ASQ - Ch 18: Supply Chain Management (P. 490 - 512)

Deming's thoughts on supply chain contracts

must end the practice of awarding business on the basis of price tag alone.

Standardization

system that results in the identification of non-conformance and then applies that solution to other similar areas in the company.

corrective action

taken to correct a problem that has occurred. Not just a quick fix, seeks out root cause of problem, explores solutions and selects best solution. Implies the extension of this activity to prevent recurrence

Partnerships

Purpose of partnership is to mutually improve each other's operation in areas of quality, cost, delivery, cycle-time, response time and other areas to ensure competitive advantage.

Communicating with Vendors on Quality Problems with an Order

typically communication with vendors on quality problem with an order would be with the purchasing department that placed the order.

Supplier Performance Metrics

- defects (parts per million defective) -accuracy (order processing, billing) -timeliness (traditional delivery, just-in-time delivery, stock replenishment) -completeness (order quantity delivered, required paperwork submitted) -responsiveness (to inquires, corrective actions, complaint resolution) -returns for rework or repair -technical support made available (field adjustments, end-user training) -supplier's process capability (Cpk) -supplier's process performance (Ppk) -cost/price responsiveness -compliance -warranty performance

Communication to Supplier of Requirements

- formal written specs/ drawings created by purchaser (hardcopy, electronic), the supplier or a 3rd party org -samples of finished products/components provided to supplier -supplier QA (SQA) requirement manual -visits to customer plants by technical, quality or logistics personnel -written contracts on details of products, volume to be purchased within contract period, and purchase price -purchase orders and releases (phone/fax/mail/electronic) etc -other written communication -training provided by the purchaser's org to supplier personnel -purchaser-supplier info exchanges during joitn design reviews -purchaser furnishing order demand forecasts to suppliers -having supplier visit the purchasing org on ass-needed basis/regular basis -face-to-face contact by on-site rep from purchaser (often in government contracts) Should spell out expectations and consequences of nonconformance. Suppliers must be made aware of critically of quality of purchaser. Keep purchaser informed of changes/process delays/late materials/supplier delays/recalls/rework. Who to contact for types of situation.

Evaluating Supplier Improvement

- is the purchasing process measured solely on reducing costs, is purchasing measured on "don't pay too much, don't run out and never shut down a line? -is the focus on suppliers absorbing storage costs, causing higher prices? -is the total cost of procurement considered (price + poor quality + poor delivery) -are specifications given the suppliers correct and adequately defined? -are buyer-supplier relationships more adversarial than collaborative?

Supplier Performance Indices

-Past performance index (PPI) -Supplier performance index (SPI) -Commodity performance index (CPI) -Quality performance index (QPI) -Delivery performance index (DPI) Performance Index (PI) = (Purchased costs + Nonproductive costs)/purchased costs *This allows index to be a ratio of total costs of working with a supplier to purchase price. Also need to develop nonproduction cost (e.g., late deliveries etc.) to support this)

Buyer-Supplier Relationships

-basic buying and selling -bare bones -contractual transaction -customer supply -cooperative systems -collaborative -mutually adaptive -customer is king Buyer Responsibilities - e.g., explanation of levels of expected quality. Supplier Responsibilities - e.g., sample submission (as requested), record retention of produced product, possibly inspection/testing reports

Considerations when using supplier rating system

-both suppliers and purchaser must be involved in rating system design used and agree on acceptable performance level -metrics must be meaningful, fair, objective, easy to understand and little error in methodology & interpretation -costs associated with maintain rating system must be significantly lower than benefits derived from rating system - keep to minimum # of factors (too many can result in less effective action) -rating system & components must be periodically reviewed for cost-effectiveness, as well as potential improvement

Considerations of if a Supplier Rating System is needed

-given the nature of items purchased (value, cost, availability and criticality) and reputation of supplier of providing items - is a rating system worth the effort? -is quality alone the only criteria to be used as a rating parameter? -are charts show lots accepted as percentage of lots received and deliveries received on time as percentage of deliveries scheduled adequate? If you have levels with acceptable ranges this may be sufficient. -are more sophisticated quality/delivery cost indexes appropriate? The index may only deal with a fraction of the total cost of poor quality (e.g., penalties associated with ranges). -is a more comprehensive approach appropriate (to cover all aspects and effect of nonconformance?) This would be fair but most expensive and cumbersome to maintain

Additional activities to integrate partnership/alliance relationship

-joint design, marketing, and launch of new products/services -sharing of long-term strategies -communication of demand and resource planning info beyond a day-to-day/week-to-week horizon -lending employees to each other's firm for technology transfer and development opportunities -sharing in financial gains achieved by venture

Methods for determining potential supplier fits selection criteria

-obtain Dunn & Bradstreet (or other financial reports) -request formal quote (including specs) -management/selection team to visit supplier -confirmation of quality system status by on-site assessment, written survey or request of certificate of quality system registration -discussions with other customers served by supplier -review of databases or industry sources for the product line and supplier -evaluation of samples obtained from supplier (e.g., prototype) Then rate using standardized storing system; suppliers not selected should be contacted and informed of deficiencies in bid. Treat with respect, objectivity and professionalism (may need them in future)

Supplier performance metrics

-reinforce terms of contract (Purchase order accepted by supplier is a contract) -serve to link supplier organization with strategic objectives of purchaser -aid in detecting current/emerging problems -help purchaser's process owners in understanding overall process (and what is impt). -help make decisions needed from purchaser to keep supply chain viable

Actions Purchaser can take as result of nonconformance

-return defectives at supplier's expense -accept nonconforming products temporarily until can e replaced -accept nonconforming product at discounted price -accept nonconforming product that has been modified, adjusted or repaired at supplier expense -scrap nonconforming product received and deduct price charged from supplier's total invoice -bill supplier for purchaser's internal costs related to nonconformance -scrap nonconforming product in accordance with purchaser's policy and procedure -make arrangements with supplier for purchaser to provide technical assistance or training to improve quality.

Sample Partnership Survey

-what is a supplier partnership -what benefits do you expect (as customer) from a supplier partnership? -what are characteristics of your best suppliers *want suppliers that will go extra mile, have can-do attitude, honor commitments, and provide problem solving support

Frequency of Supplier Measurement

-what is purpose of metric? What is needed by when? How critical is item(s) to be purchased? -how much time/money will measurement require to maintain/use? -can measurement be used in controlling the overall process? Can an unfavorable trend be correct, and how quickly? -what are risks/consequences of not using the measurement? -will the measurement be consistently used over time for trend analysis? *Suppliers can be provided with bench marking data (must not violate confidentiality (can help them see how they compare with defect rates, delivery, corrective action effectiveness)

Guidelines for effectively managing partnership relationships

-what key products/services do you purchase from suppliers and/or partners -how do you incorporate performance requirements into supplier and/or partner process management? What key performance requirements must your suppliers and/or partners meet to fulfill your overall requirements? -how do you ensure that your performance requirements are met? How do you provide timely and actionable feedback to suppliers and/or partners? Include key performance measures and/or indicators and any targets you use for supplier and/or partner assessment. -how do you minimize overall costs associated with inspections, tests/processes/and or performance audits. -how do you provide business assistance and/or incentives to suppliers and/or partners to help them improve their overall performance and to improve their abilities to contribute to your current and longer-term performance? -how do you improve your supplier and/or partnering processes, including your role as supportive customer/partner, to keep current with your business needs and directions? How are improvements shared throughout your organization, as appropriate -do legal ramifications of the planned partnership prevent setting up the partnering arrangement.

Evaluation of Supplier's Manufacturing Processes

3 possible manufacturing process evaluations: 1. Prior product performance 2. Process capability analysis 3. Quality system review

Corrective Action Procedure Sequence

1. Assignment of responsibility 2. Evaluation of potential importance 3. Investigation of possible causes 4. Analysis of problem 5. Preventive action 6. Follow-up to ensure that preventive action is effective Principle Corrective Action Sources: -internal inspection and audit results -customer returns -customer complaints -employee interviews and comments -system and management audits.

Juran's Major Approaches for Supplier Surveillance Approaches

1. Auditing 2. In-process surveillance - monitoring manufacturing process (witnessing key events - operations, inspection, tests); critical characteristic inspection (by witnessing and by performing); joint troubleshooting of mutual quality related issues)

Steps to develop partnership or alliance relationship

1. Determine materials/services for which a closer relationship would be beneficial. 2. Be aware of any legal implications. 3. Identify suppliers with whom a partnership or alliance will be pursued. 4. Define expectations and potential risks for such a relationship. 5. Communicate and negotiate with suppliers. 6. Implement arrangements that are mutually agreed to. 7. Establish ongoing monitoring and communication to maintain the relationship

Juran's thoughts on supplier evaluation process

1. Evaluation of product samples 2. Evaluation of the supplier's manufacturing processes

Critical aspects of having a successful partnership/alliance relationship

1. Mutual benefit - both parties must profit (unless product is satisfactory and level of service is acceptable, neither will want to continue relationship). Problems should be approach collaboratively, win/win mutual benefit, creative solutions, strive to both make money while reducing cycle times. 2. Trust building - don't let momentary problems or opportunistic behavior derail relationship (even if planned to be short term relationship). Suppliers and customers must feel free to exchange ideas without fearing that proprietary info will be divulged to competitors 3. Open/complete communication - clearly and frequent communication. Immediate feedback is important. 4. Interdependence of parties - must both foster mutual assistance, joint planning, other forms of close collaboration, be open.

Bhote - 5 Generic Types of Supplier Rating Systems

1. No rating - reason is purchasing/quality know which companies are good/bad (no formal rating needed). 2. Quality rating only - rating based on the incoming inspection statistics. 3. Quality & delivery rating - graphic method - quality rating charted against delivery rating. 4. Quality & delivery rating - cost index method - rating system based on fixed dollar penalty for nonconformances. 5. Comprehensive method - measuring & rating of agreed to variables such as: quality, cost, delivery, service etc. with applied weightings.

Long-term Action Corrective Action Planning (Anderson, Wortman)

1. Organize appropriate team members/experts 2. Investigate and verify problem (including historical data) 3. Clearly define problem statement 4. Inform team of short-term activities 5. Present all known evidence and explain objectives 6. Brainstorm and reach consensus on potential cause(s) 7. Delegate investigative and analytical problem solving activities 8. Perform any further investigation, if needed 9. Clearly define support root cause(s) 10. Determine action to correct root cause problem 11. Implement action to correct root cause problem 12. Verify effect of corrective action through data and analysis 13. Report results to management

Poirier Partnership Steps

1. Share info in all necessary areas, including confidential info 2. Know each other's goals, vision, capabilities, personnel and technology 3. A task team will normally seek out viable suppliers for partnering 4. Conduct a brief seminar for potential partner 5. Submit proposals for partnership (pricing, delivery, quality service features, special needs for both parties) 6. Awards for partnership would be for major shares of business 7. Join task teams with members from both sides would work on problem areas or improvement opportunities. Joint training can be conducted. 8. Shared information would include sales forecasts, operating data, shipments, inventories, usages (everything they need to know).

Juran's thoughts on purpose of supplier assessment & feedback

1. To identify areas needing corrective action 2. To minimize risk of an increase in failures 3. To provide a balanced judgement of supplier performance 4. To provide an objective measure of supplier performance Customer ratings serve as effective change agents: demonstrate effects of poor quality on cost, move supplier to probationary status, disqualify supplier in the future

Supplier Rating - Need for multiple numeric assessment

A single numerical assessment is difficult because: a. Consideration of criticality of non-conformities b. Economic consequences of bad quality may be hard to determine c. Some factor may be subjectively measured d. May be a multitude of possible metrics. Some composite weighting options: NAPA - Quality, Price, Service Dobbins - Quality, Delivery, Service Bossert - Inspection Results, Documentation, Delivery, Price, Service, Effects of Problems

Dominick & Lunney thoughts on Supplier Alliance

A special, formalized relationship with a supplier. An alliance implies the 2 parties are working together for a common purpose. Partnership goes further implying a shared fate, mutual benefits, and equal relationship. Strategic relationships involve cooperative undertaking between companies and can involve technology, licenses, or supply/marketing agreements.

Supplier Certification Program

After supplier selection and approval (after supplier begins to ship product) - candidacy over, qualification and maintenance phases start. 1. Customer and supplier shall have agreed upon specifications that are mutually developed and justifiable and clear. 2. Supplier shall have no product-related lot rejections for a significant period of time. 3. Supplier shall have no non-product-related rejections for a stated period of time. Non-product related non-conformities include items like wrong count/billing errors are not as serious as product-related ones and quickly correctable. 4. Supplier shall have non negative non-product-related incidents for a stated period. This criterion covers incidents or problems that occur - even through inspection and tests showed conformance to specifications. 5. Supplier shall have a fully documented quality system (ISO 9001 is an excellent model to build a system even if registration is not the goal). 6. Supplier shall have successfully passed an on-site evaluation (by 3rd party or by customer). 7. Supplier must conduct inspections and tests. lab results are used for batch processes and statistical process control (SPC) is used for piece part production. 8. Supplier shall have ability to provide timely inspection and test data. Documentation is necessary when product arrives (Besterfield). **Can de-certify supplier after multiple major problems.

CQI-19

Automotive Industry Action Group (AIA) have developed detailed supplier management guidelines

Bossert's thoughts on Supplier Evaluations

Common supplier evaluated elements include: Quality, delivery, cost service, compliance A trend analysis of these items would be used to describe as positive, negative or static performance

outsourcing

Contracting out certain business functions or operations to other companies. They often: -don't directly contribute to the organization's core business (e.g., bookkeeping) -are operations or tasks in which organization w ishes not to engage (e.g., lab testing of raw materials) -are operations or tasks that the org doesn't have expertise nor wants to develop the expertise (e.g., fundraising)

Business Partnering

Creation of alliances or partners. Pooling of resources in a trusting environment focused on continuous, mutual improvement priorities.

Supplier selection criteria

Criteria should be defined by a cross-functional team. 1. Previous experience and past performance with the product/service to be purchased. 2. Relative level of sophistication of quality system (including meeting reg requirements or customer mandated system registration - e.g., ISO 9001) 3. Capability to meet current and potential future capacity requirements and at the desired delivery frequency 4. Financial stability of supplier 5. Technical support available and willingness to participate as a partner in developing and optimizing design and a long-term relationship. 6. Total cost of dealing with the supplier (e.g., material cost, communication methods, inventory requirements, incoming verification required). 7. Supplier's past track record for business performance improvement. 8. Supplier's code of conduct and ability to be socially and ethically responsible.

Evaluation of product samples from supplier

Customer requests product samples from supplier. Customer approval stages arise at each phase of production process. Typical sequence: 1. Supplier creates prototype that meets requirements. 2. If prototype is accepted, additional production samples are produced. 3. Customer tests production samples 4. If accepted, production is started.

Deming Thoughts on # of Sourcing Vendors

Deming suggested to reduce the number of vendors you work with for sourcing for a given item consistent with scheduling protection that minimize variation that negatively impacts quality. May also receive volume discount. Supplier should ensure product is correct and must prove it. May use surveys, preventive and timely correction.

Current trend in Supplier Relationships

Determining lowest cost supplier; trend to develop mutually beneficial supportive long-term relationships with suppliers. New trend is interdependence with vendor and purchases. Vendor selected based on quality, delivery, technology, life cycle cost and management philosophy.

Robert - Strategic Alliances Do's and Don'ts

Do: 1. Form alliance to exploit a unique strength 2. Form alliance with partner who has a unique strength 3. Form alliance for matching up to marketplace (once company may have production means and other may have marketing channels) 4. Form alliances around capabilities Don't: 1. Don't form an alliance to correct a weakness (weakness won't be gone and will be dependent on stronger). Weak partner will not be an equal partner in process 2. Don't form an alliance that is trying to correct awareness on its own 3. Don't license critical proprietary technology (may give other partner too much advantage in the long run) 4. Don't rally around certain products (significant advantage - may not be attained when products/markets are too similar) In partnership, an attempt is made to transfer a company and goals and objectives to supplier. Partnership is carefully extended to those business suppliers that will undertake mutual and continuous improvement.

Juran's Best Predictor of Future Supplier Quality

Evaluations used could be: a) Prior product performance (via government data banks ( Government Industry Data Exchange Program (GIDEP) contains engineering, reliability & maintainability data). b) Process capability analysis (Current AIAG PPAP - Production Part Approval Process requirements state that process capability studies shall be submitted for identified product characteristics. Initial production index value >/=1.67 P is required, ongoing production index capability >/= 1.33 P must be maintained) c) Quality System (may require customer visit) - usual steps are to assemble available information on the supplier; collect pre-survey data from supplier; organize cross-functional survey team, on-site survey of supplier (dependent on size & customer resources). Only really large companies can afford to audit most of their suppliers (may want to determine a minimal dollar amount of supplier work prior to onsite audit). For smaller companies holding an ISO 9001 or IS/TS 16949 certificate may be sufficient and only site visit for most critical parts. Note: ISO 9001, ISO/TJ16949 indicate quality system is certified but may/may not be applicable to product/process under consideration.

audit type most important for food

GMP & HACCP audit

External Certification Models

ISO 9000 Quality Systems Standards intro in 1987 led to retirement of many quality system standards but some are still required. APQP - Advanced Product Quality Planning FMEA - Failure Model & Effects Analysis MSA - Measurement System Analysis PPAP - Production Part Approval Process SPC - Statistical Process Control 8D - Ford's 8 Discipline Problem Tools If customer endorses IS 9001:2008 (supplier has no option but to become registered and comply with the appropriate standard. In general, ISO 9001: 2008 Standard focuses on: -Controlling the processes that produces conforming products -Controlling the processes that satisfy the customer -Establishing processes that identify the customer's legal and regulatory: (Product expectations, non-product expectations, specified expectations implied expectations) Note that this certification requires product verification by a) examination and b) objective evidence that specifications have been met.

ISO 9001 Emphasis

ISO 9001 emphasizes controlling process to both produce a conforming product and satisfy the customer. Continued ISO 9001 registration and self compliance is considered a supplier responsibility.

Supply Chain Contracts

Include: -specifications of items to be purchased, including quality & testing requirements -quantity to be purchased, or purchaser's forecasted demand level -price and delivery requirements -corrective action process to be followed -exclusivity constraints, and nondisclosure agreements -terms of rating system to be used to evaluate supplier's performance -time period covered by contract -contract cancellation terms **may want to identify and qualify back-up suppliers**

Long-term Corrective Action Outcome

Ineffective - check method of corrective action implementation. If unsatisfactory, report process, seek assistance from other problem solving source. Effective - assign follow-up verification using periodic or sample checks. Check similar processes or applications and implement same solution where applicable (called standardization). Report to Senior Management. Document action plans, systems/process, assigned personnel, commitment, standardization on corrective action forms and submit within time-frame.

Risk Assessment in Finding Supplier

Internal team should conduct risk assessment and determine if can keep in-house or if a short-term supplier would work before moving to a long-term supplier relationship.

Partners

Joint parties in a common business with a common goal or purpose. Parties are on same team, with equal rights.

Types of Corrective Action

Most companies require at least 2 improvement activity responses for each Corrective Action request (temporary - short-term, permanent - long term) Temporary - remains in place until permanent action (e.g., 100% inspection). Keeps audittee management focused on problem to expedite permanent corrective action. Temp/Permanent Corrective Action should reference target/implementation dates - may have up to 3 corrective action steps. When floor-level employees takes care of problem, actions are usually limited to "immediate actions". Temporary or permanent actions are needed also. Intermediate Actions (stop problem immediately) Temporary Actions (stop problem in near future) Permanent Actions (stop problem forever) Company should have documented procedure for corrective and preventative actions. Should assign responsibilities for short-term and immediate action. Permanent corrective action must address root cause and strive to eliminate them.

Supplier Assessment Metrics

Objective Metrics (specific measurable events): 1. Quality Metrics (% defective lots, DPM, ppm) 2. Timeline Metrics (% on-time deliveries, % late deliveries) 3. Delivery Metrics (important for JIT) - (% over/under quantities, % under/over quantities, % early deliveries (Bossert)) 4. Cost Metrics (difficult to define - % reported quality into, % supplied certifications). Subjective Rating Metrics (Bossert) - (responsiveness, timeliness/thoroughness of technical assistance, ability of supplier to follow instructions).

Common Communication Activities

Often concentrate on following: deviations, product unfit for use, design & change info, need for corrective action. Also need to routine communication channels and emergency channels. Positive communication should be shared. Supplier training can be a cost effective way of improving quality in purchased goods & services. Supplier training is a highly desirable communication and beneficial.

Material Acceptance

Once product is delivered, purchaser must determine that product meets requirements. Can be done by source inspection, certification of suppliers or receiving inspection. Amount/type of inspection depends on risk purchaser assumes (based on knowledge of supplier's quality system). Product may be directly sent to stock if supplier has been certified, has a certificate of certification or if source inspection. Product that has a certificate of certification (which is supplier-generated data or independent lab demonstrates that products meets requirements) is also sent to stock after certification data is reviewed. Product that has been source inspected (inspected by purchaser at supplier's facility to confirm complies) can be sent directly to stock. Incoming/receiving/inspection - used to verify product once it is received from suppliers. Receiving inspection can be a quick check of package or complete dimensional, visual, chemical or electrical evaluation. Inspection rates can be 100% for product mandated requirements or poor quality history more much less for other product. If inspection is necessary, most economical way to accept product is through use of statistical sampling plans (see Ch 15, Section 2). If product is rejected per sampling plan, supplier is to provide corrective action before any additional shipments can be made.

Assessing Supplier Capabilities

Rating systems to evaluate performance: -trigger suppliers' corrective action -plan actions to improve suppliers' performance -comply with end customers' contractual requirements, regulatory requirements, and other external standards -determine whether to continue or discontinue business with a supplier -provide a basis for recognition of suppliers for work well do.

Supplier Requirements

Should be detailed in writing and communicated/reinforced: a) Quote requirements - info to be included in quote, by when and who to submit to b) Product technical requirements - specs for product attributes that must be met and why. Pass through characteristics (PTC) etc. c) Process requirements - special requirements related to process d) Product verification & traceability requirements - testing supplier is obligated to perform, info to be provided to purchaser for verification (e.g., statistical data, certificates of analysis and identification requirements for product batches that allow recall if necessary e) Quality management system requirements - must be in place to ensure quality and specific quality management system standards that supplier must be compliant and/or certified f) Delivery requirements - how many orders, how product protected during shipment, mode of shipment, min/max batch sizes g)Order requirements - quantity of particular product that the purchaser currently wants, and the date on which it is due. h) Corrective actions required - process followed with problems and document a formal investigation and report back on what was found how to rectify I) Safety & security safeguards required to protect persons coming in contact with product/service j) Environmental protection requirements - voluntary/involuntary EPA parameters related to contamination, pollution, destruction, depletion of natural resources, intro of harmful organism etc. k) Financial requirements - related to supplier's financial stability. l) Management requirements - a to supplier's integrity and ethical behavior.

Partnership & Alliances

Should be win-win, build customer loyalty and create close-knit relationship to secure future business. Important that both parties build strategic relationship (eg., coalition, joint venture, strategic alliance/partnership)

Supplier certification process

Steps: 1. Development of certification criteria & process (e.g., selection, evaluating, rating, communication & reaction processes) 2. Identification of supplier categories for which certification would be advantageous 3. Evaluation of selected suppliers against defined criteria 4. Reporting of evaluation results, awarding of certification for those who qualify, and clarification of a future interrelated process (e.g., supplier reporting requirements) 5. Ongoing monitoring of supplier performance, with actions taken in accordance with the defined certification process

Phil Crosby's thought on Upper Management's main interest with Suppliers

Upper Management is interested in money, making money and not losing money.

Corrective Action Committment

Upper management is responsible for developing and implementing corrective action program. Implementation of corrective action should begin with detection of any quality related problem with purpose of eliminating/minimizing problem. Most chronic system problems cannot be solved by simple troubleshooting.

Most Common Tools used to present supplier performance elements to both supplier and business customer management

Use a graphical representation. Most commonly used: Trend Analysis Deming (and others) recommend control charts, but in reality control charts are rarely used for management consumption

Reporting of supplier performance

Usually done on regular basis (e.g., quarterly) using by one of following: -rating info is mailed to suppliers -rating info provided as part of visit to supplier (if significant problem to be addressed) -info is entered into an online database so individual suppliers are able to access their own rating -electronic report sent to suppliers -report given during regularly scheduled supplier performance meetings *Suppliers who receive unacceptable rating are often given a probationary period to resolve issues. If they don't they will be replaced. In cases where supplier is the only option, requires a creative approach in working with them. Those who consistently perform exceptionally well may be given supplier performance awards.

Supplier Feedback Reports

Usually focuses on economics and trend reports are preferred by Management. e.g., total $ purchased, % defect, $ to $ purchased, % lots rejected, corrective action activity, composite supplier rater

Considering purchaser-supplier partnership

When: -difficulty in obtaining suppliers, or the need to maintain stability of product/services in tight market -review of core competencies, purchaser might recognize supplier's capabilities exceed the company's own internal capabilities. In these cases, a better ROA might be attained by outsourcing these parts -cost cutting pressures from substantial price competition in market might force purchaser to search for ways to lower costs (internally/external) so profit margins can be maintained -combining resources can increase capabilities, flexibility, responsiveness, innovation so they exceed individual traditional purchaser-supplier relationships **May need to convince/court the other side.

ISO 9001:2008

a set of standards governing documentation of a quality program (Continual improvement in manufacturing and verified by items such as audit.) Continual improvement implemented once manufacturing processes are stable. Corrective Action Problem solving, error-proof corrective action impact, rejected product, test analysis (records retained). Analysts must lead to corrective action to prevent recurrence. Cycle time related to rejected product analysis should be consistent with determination of root causes, corrective action and monitoring effectiveness of implementation. Preventative Actions

Supplier Alliance (Dominick & Lunney)

a special, formalized relationship with a supplier. Implies working together for a common purpose, shared fate, mutual benefits, equal relationship. Strategic relationships involve cooperative undertaking between companies and can involve technology, licenses, or supply/marketing agreement

ISO 9001: 2008 Example Elements

a) 7.3.6 Design & Development Validation (prior to delivery/implementation of product. Records of validation results and actions must be maintained). b) 7.3.7 Control of Design & Development Changes (reviewed, verified and validated and approved before implementation. Should include review of design & development parts and products already delivered. Records of review results and actions must be maintained). c) 7.4.1 Purchasing Process (conforms to specified purchase requirements - type & control applied dependent on effect of purchased product on subsequent product realization on final product. organization will evaluate based on criteria. Records of review results and actions may be maintained). d) 7.4. 2 Purchasing Information (must describe product to be purchased including requirements for approval of product, procedures processes and equipment requirements for qualification of personnel, and quality management system requirements. Ensure requirements are adequate prior to their communication to the supplier. e) 7.4 .3 Verification of Purchased Product (establish/implement inspection/activities to ensure purchased product meets specified requirements. If customer is going to inspect supplier's premises, organization should state the intended verification arrangements and method of product releases in purchasing information. f) 7.5.1 Control of Production & Service Provision - controls in place to ensure production is made with right equipment, work instructions, oversight, measurement control and implementation of release, delivery and post-delivery activities. g) 7.5.2 Validation of Processes for Production & Service Provision - must validate any process for production and service when the resulting output cannot be verified by subsequent monitoring or measurement. Includes any processes where deficiencies become apparent after delivery. Validation should demonstrate the ability of these processes to achieve planned results. Review criteria determined, methods, approvals, process, qualification, methods and procedures for records & re-evaluation. h) 7.5.3 Identification & Traceability - identify product by suitable means throughout product realization (monitoring and measurement requirement throughout realization. Records and actions should be retained. i) 7.5.4 Customer Property - organization safeguard, verify, protect customer's property provided for use/incorporation into product. Any customer product loss must be reported and records maintained. j) 7.5.5 Preservation of Product - preserve conformity of product during internal processing/delivery to intended destination to maintain conformity to requirements. Preservation should include identification handling, packaging, storage and protection. Preservation shall also apply to constituent parts of a product.

Common Assessments of Supplier Performance

a) Questionnaires/audits - fill out survey with questions about organization and how quality system is designed/improvements etc. Or may conduct on-site assessment . Purchaser may also conduct satisfaction survey with own org, asking employees to rate supplier performance & problem resolution b) Product data - suppliers to provide quality data with each delivery (formal verification). Purchaser can analyze internal performance of product. A number of defects analysis is common in some industries (can tell when supplier was at fault. c) Delivery performance - supplier performance against delivery requirements can be tracked comparing received records against order requirement's. d) Corrective actions - when problems are reported, request formal corrective action (tracked process); can analyze these records to determine whether the supplier has been timely in its responses and effectiveness of corrective actions. e) Product price & total cost - ability to continually show reduction (total cost of doing business with supplier). Supplier performance is analyzed using standard form; numeric score applied to each category along with total score (compare against minimum score required to maintain contract)

Typical Reasons for outsourcing

a) improve customer organization's focus by allowing it to concentrate on essential activities b) gain access to world-class capabilities c) accelerate the benefits of reengineering d) sharing and reducing risk e) freeing noncapital resources or making capital funds available f) reduce operating costs g) securing resources not available internally h) increasing production capacity I) eliminating a function that is difficult to manage

preventative action

action taken to eliminate causes of potential noncompliance and nonconformance from occurring again in future. This involves interaction between purchaser & supplier and supplier's internal processes. Changes may need to be made.

supplier

any provider whose goods and services may be used at any age of the design, production, and/or delivery process

Past Performance Index (PPI)

based on both quality and/or delivery and/or best-value measures. Used for individual materials and can be calculated for each supplier that provides materials (then compare index)

Supplier Audits

can be used to gather data for periodic supplier scorecards but the data can also be gathered in other ways as well. Suppliers are audited against a quality system standard and may be asked to improve particular aspects of system. Some industries require that registered companies develop their suppliers based on requirements of industry quality management standard (e.g., TL 9000 - telecommunications). Audits performed against company's standards or other criteria (may measure strengths/weakness). Score may be given, may need to maintain minimum score. Audits must be done by qualified individuals (if auditing against standards, must e versed in standard), have ability to communicate with supplier personnel in manner that will result in willingness to listen to results (rather than feeling like criticized). Given deadlines to respond. Preventative & Corrective Actions required.

Containment Action Inspection Technique

consists of measurements taken to screen and eliminate defective products by inspection and removal (detection/segregation/disposition). Should be viewed as a "temporary" fix and should be a management philosophy. Guidelines for Containment Action Inspection (Anderson, Wortman) 1. Clearly define problem 2. Present problem to any contributing team members 3. Develop an immediate action plan 4. Determine (how to contain? how to repair? how to inspect? what tools or gages needed? who will perform sorting and/or repairing?) 5. Put short-term plan into effect as quickly as possible 6. Document containment activity and results (quantify and qualify) 7. Notify appropriate personnel

Juran- Joint Quality Planning Requirements for Detailed Discussions with Customers & Suppliers

detailed discussions related to quality planning requirements between customers & suppliers should focus on the following 3 areas technologic (all the technical specs, requirement for quality, conformation) economic (value rather than conformity; optimizing quality costs) managerial (defining responsibilities, documented reporting requirements, define communication channels, formal contracts, buyer/supplier management requirements, actions expected of supplier)

Strategic Alliances

development of an association (partnership) with 1 or more companies. Many alliances are formed when 1 partner is strong in an area that benefits the other company. Alliances allow partners to be bigger than they were prior to the alliance and benefit both parties.

Just-In-Time (JIT) programs

eliminate raw material storage altogether on some products by having supplier ship materials in smaller quantities more frequently and directly to point of use. Consider shipping lot size, frequency, time in transit, cost of inventory. JIT consists of 2 principle elements (procurement & inventory). Procurement involves scheduling and receiving purchased protection in a fashion that purchased product is maintained at a near zero level. JIT procurement would focus on same element as STS but addition of rigid: forecasting, scheduling, inventory cost control, freight transportation expense controls. Working in this environment requires close coordination between purchaser and supplier. It is best to level demand rather than have large swings (when feasible) that require the supplier to radically adjust output levels. When the type of business makes demand leveling difficult, production plans and schedules must be communicated more frequently. This often involves electronic communications between purchaser and supplier's advanced planning and enterprise resource planning systems.

ISO 9001 Preservation of Product Requirements

identification, handling, packaging and protection provisions. ISO addresses validation of design and development; exercise of normal care and customer property; the verification activities to ensure attainment of requirements.

Supplier Performance Index (SPI)

includes both quality and/or delivery measures. Tracks all materials provided by a supplier in order to sow overall performance trends

Commodity Performance Index (CPI)

often used when there is no past performance history

Feedback to suppliers

maintain regular meetings/communication that provide opportunity to provide feedback. Be sure to provide both positive and negative feedback. It isn't good when suppliers only hear from purchasers when there are problems.

Logistics

materials must be available when need, but done in a manner that considers the costs of transportation, receipt, and storage. This requires coordination of schedules across multiple organization sin the supply chain. Push/pull systems might be used to assure that material is available when needed

Supplier Quality Audit Conduct

may be conducted before/during contract execution. Audit Team (Anderson) Supplier Audit Items: 1. Management (philosophy, org chart, quality representatives, authority of quality dpt, management commitment) 2. Resource Management (planning & use of time, manpower, training, materials management) 3. Communication (closed loop management system, constructive testing capabilities, measurement control) 4. Manufacture (physical layout, machine/process capabilities, process layout, support activities - tooling & maintenance programs, lot tractability) 5. Inspection Procedures (production test and inspection, lab procedures, testing capabilities, measurement control) 6. Design control (maintenance blueprint design with change procedures, design capabilities, attention to reliability) 7. Quality Planning (long-term quality improvement plans/goals) 8. Purchasing (specifications, vendor relations 9. Quality Control (organizational structure, availability of resources, good quality planning and execution) 10. Quality Coordination (sub-contractor controls, Quality Cost Analysis, corrective action loops, handling of non-conforming product) 11. Data Systems (hardware, software, procedures, effective reporting 12. Quality Results (quality performance ratings, satisfied customers and sub-contractor results)

Quality performance Index (QPI)

organized by product or by supplier; takes into account things like manufacturing floor failures, scrap, supplier corrective action, and failures oat receiving inspection

supply chain management

process of effectively integrating and managing the supply chain, is a series of processes including planning, sourcing, making, delivering and returning aspects of supply chain management

Modular assembly programs

process of transferring additional business back to suppliers, who purchase a product and complete subassembly that was previously assembled by the purchaser. The result is that the purchaser receiving the subassembly as a completed item can more effectively integrate the subassembly into the final assembly

Push logistic systems

require purchasers to order product from suppliers as replacements for those items that have been used. Pull systems keep purchasers' inventory lower than the push method.

Pull logistic systems

require suppliers to ship according to purchasers' demands. Forecasts and demand must be closely aligned and communicated.

Root Cause Analysis (RCA)

review necessary to determine original/true cause of a product or process conformance

supply chain management (SCM)

role is to ensure that the right product/service, in right quantity, of right quality, get to end customer at right time. It may be inevitable that there will be conflicts, incompatible objectives, and breakdowns in communication. Full integration is a daunting task, requiring careful planning/implementation, highly effective support systems in all participating organization's, extreme patience, effective collaboration and negotiation. Very important when working across globe adding culture, politics, language, education level and so on. Need good information technology. Vital to establish strategic partners is vital to exchange of info and resources. Allow for shared risks and benefits. Decide early who at each organization is in charge of SCM is critical. Someone has to facilitate big decisions or chain will collapse.

Delivery Performance Index (DPI)

shows delivery trends and can be organized by product or supplier. late, early, and on-time deliveries are considered on basis of requested delivery dates

Supplier selection

the stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers. Should be based on type of product or service being purchased, uniqueness of product/service and total cost.

Most desirable method of quality evaluation of suppliers

the supplier's history reflects the performance over long period of time in a number of areas (quality, reliability, responsiveness etc.)

Supplier certification

third party or internal certification to assure product quality and service requirements. Allows consistent supplier performance to be reflected in operating practices for handling received material an awarding future business. Suppliers who are certified may receive higher priority for new business. Determining which suppliers that will be certified requires evaluation of potential impact on both purchaser and supplier. Certification should be considered if it could significantly reduce costs and enhance business relationship. Risks (e.g., regulatory mandates) for incoming product verification may rule out the option. Level of sophistication of supplier org and its process technology can support performance expected from certified supplier. Certification benefits: 1. Eliminates receiving inspection (supplier can ship directly to stock) 2. Customer/supplier partnership is created (each partner is responsible for appropriate quality) 3. Decrease number of suppliers to a manageable level (decrease overhead costs) Some organizations have changed to a preferred supplier program (requires outstanding product and service performance (main benefit is in new part development and subsequent purchases)

Ship-to-stock program (STS) - Bossert

utilizes supplier performance and supplier certification as a means of identifying suppliers whose materials can be received directly into the organization without verification. Material is moved directly into storage is received. Adv of this program: reduced inventory levels and elimination of incoming inspection STS came about due to a disadvantage of traditional procurement methods. Three phases - candidacy, qualification, maintenance. Candidacy - review supplier's past quality history, other requirements and other background information. Establishment of STS agreement criteria (quality ratings, audits & inspection requirements). Evaluated by cross-functional and manufacturing representatives. Qualification - survey candidate regarding additional necessary quality history, adequacy of process controls, adherence to quality process controls, adequacy of supplier quality system (process may include - # of 1st article inspections/evaluations; completion of a number of product lots with acceptable quality rating, thorough review of drawings and specification; review of manufacturing process and inspection (in detail); determination that product manufacturing process is mature; selection of supplier QC responsible for many STS program). Maintenance - process and product and system audits (system audits may be annual basis; process audit may be conducted periodically to assure customer that quality parameters are being met and procedures followed). Ship-to-stock is a forerunner of Just-in-Time (JIT) programs.