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7/23/2019 Supply base quality [Compatibility Mode].pdf
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Copyright, David M. Lyth, WMU
Supply base quality
David M. Lyth, Ph.D., CQE
Department of Industrial and ManufacturingEngineering
Western Michigan University
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Copyright, David M. Lyth, WMU
Purchasing’s impact on quality
Purchased goods and servicesTotal organizational revenue
= 65%
Source: U.S. Census of Manufacturers
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ASQ’s take on things
Specifications for the manufacture of a product or the
delivery of a service are a translation of these features
and characteristics into manufacturing or performance
terms.
The features and characteristics often are considered in
relationship to the design and specification of the
product or service to the conformance of the product orservice
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Fundamental Research PISI Model
(Reck & Long)
Loose vs. tight
relationships(Monczka and
Landeros)
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Copyright, David M. Lyth, WMU
Basic Issues
Source selection
Specifications
Supplier RatingSupply Base Management
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Source Selection
Identify need
(operational, capital)
Identify potential
suppliers
Select suppliers
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Copyright, David M. Lyth, WMU
Types of suppliers Partners – critical to
firm’s success Certified – known level
of performance, don’t
need to inspect Approved – need to
pay attention to what
they provide you, butthey are capable
ISO-9000
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Specifying product
characteristics
Brand or trade name
Samples
Standard Specification
Design Specification
Performance Specification
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Copyright, David M. Lyth, WMU
Specifying product
characteristics – brand name Easily described
Easily purchased Readily available
Facilitate obtaining
special workmanship Promotional pull of
brand name
Avoid testing Assurance of quality
Limited competition
Higher prices
Miss competitor
improvements
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Copyright, David M. Lyth, WMU
Specifying product
characteristics - Samples Easy
communication ofrequirements
May required
detailed test andinspection
No definite
standards
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Specifying product
characteristics – Standardspecifications Facilitate communication
Avoid cost of developingspecifications
Wide competition Facilitates standardization
Readily available materials
Specifications may be dated
May require expensiveprocessing
High test costs
Purchaser has responsibilityfor suitability
Standardized material mayconflict with marketing’sdesire for differentiation
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Specifying product
characteristics – Designspecifications
Avoid sole source Avoid premium prices
Facilitatesstandardizationprogram
Expensive to prepare Purchaser responsible
for adequacy ofspecification
Miss latest technology Higher cost than
standard item
Less readily available More expediting
problems
Late deliveries
Larger inventories
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Specifying product
characteristics – performancespecifications
Easily prepared Gain latest
technology
Obtain specifiedlevel of performance
Increased depth of
competition
Possible loopholesin specifications
Decrease breadth of
competition
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Specifications - additional
concerns Product--reliability, tolerances,
acceptance/rejection criteria, user instructions Analytical – manufacturability, capability to
inspect, specifications of materials, Cpk
Raw material – source, certifiable, traceability
Quality Management – MIL-Q-9858A, ISO-
9000, FDA-GMP
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Reck & Long’s PISI model A classification system which categorizes
purchasing systems based on their degree ofsophistication
It addresses the contribution made by
purchasing to the firm’s competitive strategy
Organizations show different levels of
maturity based on different characteristics
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Copyright, David M. Lyth, WMU
Reck & Long’s PISI model A classification system which categorizes
purchasing systems based on their degree ofsophistication
It addreses the contribution made by
purchasing to the firm’s competitive strategy
Organizations show different levels of
maturity based on different characteristics
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Reck & Long’s PISI model
Passive
Independent
Supportive
Integrative
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Reck & Long’s PISI modelPassive Purchasing function has no strategic direction and
primarily reacts to the requests of other functions
Independent The purchasing function adopts the latestpurchasing techniques and practices, but itsstrategic direction is independent of the firm’scompetitive strategy
Supportive The purchasing function supports the firm’scompetitive strategy by adopting purchasingtechniques and practices which strengthen the firm’scompetitive position
Integrative The firm’s competitive success rests, in part, on thepurchasing function’s expertise and maturity.Purchasing is a top management peer and itcontributes to the success of the organization by
participating in it’s choice of strategic direction
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Monczka & Landeros’s Loose-
Tight ModelOpen Market Cooperative
Buyer/Seller
Relationship
VerticalIntegrations
Supply pool Numeroussuppliers
One supplier
Alliance Credible
threat
Credible
commitment
Disputeresolution
Unyieldingnegotiations
Managerialtradeoffs
Information
exchange
Minimal Great
MarketplaceAdjustment
Separate Joint
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COOPERATIVE BUYER/SELLER RELATIONSHIPS
Award larger contracts, provide future production
schedules, exchange information, use preferred suppliers
Supplier can justify use of automation, maintain smoother
production schedule, advise on product/process
developments, identify unnecessary product/process
costs
Preferred supplier can offer volume discounts due to
economies of scale, plan long term expenditures, better
understand purchase requirements
Reduces production cost of preferred supplier
LOWER PURCHASED PRICE TO THE BUYING FORM
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Copyright, David M. Lyth, WMU
COOPERATIVE BUYER/SELLER RELATIONSHIPS
Use preferred suppliers’ design capabilities, research
and development activities and participate in joint
product development
Preferred supplier can develop product/process
innovations, expand R & D, jointly develop
product/process innovations
USE PRODUCT/PROCESS INNOVATIONS TO FURTHER
DIFFERENTIATE THE BUYING FIRM
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Supplier Rating SystemsRequirement of many standards, requirement of
good supply base managementIncorporate PISI model into system design
Track performance based on standard measures
•Quality
•Cost
•Delivery
•Service
•Flexibility
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What motivates you to
evaluate supplier1. Regulatory agency requirements
2. Part of PDCA3. Good to give feedback on system
4. Integral part of supply management program
Copyright, David M. Lyth, WMU
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Performance measuresPrice
Image
Efficiency (Operational)
Efficiency (Administrative)Effectiveness (Requested)
Effectiveness (Initiated)
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Price
Criteria Zone1
Zone2
Zone3
Zone4
Offers competitive prices X X X X
Maintains stable prices X X X X
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Copyright, David M. Lyth, WMU
Image
Criteria Zone1
Zone2
Zone3
Zone4
Fair and honest in dealings X X X
Keeps promises X X X
Exhibits desire for business X X X
Exhibits favorable attitude X X X
Provides reliable sales staff X X X
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Efficiency (operational)Criteria Zone1
Zone2
Zone3
Zone4
Consistent delivery X X X
Conformance to qualityspecifications
X X X
Offers technical assistance X X X
Solves problems quickly X X X
Initiates cost reduction ideas X X X
Helpful in emergencies X X X
Advises of potential problems X X X
Supplies special reports X X X
Provides product in time ofshortage
X X X
Follows up problems voluntarily X X X
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Efficiency (Administrative)Criteria Zone 1 Zone 2 Zone 3 Zone 4
Handles rejections promptly and efficiently X X X
Handles routine documents promptly andefficiently X X X
Complies with procedures X X X
Helpful in overcoming errors X X X
Answers all communications promptly X X X
Delivers without constant follow-up X X X
Adheres to order quantities X X X
Handles complaints quickly X X X
Responds to requests promptly X X X
Provides sales staff as needed X X X
Provides knowledgable sales staff X X X
Sales calls useful and frequent X X X
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Effectiveness (Requested)
Criteria Zone1
Zone2
Zone3
Zone4
Provides value analysisassistance
X X
Provides aid in problemsolving
X X
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Effectiveness (Initiated)
Criteria Zone1
Zone2
Zone3
Zone4
Aids new product development X
Expands capabilities to meetlong term needs
X
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Supplier Rating System ModelCompetitive
Strategy
Stage of PurchasingDevelopment
Supplier
Performance
Primary
Criteria
RatingCriteria
ScreeningDecision
Applicable PerformanceRating Criteria
Secondary ScreeningDecision
Products Components andService Mix
Focused PerformanceRating Criteria
Supplier Rating SystemDesign
Mathematical andStatistical Models
Wh l i h l?
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What else is there to control?
Supplier AssessmentsProduct Assessment Quality Process
AssessmentManufacturingProcess Assessment
• Compliance focused• Use a checklist to
report product/servicecompliance withspecifications.
• Data collected isbased on drawing orperformancespecification
• Compliance andImprovement
• Use checklist as atool.
• Focuses on qualitysystems, e.g. secondtier supplier control,corrective action,type of inspection
throughout system,records
• Compliance andimprovement
• Technical reportproviding results andrecommendations
• Addressmanufacturingresponses to CAR
• Look at overall
improvement ofprocesses
Copyright, David M. Lyth, WMU
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Supplier certification“A certified supplier is one who, based on
history and objective evidence, is foundto be capable of performing at a level ofservice that no longer requires anyverification activities on our part (thecustomer),”
John O. Brown, Quality Progress, January1998
Copyright, David M. Lyth, WMU
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Certification Steps1. Define the measurable aspects of the service in customer
terms.
2. Commence measurement.
3. Meet with supplier and share initial results.
4. Gain agreement on measures and measurements.
5. Commence setting of acceptable performance levels ortolerances jointly with the supplier.
6. Set improvement goals.
7. Perform ongoing measurement.
8. Develop certification plan.9. Include subjective factors for discussion.
10. Gain certification/recognition.
11. Renew certification status.
Copyright, David M. Lyth, WMU
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Typical criteria for certification
High qualityCost efficiency
Precise delivery
Strive for long-term partnership
Copyright, David M. Lyth, WMU
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Why bother?
Advantages
• Marketing tool• Procurement inclusion• Network opportunities• Less Inspection/Cost
Savings• Increase profitability and
customer satisfaction•
Long term relationshipwith suppliers
Disadvantages
• High Cost
• Time Consuming• Documentation• Requires employee
support
Copyright, David M. Lyth, WMU
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