Supplier Quality Management Best Practices

Supplier Quality Management Best Practices
Supplier Quality Management Best Practices
Supplier Quality Management (SQM) represents the management of the supplier to ensure that materials flow down the supply chain smoothly and that quality requirements are met. 

Generally, the supplier is an external stakeholder in the business of a company, and such a supplier plays a significant role in determining the overall success of the company.

For companies operating in high technology sectors, such as the aerospace, automotive, or biomedical industries, the supplier base represents an important link in the supply chain, contributing significantly to that firm's capability advantage, a prerequisite to compete successfully in global markets. 

These firms view internal and external business relationships more from an extended enterprise or 'corporate family' perspective.

While suppliers are part of the corporate family, the business focus is on integration, close interaction, cooperation, and partnership, emphasizing mutual cooperation and continuous improvement.

10 Supplier Quality Management Best Practices

Implementing the following 10 supplier management best practices allows your company to build quality into your vendor partnership:

1. Establishing Clear Quality Standards

To assure that supplier quality is optimal, it is important to develop clear and lapse-free supplier quality norms.

To help achieve these norms, develop supplier quality standards that are developed through intensive communications predicated on concerns, complaints, and proven quality problems related to suppliers' products. 

Furthermore, suppliers' personnel should be continuously trained and nurtured on quality specifications and measurement methods. Such nurturing will increase the ability of suppliers to understand and meet the quality standards that are required.

2. Conducting Supplier Assessment

Companies that make products need to know if their suppliers can meet the required quality standards. Conducting and reviewing supplier assessments can provide insights to help you make informed decisions as to the potential future performance of your suppliers.

An assessment process determines the competency of the supplier and enforces recognition of the need for improvement in supplier activities.

The supplier assessment may have a dependable performance procedure, including a set of performance metrics, and must initiate action to resolve poor quality and overall deficient supplier performance.

3. Implementing Supplier Development Programs

Established suppliers that provide quality buy/resale items can and should be expected to make continuous improvements in both their quality and their costs over an extended period of time.

These items are strategically, passed through the supplier's factory gate to your factory. Select only strategic suppliers committed to a continuous improvement program.

Unsolicited demands for price/cost reductions typically prompt strategic suppliers to search for and focus on new dispersible customers while moving higher-quality customers' orders to the end of the delivery schedule.

Only a win/win strategy will work. Remember, when you grind down one of your suppliers, you are creating the opportunity for one of your outsource competitors to rise.

4. Ensuring Effective Communications

Effective communication between the purchasing organization and key supplier personnel ensures that all parties understand the performance requirements and the business objectives.

For example, the supplier should understand the role played by the specific commodity or service it supplies. If a part is so important that its failure would result in the stoppage of all production or a plant shutdown, the supplier should be aware of it.

The supplier should be aware of your expectations relative to your production schedule, customer requirements, and the level of on-time deliveries you are expecting. In addition, the supplier should understand the use of any new technology that is critical to the part or service.

Failure to communicate customer expectations related to key objectives and strategic or tactical information advances the risk associated with poor quality performance produced by poor supplier performance.

5. Utilizing Technology for Supplier Monitoring

Modern technology allows manufacturers to use the internet, desktop, and smartphone applications to monitor and respond to supplier nonconformances.

The good thing is that using these types of technologies can help identify common supplier issues, which may also point to common part problems. Access to live quality cost data can influence what supplier performance metrics a manufacturer chooses to utilize.

Choosing the right metrics can change how a company interacts with its supplier, allowing the company to spend less time monitoring and more time on supplier process controls and problem prevention.

Technology is available today that allows manufacturers to record nonconformances on the shop floor, send quality data to the supplier before parts are received, and prioritize work that needs to be done to contain nonconforming materials.

6. Risk Management in Supplier Quality

From a risk management standpoint, there are two primary concerns about supplier quality. The first is quality-related risk, which can lead to customer dissatisfaction, rework and warranty administration costs, and liability.

The second is the risk of business disruption, which can be caused by capacity constraints, shipping or delivery problems, and, in extreme cases, bankruptcy.

Most buyers have spent little time considering which suppliers might represent significant quality or other risks. As a result, many companies expend a great deal more effort on managing the risk associated with supplier insolvency.

While this is clearly a much greater financial risk, in reality, the same few large suppliers are covered by this risk management process, whereas many of the more significant quality-related risks are hidden in the balance of the supplier base.

7. Continuous Improvement Strategies

As you evolve and your products or services evolve, it's important to have suppliers that recognize the need to keep up and help you remain competitive.

Not doing so is a recipe for being left behind, so it's critical that these quality commitments extend outside your walls. Make sure these goals also apply to suppliers' back-end systems and ways of doing business.

While we're not talking about expecting them to operate in the same way that you do, simply make sure your suppliers make a similar investment to keep ahead of business challenges.

No business operates independently, and an important set of suppliers can help you continue to raise the bar, drive innovation, reduce defects or rework, and maintain costs.

Prioritize long-standing suppliers who do what's right to invest, evolve, and demonstrate that they understand factors that are critical to you. Keep in mind that your end products or services rely on many services and parts from other businesses.

A failure in any link in supply chain mathematics is a failure. So, take advantage of those critical components of success that ultimately separate poor, good, and consistently great businesses.

8. Compliance and Regulatory Considerations

Businesses in highly regulated industries rely on critical supply chains to assure product safety and compliance.

Manufacturers, suppliers, and contractors can directly affect regulatory and compliance risks if they fail to meet the quality, safety, and regulatory standards set by the FDA and other authorities.

Scrutiny on quality control, manufacturing processes, compliance, and governance necessity is increasing, and so are penalties for suppliers and businesses that do not meet compliance requirements.

There are numerous instances of fines, injunctions, and recalls due to regulatory non-compliance. This has driven up the cost of compliance significantly for heavily regulated businesses.

Having a well-thought-out SQM process helps control this risk by ensuring that suppliers are meeting their regulatory requirements. Some of the related compliance/domains include:
  • Quality management
  • Training management
  • Document management
  • Change control
  • Audit and supplier management
  • Risk management

9. Building Strong Partnerships with Suppliers

A strong partnership that looks for mutually beneficial benefits will help create an ongoing atmosphere of problem resolution and avoid problems.

This relationship is built on knowledge and, if done correctly, will help drive innovation, creating a strong unique selling proposition and relevant product and process excellence in the marketplace.

Acquiring a competitive, quality-minded supply base can be achieved, but it is not a short journey. It takes leadership, the dedication of the organization to maintaining a strong supply partner, and knowledge based on proven quality and business philosophies to ensure favorable results.

10. Measuring and Evaluating Supplier Performance

A formal system for measuring, scoring, and evaluating supplier performance is an indispensable component of a strategic approach to supplier quality management. Many organizations depend on reactive, one-to-one feedback from top internal customers.

This subjective feedback is weak in root-cause analysis capability, not necessarily objective, and frequently tainted by personal relationships. Worse, when internal customers skip the structured feedback process, supply management often has no performance input at all.

By the time supply management can demonstrate ongoing supplier non-performance, it's usually too late. Supplier-preference inertia relegates the organization to using poor performers and fixing mistakes rather than identifying and weeding out substandard suppliers in favor of better performers.

Institutionalizing an ongoing supplier-performance monitoring system not only helps the organization recognize and reward high-performing suppliers but also helps the supplier avoid common "bad mood" issues experienced by many customers and avoid repeated service recovery requests.

Conclusion: 10 Supplier Quality Management Best Practices

A supplier quality management system mandates that suppliers work closely with the customer to use process improvement techniques, design changes, targeted audits, and measurements as an early warning system to prevent repetitive errors.

There are several best practices and processes for managing relationships with key suppliers or strategic suppliers. These best practices can be implemented to manage the quality of buy/resale items and promote continuous improvement.

These best practices assist both your internal Six Sigma and lean programs. You can also use supplier development to address poor supplier performance or to support buy/resale items from new suppliers.
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