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Tim Lozier

Quality Insider

Taking Quality Outside Your Four Walls: Supplier Quality, Part 1

How can companies increase visibility into their supply chain?

Published: Friday, July 6, 2012 - 15:40

In today’s dynamic business environment, the supply chain plays an ever-increasing role in bringing products to market. As businesses continue to evolve and improve efficiencies in the production process, suppliers play an important role in ensuring business objectives are met. The growing global market has increased the demand and specialization of products, and more than ever, organizations are relying on strategic supplier partnerships to help ease the costs of meeting these demands.

As a result of these partnerships, the supply chain often becomes very long and extensive, with suppliers manufacturing components in various countries and regions, each specialized to fit a particular niche required by the end user. With such widespread suppliers and a lack of visibility, supplier quality is often overlooked or not maintained, which has an adverse effect on the business, and can lead to poor quality of product, lost inventory due to quality issues, or even stock-outs of particular product lines.

How can companies streamline their supplier quality management to increase visibility into the supply chain, and incorporate their quality standards and practices down the supply chain?

Let’s outline several concepts into how companies can extend their quality management system to their suppliers, and effectively take quality outside their four walls.

Challenge No. 1: lack of visibility. Simply put, a quality system is only effective if it produces a high-quality product. Many companies streamline quality operations within their company—improving processes, taking corrective action, maintaining compliance to standards, and more. But as demand grows, these companies must outsource to suppliers to provide them with the components they need to continue to meet such demand. If supplier quality is poor, then the overall product suffers. Without visibility into the supplier’s quality system, it’s difficult for companies to ensure a high-quality product.

Challenge No. 2: cost of poor supplier quality. When a product fails to meet quality standards, it is often the parent company (or brand owner) that must incur the liability for such events. Companies will track the cost of poor quality (COPQ) within their organization, but often fail to track the full cost of poor supplier quality (COPSQ). While many companies will track material costs as they relate to suppliers, the nonmaterial costs such as quality department overhead, inspection overhead, supplier communication, and administrative costs are often overlooked. As a result, the overall COPQ becomes inaccurate due to supplier quality issues above and beyond materials costs. Companies often attribute this to cost of doing business, leading to higher unit costs. Making suppliers liable for both material and nonmaterial costs can help to recover costs due to poor quality.

Challenge No. 3: lack of communication. When companies enter into a supplier relationship, certain procedures and practices are agreed upon. But without a continual auditing process, there is no way for the brand owner to effectively ensure that the agreed-upon practices are being followed. Without constant supplier collaboration, processes such as nonconformance and corrective actions can ultimately misalign the supplier’s practices with the brand owner’s, leading to quality gaps in the supply chain.

Challenge No. 4: Technology prevents integrated relationships. Technology often plays an important role in how your systems integrate with those of your suppliers. If your systems differ, there may be technology hurdles to overcome. It’s sometimes difficult and costly to bridge the technology gap, and many companies are either reluctant or do not find it cost-effective to make the effort to integrate their systems. The result is gaps in communication from one system to the next, and the overall traceability of quality processes suffer. Being able to communicate with your supplier on a compatible technological level is critical in maintaining a consistent system.

Challenge No. 5: security concerns/fears. Supplier relationships should be interconnected, but there is a certain level of fear, uncertainty, and doubt (FUD) when allowing suppliers into your systems. Although it is important for suppliers to be involved in your process, it can be a detriment if too much access is granted. So many companies opt to not integrate with suppliers, simply out of security concerns or fears that suppliers may “know too much.” While a valid concern, eliminating your suppliers completely from your system can harm your efficiencies in the relationship, increasing gaps in communication, and limiting quick resolution of quality issues.

Lack of visibility down the supply chain can lead to increased cost of poor quality, limited liability in poor supplier quality, and a breakdown of following best practices.

Closing the gap with suppliers

There is hope, however, in implementing a best-practices approach to supplier quality management. Creating visibility down the supply chain can be achieved through integration of your quality management system (QMS) to your supplier’s. In part 2, we will take a look at some of the best practices to consider when integrating your QMS with your supply chain, and at various ways you can overcome challenges to build a supplier QMS that facilitates quality throughout the supply chain.

Discuss

About The Author

Tim Lozier’s picture

Tim Lozier

Tim Lozier is the director of product strategy for EtQ, in Farmingdale, New York. He has extensive experience in the software industry, and has been involved in the creation of leading-edge technologies in user-interface design and development. He began his career in digital marketing before taking a turn into software design and marketing at Quark Inc. Since then, he’s never looked back—helping to foster the development (and blog about) leading quality management software solutions.