Top 5 Supplier Quality Management Strategies

Building a foundation of quality throughout the value chain

Published: Monday, December 9, 2013 - 16:46

Join Matt Littlefield, president and principal analyst of LNS Research, and Mark Bienkowski, supplier quality process and audit manager of GE Healthcare, Thurs., Dec. 19, 2013, at 11 a.m. Pacific for a Quality Digest webcast, “Building the Foundation of Enterprise Quality Management Throughout the Product Value Chain.”

Building a product isn’t the same as it was 10 years ago, and it won’t be the same 10 years from now. Business is evolving at a rate such that market leaders have no choice but to continually adapt to emerging strategies such as mobile apps, cloud computing, and big data to gain an edge over the competition.

As relationships with global partners become more of a necessity as well as a focal point in business, the need for adaptation is undoubtedly a top-of-mind issue for those responsible for supply chain management.

The complexities of today’s supply chains rise proportionately with the complexities of the products they serve. Just consider the intricate web of suppliers required to make a product like an airplane, which requires thousands of separate manufacturers and businesses. Whether it’s regarding supplier quality, compliance, or another area, managing that many suppliers can easily become overwhelming and disjointed. Advancements related to people and leadership, business processes, and technology architectures are helping to battle this.

Many market leaders are executing supplier quality management (SQM) so well that it’s become a source of differentiation from close competitors. The strategies employed to achieve this level are always maturing and building on past successes. We’ve identified the top five you need to know about.

1. Build an integrated IT architecture that extends deep into your supply chain

It’s no surprise that today’s large (and even small) organizations face an IT architecture composed of disconnected data sources and systems. These solutions are often implemented to solve a set of problems without considering the longer-term strategic vision of a seamlessly integrated set of enterprise solutions that tie together everything from corrective and preventive action and failure mode and effects analysis (FMEA) to document control, employee training, and the production part approval process (PPAP). For supplier quality management this raises some major challenges, especially if financial, engineering, quality, and operational systems are disconnected.

Market leaders are thinking about the big picture, investing in integrated solutions that enable communication and collaboration from procurement up through design, manufacturing, and service. This means companies are creating closed-loop quality management by integrating enterprise applications across the value chain. Supplier quality management software, which can be delivered standalone or through an extension of existing enterprise solutions like EQMS, PLM, MOM, or ERP, is much more effective when it is part of an overall integrated IT architecture with access to enterprise financial, product, supplier, and asset data.

By adopting these emerging solutions, companies are able to automate many paper-based and manual processes, and manage them in a single system rather than numerous disconnected ones. Integrating these data sources with other enterprise applications delivers levels of visibility and interaction between functional units that some companies have been striving to achieve for quite some time.

2. Implement a supplier-risk scorecard solution that’s standardized across the enterprise

With suppliers comes risk, and supplier-risk scorecards are critical to managing, understanding, and mitigating that risk. Companies that rely on many suppliers develop supplier-risk scorecards and processes to evaluate and rank suppliers based on historical and current performance. When you’re dealing with hundreds of suppliers, such a process can become the cornerstone of your SQM initiatives.

It’s important to develop a standardized way to evaluate and rank suppliers that extends across the enterprise. Again, this can be achieved with many of today’s enterprise supplier quality solutions, as well as other enterprise systems. The elements of standardization and centralization are key for improving the integrity of your enterprise risk portfolio, as well as for providing data-backed insight for decision makers in different business units aiming to work with suppliers.

3. Identify a list of metrics and KPIs to monitor supplier performance

Every department will have its own way of measuring supplier performance, but it’s advisable to develop a list of supplier metrics and key performance indicators (KPIs) that should be measured across all business units. Standardizing the way these metrics are calculated and reported on will deliver major benefits when it comes to identifying areas for improvement and determining which areas require more resources or some type of change. Metrics to consider include:
•  Success of new product introductions
• Defective parts per million
• Percentage of defective products received
• Percentage of returned products
• Chargebacks for nonconformances
• Complete and on-time delivery
• Percentage of products out of compliance or quality standards

4. Create a collaborative environment and establish processes for managing supplier compliance and audits

Because many suppliers are located around the world, there will always be the challenge of making sure the parts and components being produced and delivered meet compliance requirements. Compliance requirements may be internal or external specifications, or more formally, meeting government regulations or industry standards. Market leaders, especially in highly regulated industries, are leveraging supplier portals to communicate requirements and verify that they’re being met.

Supplier audits can support meeting compliance requirements, but not every organization has the resources required or the processes in place to conduct them. It’s crucial to establish a collaborative relationship in conjunction with a formal audit-management plan, which delineates the frequency of onsite visits, reporting requirements for suppliers, and the depth into the supply chain to which you’ll go when auditing suppliers. If these relationships are built on trust, and both parties see that increased focus on quality delivers benefits to all, initiatives and change are much more likely to be effective.

5. Hold suppliers more accountable for the quality of their suppliers’ products

One of the challenges of working with suppliers is that they have their own supply chains. Not only do you have to rely on your supplier to perform, you also by default have to rely on your supplier’s suppliers. Many market leaders are extending the responsibility of supplier quality management down to suppliers, holding them accountable for the quality of products. In some cases, market leaders are even investing in their suppliers’ SQM capabilities to reduce the potential for, and cost of, poor quality.

Building a foundation of quality throughout the value chain

Interested in taking a deeper dive into supplier quality management, supplier risk management, and the role of enterprise quality? Join LNS Research’s president and principal analyst, Matthew Littlefield, and GE Healthcare’s supplier quality process and audit manager, Mark Bienkowski, for a webcast on the topic. The duo will discuss emerging best practices and strategies for ensuring supplier quality, as well as examples of the strategies used by GE Healthcare to successfully manage quality at the enterprise level.

About The Author

Mike Roberts

Mike Roberts is a research associate with LNS Research based in Cambridge, Massachusetts. LNS Research provides executives a platform for accessing unbiased research and benchmark data to improve business performance. Roberts writes research papers, case studies, and contributes regularly to the LNS Research blog, where he covers topics including enterprise quality management software, manufacturing operations management, asset performance management, sustainability, and industrial automation 2.0.