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 Customer-Supplier
Communication Systems:
360° Communication Loops
During the past quarter, we’ve been
discussing various aspects of customer-supplier
teams in The Journal for Quality &
Participation and News for a Change. In
this issue, we conclude the series with an article
on the importance of two-way communication between
customers and suppliers.
“I know you believe you understand
what you think I said, but I am not sure you
realize that what you heard is not what I
meant.”
—author unknown
Developing mutually beneficial relationships with
your suppliers is critical to any organization.
Today, we look at the entire supply chain as part of
the process for delivering high-value products and
services to our customers. The key to building
excellent customer-supplier relationships is
communication. Communication can’t be one-way;
it must be a 360-degree exchange of
information.
Most of us are familiar with a quality system that
provides a framework or road map. “A quality
system is the agreed on, companywide and plantwide
operating work structure, documented in effective,
integrated technical and managerial procedures, for
guiding the coordinated actions of the people, the
machines, and the information of the company and the
plant in the best and most practical ways to assure
customer quality satisfaction and economical costs of
quality.” (Feigenbaum, 1983)
Communication systems, not unlike quality systems,
provide a framework for achieving consistent
results.
The model in Figure 1 illustrates the flow and
sequence of two closed-loop circles of information, a
system that must be present in a long-term
customer-supplier relationship based on continuous
improvement.
Figure 1
Information About
Requirements
Suppliers often get blamed for nonconformities and
customer dissatisfaction, yet at least 50% of the
time the root cause of the problem is
miscommunication between the customer and the
supplier. This communication can be as simple as what
day to ship the product and how to package it for
shipment, or as complex as raw material formulations
and processing parameters.
Requirements cover multiple aspects of the product
or service. In defining the requirements, the
customer attempts to describe the desired end result.
The supplier has to determine the raw materials and
the process that will be used to achieve the end
result. There are numerous requirements that must be
considered. Product specifications define performance
requirements as expected by the customer. Process
specifications define parameters of the manufacturing
process that must be controlled to produce a product.
Finally, service specifications define nonproduct
parameters, such as methods of delivery, certificates
of analysis, and engineering support.
Many customers write specifications assuming the
supplier will know all the little details. When the
product arrives at their sites and it is not what
they expected, these customers get upset with the
supplier.
It is the customer’s responsibility to
thoroughly identify all of its
requirements—both product and service! Once all
requirements are defined, customers need to review
them with suppliers, preferably during the request
for quote period. Experience indicates that the
supplier not only will have clarification questions
but also will have a few additions. Because the
supplier has the expertise in the process and the
customer knows the product, it makes sense that the
requirements be finalized collaboratively. This
valuable communication step not only saves costs
associated with rework, scrap, and downtime, but it
also gets the end users their product or services
faster.
The following is a list of some questions
manufacturers might ask when identifying
requirements:
- What raw materials are acceptable for the
manufacturing process?
- Does the bill of material (BOM) call out all
parts? Are their meanings understood?
- What parameters are measured at incoming
inspection?
- What are the critical inspection
features?
- Should statistical process control data
be
collected? What attributes and variables? How
often? Who retains the data and for how
long?
- Are there fixtures or any other special
equipment required for testing and measuring? Are
they called out on the drawing or BOM?
- Are limit samples or color standards required?
How are they controlled?
- Are test methods identified in the
specifications? Are the test limits clear and
achievable? Is the test sequence
critical?
- Is the drawing clear and
comprehensive?
- How should product be identified, palletized,
and loaded into a trailer?
- Are any special shipping documents or
conditions required?
- How should the supplier respond to a
nonconformance notification?
There are many types of questions that could be
stated about the everyday business dealings with
suppliers. Each and every one of them is crucial to
the success of both the customer and the supplier. If
the customer can think like a supplier and provide
clear and complete specifications, the relationship
between the companies will start with trust and will
result in shorter lead times, reduced
nonconformities, and increased
profitability.
Information on Products and
Services
Specifications help to communicate performance
targets for suppliers, but how do customers know if
their suppliers are meeting requirements
consistently? To know the quality of the goods and
services that are received requires a system to
capture important data and turn it into usable
information—for both the customer and the
supplier. A measurement system is needed to monitor
performance.
Performance information, such as conformance to
specification, nonconforming material costs, and
level of service can be used to compare suppliers,
monitor improvement, and determine “best
value” suppliers. Best value means those
products/services that have the lowest overall cost
through the entire system.
Best value looks at the total cost of doing
business with a supplier, the purchase-order price
along with the associated costs of poor quality that
occur as the product is utilized. These costs of poor
quality, or non-value-added costs, include incoming
inspection, lab analyses, rejecting product,
re-receiving product, manufacturing wastes (scrap,
rework, downtime, reduced efficiencies), and customer
complaints.
To identify and determine costs for these
non-value-added activities, create flowcharts for
each activity. The flowcharts follow both product and
paperwork through the system and assign costs to the
associated labor and waste.
This measurement system monitors the frequencies
of non-value-added activities. The frequency of each
type of activity during a specified time frame
multiplied by its associated cost provides the
non-value-added costs. These costs added to the
original purchase price yield the total cost of the
product purchased from a supplier.
Numerous supplier measurement systems are set up
to report in pounds rejected, percentage of
defectives, or defects per million. Although these
are useful indicators to measure supplier
performance, they fail to provide cost information
that is necessary to make sound supplier-management
decisions that impact the profitability of a
customer. Quantifying the cost of poor quality helps
focus both the customer and the supplier on improving
those things that will generate the greatest
return.
Performance Feedback: Supplier
Performance
Open and honest communication builds a trusting
customer-supplier relationship. Providing suppliers
with factual performance information encourages
continuous improvement. Performance information can
be communicated using formal and informal
methods.
Formal methods include meetings and reports that
inform suppliers how well they are progressing.
Formal methods should be in place to provide regular
feedback to suppliers. As suppliers achieve targeted
quality levels, customers and suppliers should
celebrate the success and personally congratulate
those involved for a job well done.
Informal performance feedback can take on many
forms. Immediate feedback, such as a telephone call
or a fax that focuses on improvements shows that
customers value suppliers’ efforts and that
customers care about progress. Customers should
establish and frequently use these easy channels of
communication to provide feedback.
Sending improvement teams to work with suppliers
provides support and often clears up
misunderstandings that, in turn, can lead to improved
performance. Customer-supplier teams also emphasize a
commitment to a long-term relationship.
Remember to exercise care with informal feedback.
As a customer, conflicting performance feedback is
sent whenever products or services are accepted that
do not meet the established requirements. Informal
feedback should always align with formal
feedback.
Performance Feedback: Customer
Performance
Feedback generally is understood to involve
customers asking suppliers questions to determine the
suppliers’ ability to meet the customers’
needs. Well, this understanding represents the old
survey paradigm. As part of the supply chain,
customers are also suppliers. Customers provide
information that suppliers need to produce and
deliver acceptable products and services.
A commonly used method to measure customer
satisfaction is to send surveys to end users.
Marketing usually does this, and the information is
shared with numerous departments in hope of improving
the product and services. Keep in mind that
continuous improvement can be achieved throughout the
entire supply chain, so why shouldn’t customers
survey their suppliers to determine how effectively
they provide necessary information?
Customer-performance survey questions should be
designed to benchmark relationships with suppliers.
For example, a four-point rating scale, where 1 is
poor and 4 is above average, can allow customers to
numerically monitor their progress at improving
communications over time. Surveys also should include
open-ended questions that encourage suppliers to
share concerns. The questions should address
effectiveness of communication in all pertinent
areas, such as specifications, changes to
specifications, quality requirements, performance
feedback, etc.
Customers need to collect information from
multiple sources at the supplier, not just the sales
representative. If customers want valuable,
actionable data, they need to get answers from a
cross section of people who use their
information—from order entry, production,
quality, engineering, and even accounting!
When the results are tabulated, customers should
share them with internal engineers, buyers, quality
engineers, and management. Make sure to develop an
action plan with responsibilities assigned and due
dates identified. Customers also should communicate
plans back to suppliers and thank suppliers for their
feedback. When suppliers start seeing positive
results, they will be more encouraged to stick with
customers during hard times and rush jobs. The
relationship will be solid enough to handle difficult
situations.
Conclusion
The quality of products relies on effective
communication between customers and suppliers. Where
can News for a Change readers go for more
information on developing strong customer-supplier
relationships? The most important resources available
to you are people—network with your colleagues.
They can share experiences, both positive and
negative—what worked for them and what
didn’t. By listening to the experiences of
others, process steps can be chosen that will work
best for each organization. Listed are some books
that may be helpful.
- Strategic Supply Management—A
Blueprint for Revitalizing the
Manufacturer-Supplier Partnership by K.R.
Bhote. A resource for both technical tools and
human skills to create and maintain
customer-supplier relationships.
- Supplier Management Handbook by J.L.
Bossert. This handbook provides a thorough
examination of all facets of procurement quality
activities. It is a definitive reference for
purchasing and quality professionals, as well as
management interested in understanding, developing,
and participating in supplier improvement
programs.
- Quality Planning and Analysis, Third
Edition by F.M. Gryna and J.M. Juran. With a
focus on internal and external customers in both
manufacturing and service industries, this book
looks at a systems approach to quality from product
development through use.
- Supplier Certification—A Continuous
Improvement Strategy by J.L. Bossert, J.O.
Brown, and R.A. Maass. A step-by-step approach to
bring suppliers through the certification
process.
- Measuring, Planning and Controlling Quality
Costs by K.M. Poston, H.P. Roth, and W.J.
Morse. An introduction to quality costs.
- The Malcolm Baldrige Quality Award Criteria
from United States Department of
Commerce—National Institute of Standards and
Technology. The criteria help an organization to
achieve performance excellence and improve its
competitiveness.
PAT LA LONDE is the director of supply chain
management at ALARIS Medical Systems, Inc., in San
Diego, CA. She is an ASQ Fellow and an ASQ-certified
quality technician, quality auditor, quality
engineer, and quality manager. She currently serves
as chair of ASQ’s Customer-Supplier Division.
Her experience includes building customer-supplier
relationships, as well as designing and implementing
lean supply chains.
JANET RADDATZ is director of quality systems at
Sargento Foods Inc. in Plymouth, WI. Raddatz has been
involved in the development, implementation, and
auditing of quality systems for more than 20 years.
She is an ASQ Fellow, as well as an ASQ-certified
quality manager, quality engineer, quality auditor,
and Six Sigma Black Belt. She recently completed her
term as chair of ASQ’s Customer-Supplier
Division.
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