Managing Supplier quality management is emerging as a leading business practice and significant investments are being made in systems and processes to improve supplier quality. It has taken hold in the manufacturing sector but evidence shows that it is rapidly becoming applied in the services sector.
Supplier performance is about more than achieving the best purchase price. It is also about measuring and monitoring the supplier's delivery reliability, inventory levels and his all round responsiveness to problem resolution and communication.
There are some best practices to promote consistency and a high level of supplier quality:
- Track the cost of poor quality through measuring both materials and other related supply chain costs. Most companies fail to do this so they carry the costs of scrap, rework, return freight and recall expenses themselves. These costs should be recovered from the supplier and it is an effective way to introduce business discipline and accountability.
- Conduct regular audits at the supplier to ensure that they are following approved processes and identify deviations. Set up a plan for corrective actions jointly and agree a fair timeframe. This can be a provision in the contract.
- Implement a supplier scorecard or ratings for all suppliers which provides a relative measure of performance for a supplier against his peers. Recording levels of achievement mean that they can be tracked over time and used as a basis for improvement plans.
- Developing and maintaining an open and trusting interactive relationship between buyer and supplier. Having a collaborative planning process will promote mutual success.
- Our mission is 100% of materials and services used by Intel and its customers will function as expected at the lowest total cost. Clear and high quality communication between suppliers and Intel is one of the key items to achieve this mission."
- Anand P. Shah, Director, Materials Quality and Reliability, Intel Corporation
- Implement a formal web-based quality management system that links both organizations data and is user friendly where it is affordable. Also look for certification by International Organization for Standardization (ISO) that ensures a minimum level of quality for both goods and services. External product certification systems and services test samples on a repetitive basis to ensure consistency of quality.
Supplier quality is the responsibility of senior management as it is critical to the longevity and profitability of the organization.
Next week's tip is on identifying the various risks in a contract with a supplier and how best to manage them.