwai M Lau HCW and Choy L 8 Global Supplie Seletion: A Fuzzy-AHP Appoah Intenational Jounal of Podution Reseah Vol 46 No 4 pp Chang SJ Pak YH and Pak EH 996 Quality Costs in Multi-Stage Manufatuing Systems Computes & Industial Engineeing Vol 3 No - pp 5-8 Coope R and Yoshikawa T 994 Inte-oganizational Cost Management Systems: The Case of the Tokyo - Yokohama - amakua Supplie Chain Intenational Jounal of Podution Eonomis Vol 37 No pp 5-6 Feeman JM 995 Estimating Quality Costs Jounal of the Opeational Reseah Soiety Vol 46 No 6 pp Ghodsypou SH and O Bien C The Total Cost of Logistis in Supplie Seletion unde Conditions of Multiple Souing Multiple Citeia and Capaity Constaint Intenational Jounal of Podution Eonomis Vol 73 pp 5-7 Moskowitz H and Plante R 984 Effet of Risk Avesion on Single Sample Attibute Inspetion Plans Management Siene Vol 3 No pp 6-37 Reynies DJ 99 Supplie-ustome Inteation in Quality Contol Annals of Opeations Reseah 34 pp Stabid SA 994 The Effet of Aeptane Sampling and Risk Avesion on the Quality Deliveed by Supplies Jounal of the Opeational Reseah Soiety Vol 45 No 3 pp 39-3 Tagaas G and Lee HL 996 Eonomi Models fo vendo Evaluation with Quality Cost Analysis Management Siene Vol 4 No pp Wu CW Shu MH Peam WL and Liu H 8 Bootstap Appoah fo Supplie Seletion Based on Podution Yield Intenational Jounal of Podution Reseah Vol 46 No 8 pp