What is Supplier Quality?

Quality Glossary Definition: Supplier quality

• Benefits of supplier quality management
• Supplier selection criteria and strategies
• Supplier quality certifications
• Managing supplier/buyer relationships
• E-business in a lean supplier network
• "Cost out" vs. "price down" strategies
• Supplier quality resources

Supplier quality is a supplier’s ability to deliver goods or services that will satisfy customers’ needs. Supplier quality management is defined as the system in which supplier quality is managed by using a proactive and collaborative approach.

It's in an organization’s best interest to ensure that its service or material suppliers are providing the highest quality products and services while also conforming to pre-established requirements. This is often accomplished through the use of supplier quality management systems (QMS), which allow companies to monitor supply chains and inspect or audit materials and services at regular intervals.

Supplier quality management begins early in the product design and supplier selection process. It continues through the entire life cycle of a product and for the duration of the relationship with that particular supplier. Proper supplier quality management tactics include taking inputs (such as employee work, marketplace requirements, operating funds, raw materials, and supplies) and effectively and efficiently converting them to outputs deemed valuable by customers.

Supplier performance and quality management go beyond securing a low purchase price or getting the best deal on bulk materials. It also includes:

• The costs of transactions, communication, problem resolution, and switching suppliers
• The reliability of supplier delivery, as well as the supplier’s internal policies (e.g., inventory levels, all impact supply-chain performance)

The Benefits of a Proper Supplier Quality Management Process

At one time, it was not uncommon to line up multiple suppliers for the same raw material, usually due to concerns about running out of stock or a desire to play suppliers against one another for price reductions. This has given way to working more closely with a smaller number of suppliers in longer-term, partnership-oriented arrangements.

The benefits of supplier partnerships include:

• Less variation in vital process inputs when working with fewer suppliers
• Reduced need for constant monitoring of suppliers and products if the suppliers have proven to be effective at controlling their output

Establishing an effective supplier management process requires:

• Mutual trust and relationship building to share expertise and resources and reduce risk
• An understanding of both organizations’ unique roles in the process
• Support from executives or upper management of both companies involved

Supplier Selection Criteria and Strategies

Supplier selection criteria for a particular product or service category should be defined by a cross-functional team of representatives from different sectors of an organization. In a manufacturing company, for example, members of the team typically would include representatives from purchasing, quality, engineering, and production. Team members should include personnel with technical/applications knowledge of the product or service to be purchased, as well as members of the department that uses the purchased item.

Common vendor and supplier selection criteria includes:

• Previous experience and past performance with the product/service to be purchased
• Relative level of sophistication of the quality system, including meeting regulatory requirements or mandated quality system registration (e.g., ISO 9001)
• Ability to meet current and potential capacity requirements on the desired delivery schedule
• Financial stability
• Technical support availability and support in developing and optimizing processes
• Total cost of dealing with the supplier, including material cost, communications methods, inventory requirements, and incoming verification required
• The supplier's track record for business-performance improvement
• Total cost assessment

Methods for determining how well a potential supplier fits the selected criteria:

• Requesting a formal quote, which includes providing the supplier with specifications and other requirements, such as testing
• Visits to the supplier by management and/or the selection team
• Confirmation of quality system status either by on-site assessment, a written survey, or request for a certificate of quality system registration
• Discussions with other customers served by the supplier
• Review of databases or industry sources for the product line and supplier
• Evaluation, such as prototyping, lab testing, or validation testing, of samples obtained from the supplier 

Supplier Quality: Selection and Development Flowchart Example

Supplier Quality Certifications

Advance your career and your organization with an ASQ certification. These certifications emphasize supplier quality in their bodies of knowledge.

Managing Supplier/Buyer Relationships

Quality, cost, and delivery have long been considered key indicators of supplier quality management and performance. The arrival of lean methodology has added another beneficial aspect to the quality supplier network, and more recently another indicator has emerged in today’s environment: connectedness. This is a measure of how well an organization is connected to and integrated with its supply chain. To create a lean but integrated value supply chain, a strong relationship and collaboration needs to exist between both supplier and buyer. This partnership includes:

• A readiness on both sides to discuss future plans
• Willingness to understand each others business processes
• Commitment to share in each other’s long-term strategies
• An agreement to share in cost savings realized by any joint activities

Developing and implementing a wide range of communication initiatives must be aimed at improving the responsiveness of the supply chain may include:

• Eliminating waste and non-value-added processes and even operations throughout the entire supply chain
• Identifying and simplifying key supply chain processes to improve efficiency and overall effectiveness
• Rationalizing the entire supply base
• Reducing throughput and lead times and overcoming the functional silos that divide and separate companies and foster inefficiencies

E-Business in a Lean Supplier Network

A critical component of creating a lean supplier network is the implementation of an e-business strategy. Technology should be used to enhance communication and move an organization and its entire supplier network toward paperless transactions. This can help improve efficiency in data transformation and information flow without unnecessary costs. Electronic commerce can also help increase access to a larger number of global suppliers that may be strategically aligned with your organization. Collaboration is critical for just-in-time (JIT) production of the right amount of product exactly when it is needed, which can serve as a mechanism to avoid lead time issues.

Collaborative supply chain solutions function as a broker between customer and supplier by communicating supply-and-demand needs and issues across the supply chain via visual signals. Collaborative commerce (c-commerce) allows cyber communities to share intellectual capital, integrate diverse business processes, and increase corporate innovation, market reach, productivity, and profitability. The technology must provide a means for understanding the entire supply chain, encompassing what the roles, policies, and processes that define its personality are and how business transactions are handled, to encourage optimal efficiency across the supply chain.

“Cost Out” vs. “Price Down” Strategies

In the past, when there were material price increases, the increased cost was passed up to the customer. Today’s increasingly competitive climate often leads to costs being passed down the supply chain instead. Likewise, the introduction of technology and methodologies that can lead to increased productivity have prevented labor costs from impacting on product costs, making price differentiation within market segments less likely. This requires the entire chain to continually adapt and respond to ongoing changes in cost.

Pressure to reduce costs has forced companies to find innovative ways to offer high-performance products at a low cost. This has prompted organizations to assess the role of their suppliers and the supply chain as a source of increased profitability and cost reduction. However, as cost pressures are passed down the supply chain, cost reduction and the overall enhancement of value cannot be viewed as an isolated initiative. Price reduction is only a tactical short-term solution and organizations must understand that there is a limit to how much a supplier can reduce its price and still remain viable. Instead of focusing on a "price down" strategy, organizations need to employ a "cost out" strategy. This requires a holistic view of the supply chain whereby an organization works with its supply base to achieve the removal of waste through joint initiatives aimed at value creation.

Value creation requires:

• The alignment of the entire organization, including suppliers that are involved in product realization to meet customer specifications
• An acknowledgment that value must be delivered to the customer in a way that will ensure profitability and increase shareholder value
• An understanding of the relationship between the product’s price and its performance
• The ability to deliver value to the customer by achieving the total integration of the knowledge and skills of everyone in the supply chain
• The information technology infrastructure to support the supply chain processes

To create value, greater collaboration is required by organizations up to the customer, down to suppliers, and across the entire supply chain. These improvements in communication, information sharing, and relationships can not only create value, but establish stronger, more efficient supply chain management processes.

Supplier Quality resources

You can also search articles, case studies, and publications for supplier quality resources.

Books

The Certified Supplier Quality Professional Handbook

Managing Organizational Risk Using The Supplier Audit Program

ASQ Certified Supplier Quality Professional (CSQP) Study Guide

The ASQ Supply Chain Management Primer

Articles

Beyond Tried and True (Quality Progress) With much of an organization's value dependent on its product suppliers, a strong supplier audit program is essential. Organizational risk can be reduced or eliminated by effective management of suppliers, based on a systematic analysis of their delivery, response and rating.

Quality In The First Person: Supplier Hugger Or Engineer? (Quality Progress) The important dual role of supplier quality engineers is explained. They monitor the supply base, ensure suppliers are providing quality products, monitor supplier performance, evaluate corrective and preventive action responses, and perform audits.

Supplier Selection And Maintenance (Quality Progress) All suppliers are not equally important to your company’s success. The extent you go to depends on the associated cost, production and risk.

Adapted from The Certified Manager of Quality/Organizational Excellence Handbook, ASQ Quality Press.