Ship to Stock, STS

- overview of Ship to Stock for manufacturing component supply - what it means, the constraints, benefits and how to set up ship to stock.

Ship to stock, STS is a scheme for component supply whereby components are shipped directly into stock.

Components are shipped directly into the manufacturing stock without the traditional goods inwards inspection and possible sample test.

The concept of ship to stock saves time and cost goods inwards inspection can be time consuming, costly and often inaccurate in its assessment of quality.

Ship to stock basics

Ship to stock methodologies can provide some significant gains in terms of speed efficiency and reliability.

Ship to stock enables product to be entered directly into the storage area or production line, thereby saving time and cost.

Ship to stock can only be used with suppliers who are particularly reliable and with whom a good working relationship can be established. It is based on the understanding that goods shipped into stock will be:

  1. The correct part: It is possible that incorrect parts can be shipped and enter the production process incorrectly.

  2. Faulty parts: parts of low reliability, or not working at all.

  3. On time: it is essential for many production lines these days that product is shipped when required and not before or worse, after the required date.

To achieve a successful ship to stock the two companies involved, i.e. the supplier and the manufacturer must build a successful relationship. In this way any problems that arise can be resolved swiftly and satisfactorily.

Traditionally a manufacturer needing a supply of material for their production line would approve a supplier dependent upon its quality systems, financial reliability and the capability of its design and manufacturing organisation. The quality of the product supplied would then be assessed as an on-going process by a good inwards inspection or similar process.

This approach to the supplier purchaser relationship often resulted in a variety of problems ranging from conflict between the two parties, discovering the problems when it was too late and therefore untimely resolution of the issues, and there is also inefficient use of the resources.

Phases in ship to stock relationship

There are naturally a variety of phases in the establishment and maintenance of a ship to stock relationship. It also relies on the establishment of trust and performance. The relationship is less based on a confrontational relationship, but where both parties work together to gain a better work-flow. This benefits both supplier and purchaser.

To set up this form of relationship a number of stages are normally required:

  • Selection:   This is the first phase of setting up a ship to stock agreement. The suppliers product is assessed to check whether they meet the requirements for the manufacturer receiving he product, and also whether the quality is sufficiently high to be deemed as a candidate for selection. At this stage a ship to stock agreement may be defined and further information about the candidate company may be reviewed to ensure they are likely to be suitable.
  • Qualification:   This stage of the ship to stock programme requires both the product and supplier to be evaluated. For a ship to stock scenario, this evaluation should be rigorous and deep. The evaluation will included in-depth quality system and process surveys. In addition to this, exhaustive qualification of the product is needed. This in itself will have a number of stages that, depending upon the nature of the product may include: first article inspection, review of the engineering specification and method of manufacture; initial sample inspections of early product; assurance of manufacture using a mature production process; naming of supplier quality engineer who will be responsible for ship-to-stock issues.
  • On-going maintenance:   Once the product has been passed for ship to stock, it is still necessary audit the product and company on a regular basis. This is important to ensure that the ultimate product is of a sufficiently high quality, and also that the suppliers processes and systems are maintained as deficiencies in these would also result in a steady decline in quality. Typically three types of audits are undertaken:

    • System audits:   System audits are an essential element of maintaining the ship to stock quality from a supplier. They a\re often undertaken on a regular basis - often annually - and their aim is to verify the effectiveness of the quality systems and processes of the supplier. They can involve many elements including: drawing a specification control to ensure that the correct material is specified and old specifications or incorrect specifications are not released to their suppliers, purchase and material control, test equipment control, product acceptance procedures, corrective action procedures, record retention so that defects can be satisfactorily analysed, and the overall quality and management procedures.
    • Process audits:   Process audits also need to be undertaken. These audits check that the procedures and processes are being adhered to and that unauthorised short cuts are not being adopted.
    • Product audits:   As the product being shipped is the prime requirement, audits of the product itself must be undertaken on a periodic basis - possibly on a batch or time period basis. These audits can check that below the accepted number of deficiencies is being delivered. It can also check for a "creep" in the performance. Often as processes or even supplier input product change slightly over time, so does the performance of the product being shipped. Periodic audits of the product can ensure the required product is being accepted from the supplier. Finally this audit can check whether and acceptable performance on any corrective action is being achieved.

Ship to stock has many advantages, but there are also several dangers. These dangers can be minimised by ensuring that the correct processes are adhered to. Building a good working relationship with the customer, while still undertaking sufficient audits and checks to ensure that quality is maintained.

Ship to stock benefits

The process for allowing suppliers to ship to stock may appear to be quite burdensome. However it has been proven by many organisations that sufficient audit activity needs to be undertaken to ensure that the product being shipped directly into stock is of sufficient and consistent quality.

It has been found that some of the advantages of employing ship to stock include:

  • Reduces inventory levels because they can be employed on the production line sooner and they can form part of a just in time strategy.
  • Reduces time from delivery to availability on the production line
  • Reduces the overall level of inspection and audit.
  • Reduces the need for specialised test equipment - the item should be tested at the supplier's premises and he is likely to already have the required test equipment.
  • Reduces level of rejected product from the supplier because the emphasis is placed on the supplier to guarantee suitability. This also means that failures are found earlier in the process, causing less disruption to the overall production process.
  • Establishes mutual trust between supplier and purchaser, and this results in a more effective relationship.

Ship to stock is a recognised of supplying material and it is recognised that it brings some significant benefits, especially where large volumes of product are being shipped.

By Ian Poole

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