The Ultimate Key to Supplier Quality Management: 6 Crucial steps

Supplier Quality Management: What does it mean to you and your organisation?

All of us today are dealing with third party suppliers whether overseas or just around the corner. The bought out parts, raw materials, packaging or any other sourced material or service that is procured by us is fundamental to our overall businesses. How many of you have experienced delays and the headaches caused due to the your Suppliers? These delays can have many root causes such as poor definition of requirements in terms of Cost, Quality & Delivery or a lack of understanding by the supplier.

How many of you have had qualified supplier s also fail deliveries?

How many of you have had world class suppliers defaulting on meeting the quality requirements in a particular part/project?

I am sure many of you would have nodded yes to these two questions and would have had such bad experiences. Now, what needs to be understood is that its not necessary that the supplier is at fault, most likely the problem is that the Quality requirements were not well defined at the start of the project, which could have led to such a failure specially when its a qualified supplier.

Today I want to address what we can do specifically around the Quality Definition and understanding to help increase the quality of our Suppliers and reduce unwanted delays. There are many options and opinions that finding the right quality supplier is a challenge or is next to impossible and you will have to either compromise or do a lot of re-work if you try to source. Albeit not all Suppliers are of poor quality; however it does imply room for improvement and the guidelines suggested here, applied with a little common sense, can make a difference.

This article will focus on structuring Product Qualification Criteria, but the work done here has paybacks for the overall quality of the delivered goods in the long term.

Often the contractual arrangements between the organisation and the supplier specify a certain level of quality that needs to be delivered. If the supplier does not meet the specified criteria, remedies are often prescribed such as Debit notes for quality, segregation, administrative charges, re-work etc. Invoking these remedies is not a preferred option because they may involve time delays, haggling and often times a souring of the relationship. The ideal option is that the goods/services are delivered up front with the right level of quality and this can be achieved by working together.

To improve the quality the key point when dealing with your supplier is partnership building. Remember, your supplier can only be successful if the relationship develops a partnership or a "win -win" scenario, fostering quality and savings for both parties. Any business relationship which does not build and continue to build a strong partnership will in the long run degrade. Quality concerns will surface and that could possibly end the partnership and we all know how expensive and time consuming it is to develop a new supplier relationship as it will also go through the entire cultivation and development cycle.

Information sharing and well laid out Testing & Inspection Plan is the key component to the success of any part/project development. The basic 6 step framework is as follows:

1. Create Pre-acceptance criteria thru documented Drawings, specifications, quality standards.

2. Review and walk-through the complete Quality Acceptance Criteria with the suppliers.

3. Develop Test Cases and expected results.

4. Create execution plan and execute the plan as defined.

5. Review results: acceptance of criteria

6. Product delivery

Create Pre-acceptance Qualification Criteria: Joint Effort

Work together with your business partner/supplier to decide on the best approach for validating product validation and acceptance. Take advantage of each others' strengths to determine success criteria. For example, an acceptable pass rate on jointly developed Inspection Standards is a way to measure success. Focus your efforts on each others' strengths and expertise. Remember pre-acceptance is your way of saying to the vendor we will not accept the goods/services to do our internal validations until it meets certain specific standards that we jointly agreed upon at the supplier end itself. It also allows the supplier to make sure that their products can pass many of the tests that your organisation will execute before they deliver them,

Review and Walk-through the complete Quality Acceptance Criteria: Agree to execute plan

It may appear redundant; however a detailed walk-through of the jointly developed acceptance criteria and expected outcomes is recommended. Both parties will bring to the table assumptions or expectations that may not be clearly understood. A thorough review will uncover potential misunderstandings.

In some cases the products delivered are adjustments to an existing products developed for some other customer. The vendor may have similar or same product however it will need to be modified in order to meet your acceptance criteria as that will differ from customer to customer even for the same part

In devising an Acceptance Criteria many high level issues must be resolved such as

? What is core functionality and what are the modifications?

? Who inspects/tests what?

? How do we know that the supplier has inspected/tested their parts?

? Is there a complete Test Plan?

? What are the Test cases for previously developed similar parts? Are they documented and available for reviewing?

? How will the vendor prove that the core tests were executed? What all documentation would you need? What is the PPAP Level (Automotive Industry prescribed Production Part Approval Process) that you expect?

? What testing will the 3rd party execute to test the product modifications?

? Are these modifications included in regression testing?

? Who gives the final approval? Its you or your end customer?

Develop Test Cases and expected results: Joint effort

The creation of independent test cases may be necessary due to logistical reasons. However, sharing the testing scenarios will reduce the number of defects. If the vendor's testing team has access to these test cases and has the ability to execute them in their testing labs, you can expect less defects. The added benefit is that the vendor's testing team will also be in a position to highlight potential requirement gaps. In general, testing teams- vendors' understanding of the product (hands on daily) will verify design or product upgrades prior to any development.

In some cases a more complete pre-acceptance test can be negotiated. Here the vendor's product must pass specified tests before the organisation accepts the same. This has several advantages.

? Products will be delivered to an expected standard that will allow your organisation to start testing without having to deal with defects which should have been found by the vendor.

? The vendor has specific criteria that must be met and therefore can work more efficiently to meet them.

? The amount of politics between the two parties is decreased.

Create Execution Plan: Joint effort

Test planning in advance will reduce the "blame game" when dealing with system defects. Plan defect correction cycles in advance and worst case scenarios. Don't assume the happy path for execution based on the above guidelines. A jointly developed execution plan dealing with tough issues will continue to foster a positive partnership; when the going gets tough.

Issues which need to be resolved vary from general to quite specific. Here are some examples of the type of decisions that are required to be negotiated:

? Where the testing is to be executed, vendor site, third party lab, in your organisation or at the final customer end?

? Who will conduct what testing?

? Will there be representatives from both organisations?

? Will the vendor perform their test/ inspections and then your organisation will repeat those tests/inspection and some others before accepting the product?

? What inspection methods will be used for testing and inspection?

? Who will provide the gauges or any specific instruments for the testing/inspection?

? Will the testing be completed in a special environment and who is responsible for setting this up?

? What is the turn around time for correcting defects once found?

? How do we determine that pre-acceptance testing has been completed and the product is now deemed ready for delivery?

It is a must to have same gauges, same inspection methods and same/similar equipments in order to co-relate what the vendor has inspected versus your results as many a times the difference lies in the methodology of testing or inspection and not in the product quality.

Executing and Reviewing Results

Inspection cycles have the advantage of ensuring quality releases. If expectations are planned in advance and jointly agreed-upon as suggested here, reviewing vendor testing results prior to delivery has many benefits. Defects or design issues can be addressed in the vendor's shop where corrective measure can be taken efficiently and can potentially reduce timeline impacts.

Product Delivery

A well defined incoming inspection and testing standard which ensures that the product delivered by the vendor meets all Testing and Inspection criteria will ensure that zero defect product flows to your shop floor as well as negated the chances of any issues at the end customer.

Once you have enough data to support that the goods being delivered by the vendor are meeting quality standards 100%, then you can think of making the vendor a Direct On Line Supplier (DOL) which must be thoroughly reviewed, communicated and accepted by the vendor and they should then take the onus of any quality defects on the shop floor or at end customer via a documented agreement.

A well worked out structure and good communication is now the single most important factor to increase the chance for success. The above might sound very complicated however time spent of planning the quality strategy at the start of a project will go a long way in ensuring a smooth flow of products/services in the entire project life cycle and will save the organisation millions of dollars in defect management, product liabilities, customer complaints etc.

Parmeet Singh Sood is a Serial Entrepreneur who has built various brick and Mortar business and grown them at astonishing pace. Mr Sood grew his family business of making Automotive Components a 100 times in 15 years and took it from being a Cottage Industry to being the leaders in their product segment.

CMX Group with its parent company based in India having 3 Manufacturing facilities spanning 75000 Sq. Ft. pr production area, employing 350 people, exporting to 51 countries, producing 215 million components annually for the Automotive, Railway and White goods industry and have history of 45 years. CMX has global warehousing for JIT supplies to its OEM customers with on ground Sales & Technical Team in its major markets to work as a local supplier for its customers. (www.climaxoverseas.com

Parmeet Singh Sood is also an Author, Trainer, Public Speaker and India's foremost Business Acceleration Consultant with a mission to help Small & Medium Businesses to achieve accelerated growth and the Entrepreneur being able to have time & Financial freedom in doing so.