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




Purchasing’s impact on quality

Purchased goods and servicesTotal organizational revenue

= 65%

Source: U.S. Census of Manufacturers




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




Fundamental Research PISI Model

(Reck & Long)

Loose vs. tight

relationships(Monczka and

Landeros)




Basic Issues

Source selection

Specifications

Supplier RatingSupply Base Management




Source Selection

Identify need

(operational, capital)

Identify potential

suppliers

Select suppliers




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




Specifying product

characteristics

Brand or trade name

Samples

Standard Specification

Design Specification

Performance Specification




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




Specifying product

characteristics - Samples Easy

communication ofrequirements

May required

detailed test andinspection

No definite

standards




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




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




Specifying product

characteristics – performancespecifications

Easily prepared Gain latest

technology

Obtain specifiedlevel of performance

Increased depth of

competition

Possible loopholesin specifications

Decrease breadth of

competition




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




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




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




Reck & Long’s PISI model

Passive

Independent

Supportive

Integrative




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




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




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




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




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



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





Performance measuresPrice

Image

Efficiency (Operational)

Efficiency (Administrative)Effectiveness (Requested)

Effectiveness (Initiated)




Price

Criteria Zone1

Zone2

Zone3

Zone4

Offers competitive prices X X X X

Maintains stable prices X X X X




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




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




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




Effectiveness (Requested)

Criteria Zone1

Zone2

Zone3

Zone4

Provides value analysisassistance

X X

Provides aid in problemsolving

X X




Effectiveness (Initiated)

Criteria Zone1

Zone2

Zone3

Zone4

Aids new product development X

Expands capabilities to meetlong term needs

X




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?



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




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




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.




Typical criteria for certification

High qualityCost efficiency

Precise delivery

Strive for long-term partnership




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


Documents

Supply base quality [Compatibility Mode].pdf