In December of 2008, I penned comments on this blog related to reports that indicated that a U.S. government audit agency had determined that the U.S. Navy had $7.5 billion (yes that is billions with a “B”) in excess spare parts.  My comments reflected on how the Navy needed to get serious about investing in modern service parts business processes and supporting technology.

I was therefore somewhat pleased to read an MCA Solutions press release this week that indicated that the U.S. Navy’s Naval Inventory Control Point had successfully implemented spare parts inventory optimization software.  The release further indicates that the MCA software is expected to be integrated with the Navy’s ongoing SAP ERP implementation project, scheduled for completion in early 2010. 

The next phase for service parts modernization is the Navy’s maritime and base operating stock inventory.

It’s good to see that the Navy is serious about moving forward and I applaud their team efforts and progress to date.  The previous audit identified almost $1.9 billion of spare parts inventory with no projected demand.  Perhaps those parts can now be put to alternative use.

A final related note.  There are few blogs that are solely focused on the service management and service parts planning area.  If you’re looking for a good listing, you can review a posting by Tim Andreae on the Service Matters blog.  Service Matters is not related to Supply Chain Matters, but MCA was nice enough to seek my opinion before naming their blog.

Bob Ferrari

I had the opportunity to recently read the book Poorly Made in China, by Paul Midler.  Mr. Midler returned to China in 2001 after receiving his MBA from Wharton.  Having language skills in both Mandarin and English, and observing the ongoing boom in China’s manufacturing sector, he decided to become an export manufacturing representative. The book outlines many of his project experiences as a go-between among Chinese manufacturers and their U.S. and European based customers.

In November of last year, I recommended that readers take-in a very insightful blog posting on Silk Road International that described Chinese supplier business practices.  The Midler book takes David Dayton’s observations even further.  Midler comments on how companies would contact him typically after their supplier relationships began to fall apart around product quality or cost.  As Mr. Midler phrases in his book: “Trouble was my business.”  He cites the term “quality fade”, and a Chinese manufacturing culture that inserts many unannounced changes in product composition or manufacturing processes, without awareness by respective customers.  Having authored many postings on Supply Chain Matters that related to product counterfeiting or product safety issues that were traced to China, Chapter 9, which is titled The China Game, provides some eye opening observations.  A significant excerpt from this chapter reads as follows:

“An importer should have been rewarded for uncovering quality problems, but it was almost never the case.  Factories did not see an attention to quality as something that would improve their business prospects, but merely as a barrier to increased profitability.”

There are many other commentaries regarding the lack of openness concerning both sides, the Chinese manufacturer and non-Chinese importer.  Another quote from the book reflects:

 ”Chinese manufacturers were good at keeping costs low- it was their true competitive advantage- but importers (also) saw an advantage in not knowing all of their supplier’s little secrets.”

Of course, it would be unfair to label all manufacturers in China with these observations. But the fact that these occurrences occur should be a cause for continued concern for all.

If you are at all involved with overseeing the sourcing of suppliers or production facilities in China, or with managing any of the aspects of supplier risk, I highly recommend you read this book. 

Consumers who continually demand and expect the cheapest price for products should also take the time to read about the implications of low-cost products from a quality as well as a safety perspective.

This book broadened my perspectives on the challenges of insuring quality products from certain manufacturers in China. It is a cause for continued concern.

Bob Ferrari