Improving Quality and Reputation

Purchasing and supply management also has a major impact on product and service quality. In many cases, companies are seeking to increase the proportion of parts, components, and services they outsource in order to concentrate on their own areas of specialization and competence. This further increases the importance of the relationships among purchasing, external suppliers, and quality.

The following example illustrates this important link between supplier quality and product quality. Heparin is a main ingredient in products for patients requiring dialysis and medicines that prevent blood clots during surgery and thin the blood. Heparin has recently come under suspicion in the deaths of four Americans and allergic reactions from another 350 patients who obtained heparin from Baxter International. Interestingly, more than half of the world’s heparin comes from China. The recent deaths have highlighted the need to control sourcing accountability. One of the key ingredients in the process of making heparin is pulp extracted from pig intestines, which is then heated in large vats. This key ingredient is widely sourced in small, poorly regulated Chinese factories. For example, one Chinese firm, Yuan Intestine and Casing Factory, also manufactures sausage casings. Baxter buys its heparin from Scientific Protein. The president of Scientific Protein says it cannot trace its supplies in China as well as it can in the United States. This example illustrates the importance of the supplier selection process and its role in the entire supply chain, from raw material to finished product. This example further illustrates how lapses in managing supplier quality can potentially tarnish a firm’s reputation.