Supplier Quality Management is becoming more and more important, for organisations that increasingly outsource business processes to strategic partners. Also the increasing reliance on international suppliers, contribute to the need for effective supplier quality management.

Importance of Supplier Quality Management

With companies using suppliers and/or outsourcing their manufacturing to strategic partners across the globe, the supply chains can become very long. For example if a product is produced in the Far East and shipped to Europe or North America by sea freight, the shops and costumer would first see the product several weeks after they are produced. If an issue is fond with the product at that time, the cost would be huge due to weeks of finished products in transit.
In addition to the defective products, a significant cost due to lost sales and maybe increased air freight cost to remedy the situation would be added as well.

Improved Supplier Quality Management

Below are some best practices for improving quality from your supplier through supplier quality management. Ideally this should be part of your overall quality management system.

  1. Cost of Poor Quality: A lot of companies do not track the cost of poor quality COPQ their suppliers add to their business, and is unaware the significant cost they contribute with. There are different ways to track COPQ, some companies only include scrap, but often that counts for less than 50% of the actual cost. Additional items to be included to calculate the actual cost are as follows.
    1. Rework and sorting activity
    2. Line stop caused by the issue
    3. Engineers attention needed on the line
    4. Inventory cost due to defective parts
    5. Additional administrative cost (raise invoice, communication with supplier)
    6. Additional freight cost due to having new products shipped in express by air instead of sea.
    7. Any warranty and recall cost associated with poor quality on products shipped to the costumer.
  2. Cost Recovery: It is important to work with your supplier to improve their quality, an effective way to introduce accountability in the supply chain is using a cost recovery system. Implementing this in agreement with supplier, would not only enable companies to recover the full COPQ, but also push suppliers to solve issue asap and focus on improvement.
  3. Supplier Audit: Using supplier audit is one of the most effective ways to ensure the supplier follow the agreed procedure and to the specs originally agreed. The audit would identify any non-conformances in the manufacturing process, change requests, quality process etc. An added bonus with audits and jointly agreeing corrective actions is an improved relationship with the supplier.
  4. Supplier Scorecard: By introducing supplier score cards, you have a way to rank suppliers against each other, and follow their development based on data. Scorecards can be used in future business negotiation with suppliers. Depending on the business and available resources, some or all of the following factors can be used to generate the scorecard.
    1. PPM
    2. Amount of corrective actions over a specified period
    3. Response and resolution time on issues
    4. COPQ
    5. Amount of customer complaints
    6. OTIF
    7. Hours of rework
  5. Corrective Action: For every issue coming from the supplier, a proper investigation and problem solving need to take place. Information available on the issue (problem, delivery failure rate etc.) should be provided to supplier, and the supplier should identify the root cause and communicate corrective actions. Any changes to the process need to be agreed prior to changing it.

It you are interested in embedding effective supplier quality management into your QMS, a consultant from EQMS can help you on the journey.

Alternatively you can continue to our supplier audit section.

Go to Supplier Audit

Supplier Quality Management