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Tim Lozier

Quality Insider

Taking Quality Outside Your Four Walls: Supplier Quality, Part 2

Schedule and execute continuous audits of your supplier relationships

Published: Wednesday, July 11, 2012 - 13:25

In part one of this series, we looked at the various challenges associated with supplier quality management, and how these challenges can inhibit an organization while building a system to interact with its supply chain. Now let’s look at the ways technology can help overcome these challenges.

Real-time participation in the quality process

Ultimately, the key to providing a true supplier quality management system (QMS) is to include your suppliers in your quality process. By providing real-time visibility, suppliers will be able to participate in your processes, filling out their portion of the quality process quicker than using offline methods.

Most companies are not going to give a supplier full access to their quality systems. To avoid security concerns, many companies use limited access to their system based on the supplier type. Many software systems are able to set up access rights based on user profiles to limit access to applications, forms, and even fields. Look for a system that can provide access points for your suppliers into your system, but in such a way that they will not be able to see anything other than the data that are relevant to them.

This real-time participation can reduce the time it takes to correct quality issues by notifying suppliers via email. Web-based software systems allow suppliers to access your quality system with little to no client requirements.

Limited access is not the only way. Many software systems have integration tools that take offline forms, such as Microsoft Word and Excel, and export them to suppliers. Suppliers fill out their part, and the form is imported directly into the system. This is less of a real-time option, but it will allow suppliers visibility into your system.

Integrated receiving and inspection tied to supplier rating

In the dynamic and complex environment of supplier management, there are many touch points in which supplier goods must adhere to your quality standards. From receiving and inspection to nonconformance and deviation, it is important to maintain the highest level of quality from your suppliers.

In many systems, these elements are dispersed among several business systems (e.g., materials requirements planner, enterprise resource planning, quality management systems) with little to no integration. The result is an inconsistency of data, often relying on manual methods to effectively track the supplier relationship from receiving to production. Having a singular, integrated, and automated system to track supplier goods from start to finish is vital to creating traceability in the quality system and accurately determining the overall supplier rating.

Look for a system that not only automates the quality process with respect to positioning defective supplier goods, but also automates the receiving and inspection process. There is often a data gap between when supplier goods are received and inspected, and when a defect is found and the quality process takes over. This disconnect can result in critical gaps in identifying the lots, materials, samples, and other details related to the defective goods. This can affect the overall supplier rating and may result in a double entry of defects to the supplier’s rating profile.

Having a system that handles the receiving and inspection as well as the nonconformance, deviation, and corrective action processes is key to successfully tracking supplier quality. By integrating these elements into a holistic system, supplier quality is tracked seamlessly throughout the entire life cycle of the supplier goods as they enter your system. Furthermore, this integration automatically provides traceability into the supplier’s goods, and provides an accurate method of building the supplier rating in real time.

Tracking supplier goods from receiving to production

As supplier goods are shipped to the warehouse, they are tracked in a receiving record. The receiving department will determine the correct quantity and whether an inspection is needed. Inspections often follow a specific protocol unique to suppliers and supplier goods, and have unique sampling plans and specifications associated with them. In an integrated system, this is automatically determined and triggers an inspection record, with all the relevant data regarding that particular inspection such as skip lot profiles, supplier profiles, sampling plans based on acceptable quality levels, and more. The results of the inspection will determine the quality of the goods provided, and will affect the overall supplier rating. If an inspection fails, the system should automatically trigger a nonconformance and look for any planned deviation records corresponding to the goods. If there is a planned deviation, the goods are used as is; if not, then a nonconformance disposition type is determined and reviewed by a material review board. This can result in a supplier corrective action, updates to the supplier rating, or risk-based analysis on the supplier goods.

With real-time visibility, suppliers can partake in the corrective action, fulfilling their part of the investigation, without any bottlenecks associated with communicating the investigation. They can simply log into your QMS using limited access, and see which corrective actions are assigned to them. A corrective action that is drafted can be addressed within your company as well as to your suppliers on the same day it is issued. This eliminates the administrative overhead in seeking out the supplier’s processes and communicating offline about the issue.

Supplier ratings are affected by the quality of goods provided. The supplier rating is automatically updated in real time as the goods are delivered, received, inspected, and processed. This automation eliminates any mishandling of qualitative data related to the supplier rating and streamlines the entire process of supplier management to the quality system. As a result, processes associated with quality are directly and automatically inherited into the supplier rating. This data are now added to the supplier scorecard, which is made visible to the supplier.

Supplier scorecards and supplier exchange

The ultimate goal of supplier management is twofold: Use the best supplier goods for your product, and enable the supplier to improve its operations. By virtue of automated and integrated inspection, the quality of supplier goods is tracked and evaluated in real time, reducing defects in finished products related to poor supplier quality. Using these data, the supplier scorecard is automatically generated and sent to the supplier, notifying them of their rating, and allowing them to improve their deficiencies and remain competitive for your business.

Many companies are using web-based technologies to provide visibility into the supplier relationship through portal extranets called supplier exchanges. These portals enable suppliers to log into the system and view their overall supplier scores in real time, and view any deficiencies that may have caused low ratings. The benefit of this supplier exchange portal is that suppliers are able to take corrective action on deficient goods faster than by more manual means, and turn out better quality products faster, allowing them to remain competitive and maintain a high level of quality.

Adding risk assessment to the supplier rating and supplier scorecard

As stated above, the ability to effectively rate your suppliers and provide visibility into their quality of goods is critical to quality in your business. Many best-in-class companies are taking supplier rating to the next level by using risk assessment to understand not only the risk of quality events, but also to derive supplier risk from their daily quality activities. Although supplier ratings are integrated into the receiving and inspection process, quality events that occur after the product is finished and distributed can still arise. Using risk assessment, you can attribute supplier quality to events that occur after the product is released.

Let’s take a step back to understand what risk assessment means in a QMS. Typically, when an event—whether it’s a nonconformance, audit, or a complaint—enters the quality system, many companies use risk assessment to categorize the event. They want to know the severity, frequency, or even if the event can be detected, and how to identify high-risk vs. low-risk events. This helps them to assign corrective and preventive action to the event with the highest risk first, and prioritize their quality systems accordingly.

During the quality process, data are collected on quality events and the areas affected (e.g., products, customer information, product information, supplier information). These data are used to determine which production lines incur the highest risk events, which products may have the most high-risk events, and more. Following this logic, by collecting supplier information and doing a risk assessment on quality events within the system, a history of high-risk events can be built with visibility into which suppliers are attributed to those events.

The result is a “risk portfolio” indicating the supplier relationships that incur the highest risk in quality events. If a supplier relationship is associated with a large number of high-risk events, then this will affect the supplier rating profile. The benefit of building risk portfolios is that the supplier rating is affected in real time by post-production quality events that relate to specific supplier goods. Potential supplier risks can be identified more quickly, and more immediate actions can be taken to lower overall risk down the supply chain.

Supplier ratings and scorecards can now have a risk level associated with them. This provides quantitative evidence of their quality of product, efficiency of the process, and overall rating as a supplier to your company, both as their goods are received and inspected, and in a post-production capacity.

Maintaining the supplier relationship

Like any relationship, ongoing maintenance is required to ensure that your suppliers are following proper procedures, providing you with high-quality goods, and holding themselves to the same quality standards.

Supplier management should not only involve the process from a production and post-production perspective, but should also be preventive, using tools to audit your suppliers. A best-in-class QMS should have the ability to schedule and execute continuous audits of your various supplier relationships to ensure suppliers are held to the standards you require.

Much like you would audit your own processes or conduct maintenance on your systems, suppliers should be maintained in this fashion. Web-based tools have made this process simple and effective, providing a centralized resource for building and executing audits, and reporting and analyzing these data. If a supplier fails an audit, you can issue corrective actions automatically to correct potential issues. The last thing you want as a brand owner is to have a poor supplier process hold up your production. By automating the auditing and corrective action process, you can not only identify and mitigate potential quality gaps quickly, you can also automate the process so that the gaps are filled efficiently, with little time lost due to administrative tasks and communication bottlenecks.


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.