Practically any modern industrial manufacture from shipbuilding to oil & gas production use hoses to ensure uninterrupted operation. Like arteries, a variety of liquid forms are pumped through a system of hoses and connections, such as anything from plain water to petrochemicals or chemical reagents. Hoses are often taken for granted as an element that can be easily replaced in case of damage. Consumers may buy a more modern hose instead of an outdated one and change the connection to something more durable. At the same time, few people consider the creation of a ready-to-use product like a hose. However, there is a system designed to manage and coordinate all processes from production to shipment to the end user. This system is called Supply Chain Management (SCM).
By Jurij Artiukhov, General Manager, PipeTime, LLC
What is Supply Chain Management?
Supply chain management, in one form or another, exists at any manufacturing enterprise. The production process of hoses, connections, and related items is not possible without building an effective control system. Supply chain management (SCM) is a system of management strategy organization. It consists of a structured and integrated approach including the planning of production, logistics and other processes. This ideally results in reducing costs and therefore increases demand from the customer.
Evaluation
Furthermore, according to the SCM system, the batch of received hoses must be tested and checked by work-shop or laboratory tests. The hose is tested by excessive hydraulic pressure and maintained for a certain time. The outer diameter, the adhesion strength of the layers, and flexibility are all evaluated.
The evaluation commission, or technical control department, is an important element of the SCM system, as it allows or prevents the hose to be sold to the end user. If the plant does not produce the material for the manufacture of hoses independently (in this case, rubber), supply chain planning will be required. Supply chain planning implies the provision of stocks for the entire production process. Therefore, the company needs to analyze the consumer market, and only then develop a plan for the need for raw materials and applications.
Market Influences
While following SCM it is important to consider and understand that the demand in the hose market may shift in one direction or another. Therefore, it is necessary to model various conditions and apply a situational approach to demand fluctuations.
Production
A hose manufacturing plant has the equipment to create the final product such as mandrel machines, seaming machines, circular looms and more. Before the introduction of supply chain management, many industries used the continuous hose manufacturing process. This meant all production operations, even manual, were not divided nor systematized. The production of hoses is a difficult and potentially unsafe occupation.
Consequently, many manufacturers were forced to think about improving labor-intensive processes. This eventually led to hoses being manufactured with the separation of operation. Therefore the production cycle itself began to improve due to the use of SCM. Such separation, in the long term, made it possible to diversify the production of hoses. This resulted in the ability to produce hoses by the non-core method, to increase the number of layers of braid, the quality of the power frame, and so on.
The analysis of the consumer market includes an understanding of:
1. Which industrial enterprises use this type of hose?
2. What is the approximate volume of hoses per year purchased by different enterprises?
3. Will they require special hose connections?
4. Is it possible to create a dealer network for the sale of the manufacturer’s products?
The purchase of raw materials and applications for hose production in SCM implies the evaluation and selection of the most efficient suppliers who fit within the stated budget. This would include suppliers who do not disrupt delivery times and whose materials meet the stated technological requirements.
At this stage, supply chain management should include related operations, such as legal support of transactions with suppliers (conclusion of contracts, etc.), verification of incoming materials (creation of special evaluation commissions) and proper inventory management (planning of warranty stock, reserve stocks).
Considering all of these factors, the plant receives a high-quality hose ready for further sale to the end user.
Predicting Sales
In SCM, there is such a thing as a sales forecast or a sales plan: it is an understanding of the hose production plant and the volumes of products sold for a set time period of time, such as day, month, quarter, or year. These volumes are measured in financial terms. Based on the data, it is possible to announce specific planned figures to sales departments and monitor the progress of their implementation. For example, if the main engine of sales is the Internet, the statistical indicators of advertising companies as well as other similar factors are tracked.
If SCM software is used, it is possible to create special reports on purchases and sales as well as build forecasts ranging from short to long-term. The software implementation allows visualizing sales data, prices, and conducting various types of analyses. This saves management and performers from paperwork and unnecessary labor.
Delivery
Any sale implies the delivery of products to the customer. The organization of uninterrupted delivery of hoses or connections is one of the crucial stages of interaction in the supplier-client system. Frequently, there are situations when the customer urgently needs immediate repairs or a new hose due to equipment failure. A well-organized process of forming reserve balances and the absence of unnecessary bureaucratic delays should create an established product delivery process that will significantly increase the degree of customer satisfaction and the image of the manufacturer.
The product delivery process itself consists of several important systems:
• Control and management of customer requests (CRM system maintenance, warehouse accounting database)
• Inventory management
• Ensuring the transportation of products (coordination and control over the further transportation of goods).
Once the hoses are checked by the technical control department, a certificate of analysis is issued for the finished product. This is a document confirming the quality of the goods, in which warranty and storage periods are prescribed. This certificate of analysis is given to the end user.
Customer Service Management
The further step in SCM is the process of managing customer service. This involves regulating and controlling the relationship between the supplier and the buyer. Such a tool can be a customer support service, or a feedback form on the website of a hose manufacturing plant. In any case, the main task of SCM in this stage is to establish a strong, mutually beneficial relationship between the consumer and the manufacturer, as well as to direct efforts to maintain these relationships.
The goal is for a one-time delivery of goods to lead to a stable and long-term operation. Delivery is not always successful. Issues are inevitable in any area of business. The hoses can also be damaged during transportation, or the product does not satisfy the customer. This is where the customer support service and the return system developed in SCM are important. This process is diametrically opposite to the delivery process.
In the SCM system, such criteria and processes are:
• Performance measurement
(understanding which aspects of SCM can be improved or refined)
• Management and control of work processes both in production and in the administrative sector (control of the output of final products, evaluation and control of the quantity and quality of sales, etc.)
• Outsourcing (understanding whether it is worth attracting your own resources for a particular process, or to turn to outside resources).
Final Thoughts
Every production has its own characteristics and specifics. Therefore, it is difficult to consider all factors, such as drawing a certain common line in the formation of the SCM system or developing a universal approach.
However, at the same time, the basic criteria and principles are usually identical. It is clear that the formation and implementation of a well-established and competently built SCM system is a difficult and time-consuming process. In the long term, however, it may optimize numerous production, administrative and time costs, as well as lead to the financial growth of the manufacturer.
The manufacture of a hose, a seemingly simple and common product, is the result of painstaking work to establish a production system, control at all stages of procurement, sales optimization and maintaining relationships with the consumer.
For the supply chain management system to work successfully, it must be constantly monitored and evaluated, and critically approach the consideration of existing processes for constant improvement to production efficiency.
ABOUT THE AUTHOR
Jurij Artiukhov works as the General Manager at PipeTime, LLC. He previously worked as a Sales Manager for MTT Company and Project Manager for SOL SP Company. He holds a graduate degree from the University of Foreign Affairs, Economy and Law.