Analysis of ship to use program stu a case study to investigate the effective

International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 –
6340(Print), ISSN 0976 – 6359(Online) Volume 4, Issue 3, May - June (2013) © IAEME
318
ANALYSIS OF SHIP TO USE PROGRAM (STU): A CASE STUDY TO
INVESTIGATE THE EFFECTIVENESS OF SUPPLIER
CERTIFICATION PROGRAM
Praveen S. Atigre 1
, Prof. M. T. Telsang 2
1
(Post Graduate Student, Department of Mechanical Engineering, Rajarambapu Institute of
Technology, Islampur, Maharashtra)
2
(Professor, Department of Mechanical Engineering, Rajarambapu Institute of Technology,
Islampur, Maharashtra)
ABSTRACT
The supplier certification programs has been expanding in recent years in industries,
as they attempt to gain the competitive advantages such as reduced material cost, improved
material quality, lower total levels of inventory, and improved responsiveness of the supply
chain. Ship To Use program (STU) is supplier certification program of the case company
through which company implements quality management system at supplier side. At this
point, however, this certification program has not undergone a thorough evaluation of its
effectiveness by the company. The objective of this study is to make the analysis of STU
program in which the efforts are taken to investigate the effectiveness of STU program. For
this purpose methodology for finding the effectiveness is proposed and the effectiveness is
found out. The SAP data of 196 suppliers is collected and analyzed for this purpose.
Keywords: Supply Chain Management, Supplier Development, Supplier Certification,
Supplier Development Activities, Ship To Use.
1. INTRODUCTION
In recent years, the supplier certification programs have been expanding in industries,
as they attempt to gain a competitive advantage in the world market. A firm’s supplier
certification program typically is used as a means of measuring and then qualifying suppliers
[14]. Supplier certification programs consist of detailed examination of all dimensions of a
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ISSN 0976 – 6340 (Print)
ISSN 0976 – 6359 (Online)
Volume 4, Issue 3, May - June (2013), pp. 318-326
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319
supplier’s performance, so that the supplier will consistently meet required specifications of
product performance. The benefits commonly obtained by certification programs are lower
component cost, lower total levels of inventory, improved material quality, improved delivery
performance, increased reliability and improved responsiveness of the supply chain.[16],
[10], [9].
Many researchers have studied about the benefits of supplier certification programs
[16], [9], [8], [15]. There are many studies on supplier development activities which
predominantly investigated the areas such as supplier evaluations and communication
strategies, supplier training, involvement of suppliers in new product development, impact of
supplier development activities. There is lack of studies, in analyzing the effectiveness of
supplier certification programs. This research gap is filled by conducting an empirical study
that investigates the effectiveness of Ship To Use Program (STU).
The remainder of this paper is structured as follows: Section 2 reviews pertinent
literature on supplier development activities and supplier certification program. Section 3
presents, the present practices of the case company regarding STU program. Section 4 firstly
introduces the methodology and then provides in-depth descriptions of the methodology
adopted to collect and analyze the data in order to find out the effectiveness of STU program.
Section 5 presents the results of the data analysis. Section 6 concludes with a discussion of
the results and with some suggestions for future research.
2. LITERATURE REVIEW
2.1 Introduction
This point reviews the past research that serves as the foundation for this work. The
research cited identifies factors associated with the supplier development activities.
Following will be the review of literature on supplier evaluations and communication
strategies, supplier training, impact of supplier development activities.
2.2 Review of Past Literature
V.C. Arumugam et.al. [1] reviewed the literature relating to the supplier development
activities and implementation of these activities in manufacturing firms. They proposed a
conceptual model which not only explain the linkages among supplier development factors
but also illustrates how these activities end in high quality products for manufacturing firms.
Carol Prahinski et.al. [2] studied supplier evaluations and communication strategies to
improve supplier performance. They found out that the supplier evaluation communication
process does not ensure improved supplier performance without supplier commitment. Their
results also indicate that when a buying firm utilizes collaborative communication, the
supplier perceives a positive influence on the buyer–supplier relationship. Daniel R. Krause
et.al. [3] developed a process model for supplier development. Their research shows that the
strategic effort increases the buying company’s involvement in suppliers’ processes. Shokri
A. et.al. [4] studied the impact of the supplier development on reducing the defects in
supplier quality for a food distribution Small – Medium sized Enterprise (SME). During the
research they found that supplier development practices have impact on the supplier’s
performance in providing very good service and product quality for the end consumer.
Kadzrina Abdul Kadir et.al. [5] studied the patterns of learning for local dependent suppliers.
They present a model to describe the varying levels of training needs for dependent suppliers.
Their model highlights the need for suppliers to develop their capabilities at different levels.

320
S. M. Wagner [6] focused on supplier development activities, goals, and the relationships
among them. The author tried to obtain a meaningful structure of supplier development goals
and supplier development activities. The author proves that supplier development goals are
independent of supplier’s evaluation and feedback. S. M. Wagner [7] studied the relationship
between supplier development, improvements and the support of the customer firm's
competitive strategy from resource-based view as well as relational view. The results show
that direct supplier development activities neither result in an upgrade of the supplier's
product and delivery performance nor the buyer–supplier relationship. The results also show
that improved product and delivery performance has no dramatic impact on cost leadership.
S. M. Wagner et al. [11] developed a strategic supplier portfolio management framework
which is helpful to gain competitive advantage. The processes which are used by firms to
plan, implement, and monitor strategic supplier portfolios are explored by the authors. This
work shows that, to gain competitive advantage there is need of developing suppliers,
assembling superior suppliers, and integrating them into product development and
manufacturing. Muddassir Ahmed et al. [12] developed supplier development literature
framework and identified the main focus areas in supplier development. Authors classified
research articles that are a source of scientifically generated knowledge about various
problems and opportunities with respect to supplier development, predominantly in the
context of a manufacturing environment. Rajendra Chavhan et al. [13] found out the current
supplier development practices employed by different organizations. Authors mainly focused
on critical elements, programs and activities of supplier development.
From the literature review, it is observed that there is dearth of literature available on
supplier development activities. The review of articles regarding supplier development
activities predominantly investigated the areas such as supplier evaluations and
communication strategies, supplier training, impact of supplier development activities. But
there are still some gaps which can be taken forward for further research like, supplier
certification programs and effectiveness of certification programs. Therefore, certification
programs and their effectiveness need to be evaluated and investigated for the industries for
future directions.
3. SHIP TO USE PROGRAM (STU): SUPPLIER CERTIFICATION PROGRAM OF
THE CASE COMPANY
STU is the supplier certification program being undertaken by one of the OEM
Company (Original Equipment Manufacturer) in Pune. It is ISO/TS – 16949 certified
company by TUV India on 2006. Company stands on the threshold of a new era in the
automobile industry in India, with a stake in five product segments namely Small
Commercial Vehicles (SCV), Multi Utility Vehicles (MUV), Light Commercial Vehicles
(LCV), Tractors, and Sports Utility Vehicle (SUV). Company exports their complete range of
world class products to various countries in Middle East, Asia Latin America and Africa. The
name of the company is kept anonymous.
The STU program is a direct-online program in which the parts having “STU” status
will be directed towards the assembly line instead of going via receipt inspection. This means
that there will be virtually no inventory for STU parts at the receipt inspection of case
company and there will be no lot by lot inspection for the entire validity period of the STU
parts. STU validity varies from 1-3 years depending upon the criticality of the part and class
of suppliers defined by the requirements of case company.

321
3.1 Benefits of STU status to Supplier And Company
Many researchers points to the benefits and outcomes of supplier certification
programs. The benefits commonly offered up include lower component cost, lower total
levels of inventory, improved material quality, improved delivery performance, increased
reliability and improved responsiveness of the supply chain [16], [10],[9], [8], [15]. Supplier
certification improves performance of suppliers along with supply chain. Supplier
certification surely accomplishes beneficial outcomes for buyer and supplier. There are
several benefits associated with STU status for suppliers and for company. The benefits of
STU status for suppliers as well as for company are abridged in Table 1.
Table 1: Benefits of STU status
Benefits of STU Status To Suppliers Benefits of STU Status To Company
1 STU accredited suppliers will get company
excellence award from buyer organization
1 Prevention of entering of non-
conformities at input level of the
company
2 Only STU accredited suppliers will be
considered for New Product Development and
Outsourcing.
2 Company will get parts of required
quality, required quantity and at required
time
3 “No receipt inspection from company” for
STU parts and suppliers
3 Minimum inspection time required at
receipt inspection stage
4 Publicity and Advertising Privilege 4 Minimum inspection cost
5 Improved quality, productivity at supplier
side
5 Competitive supplier base
3.2 Process to award STU status
The process to award STU status is presented in Fig 1. The suppliers having ISO
9001-2000 or ISO/TS 16949 certification are considered for STU program. These suppliers
are then audited in line with the specially designed check-sheets focusing on quality
management system, process controls & quality planning. After passing the qualification
criteria (Audit Score ≥80%), the parts of supplier with the quality score 100% for previous
six months from the date of audit are recommended for “STU Status”. The final STU status is
given after Production Part Approval Process (PPAP) documentation and signing the file by
Top Management of the company.

322
Figure 1: Process to award STU status
4. PROPOSED METHODOLOGY FOR FINDING THE EFFECTIVENESS OF STU
PROGRAM
This point discusses the methodology, developed to find out the effectiveness of STU
program. The Fig.2 represents the steps in the methodology adopted to collect and analyze
the data in order to find out the Effectiveness of STU program.
Selection of Suppliers (ISO 9001-2000 or ISO/TS 16949 certified)
Supplier audit at supplier plant
If Audit
Score ≥ 80
Supplier STU recommendation ensuring PPAP Documentation
File approval by Top Management
Communication to supplier for STU certification
Action plan from
supplier
Action Plan
Verification
through
Documentation/
Re-Audit
If Audit
Score ≥80%
No
Yes
Yes
Auditing
the
supplier
File
Processing
and
Approval of
Supplier

323
Figure 2: Proposed methodology for finding the Effectiveness of STU Program
First collect the data from SAP system. Once the data collection part is over, identify
the STU parts for Previous and Current Year by using the criteria for giving STU status.
After that by comparing the data of STU parts of Previous and Current Year, find out the
STU parts which are withdrawn because of quality issues in Current Year. Based on these
parts define the effectiveness and then find out the effectiveness of STU program.
Effectiveness (E) of STU Program:
Based on the STU parts of Previous Year which are withdrawn because of quality issues in
Current Year, Effectiveness (E) is defined as follows
E = X 100
1 Collection of data from SAP system (Supplier - wise)
2 Understanding the criteria for giving STU status
3 Making the analysis and finding
out the parts which fail to maintain
STU status because of quality issues
3.1 By using the STU criteria,
find out the parts which are
STU in Previous Year
3.2 By using the STU criteria
find out the parts which are
STU in Current Year
3.3 Compare the STU parts for
Previous and Current Year in
order to find out the parts which
are withdrawn because of
4 Defining the Effectiveness based on parts withdrawn because of quality issues
and finding the effectiveness of STU program
STU Parts of Previous Year withdrawn because of quality issues in Current Year
Total STU parts of Previous Year

324
5. DATA COLLECTION AND DATA ANALYSIS
The company has 250 suppliers for the components and aggregate supplies. Out of
these suppliers, only ISO 9001-2000 or ISO/TS 16949 certified suppliers were selected for
this study. From the initial frame of 250 suppliers, 54 suppliers were removed from the
sample as they did not have ISO 9001-2000 or ISO/TS 16949 certification. For the remaining
196 suppliers having ISO 9001-2000 or ISO/TS 16949 certification, the SAP data was
collected from the SAP system of the company. SAP data gives the key information of
supplier’s performance of past 6 months regarding number of lots, total quantity supplied,
total quantity accepted and rejected, reason for rejection quality score, of each component
supplied by supplier to the company. The Table 2 represents sample SAP data of a supplier
with analysis.
Table 2: Sample SAP data of a supplier
The parts of supplier with the quality score 100% for previous six months were
identified and recommended for “STU Status” for Previous and Current year. Then by
comparing the data of STU parts of Previous and Current Year, the STU parts which are
withdrawn because of quality issues in Current Year were identified. Based on these parts the
effectiveness of STU program is found out.
6. RESULTS
The goal of the current study was to investigate the effectiveness of STU program
through SAP data analysis. The Table 3 summarizes the major findings obtained from SAP
data analysis of 196 suppliers.

325
Table 3: Findings from the SAP Data Analysis of 196 Suppliers
Summary of 196 Suppliers
STU parts in Previous Year 3149
STU parts in Current Year 3247
Parts of Previous Year Continued in Current Year 2107 66.91%
Withdrawn parts because of other issues in Current Year 734 23.31%
Withdrawn parts because of quality issues in Current
Year
308 9.78 %
Newly added parts in Current Year 1140 36.20%
The results of the analysis shows that 196 suppliers had 3149 STU parts in previous
year out of which 734 parts (23.31%) fails to maintain STU status because of the non-quality
issues like less lot, less quantity, non-live. 308 parts (9.78%) fails to maintain STU status
because of quality issues. That means the Effectiveness of STU Program is 90.22 %.
7. CONCLUSIONS
The paper has focused on two objectives. First we attempted to develop a guideline
for making the analysis of effectiveness of certification program. Second we attempted to
find out whether the supplier certification program is effective or not. To achieve the first
objective, four step procedures is prepared which will provide systematic guidelines to the
company for analyzing the effectiveness of STU program. By using this procedure an
attempt is made to achieve the second objective. i.e. Analysis for the effectiveness of STU
program. To make the analysis, SAP data of 196 suppliers is collected and analyzed using the
criteria’s adopted to give STU status based on last six months performance of supplier
(considering quality score, lot size, lot quantity, quality issues and previous SAP status of the
part). The results empirically show that the effectiveness of STU program is 90.22% (i.e.
STU program is 90.22% Effective).
8. ACKNOWLEDGEMENTS
The author would like to thank Professor M. T. Telsang for his help and guidance
throughout this research. Special thanks to company supervisors who provided me with
valuable insights and helped me collect the data necessary for my research. The author would
like to thank the reviewer for his valuable comments and feedback.
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326
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