SUPPLIER PARTNERSHIP

An organization (or customer) purchases its requirements, raw materials, components, and services, from supplier. Better supplier’s quality Better product’s quality A partnership between customer and supplier is one of the keys to obtaining high quality products and services. Customers and suppliers have the same goal –to satisfy the end user. They must work together as partners to maximize the return on investment because they have limited resources.

REASONS FOR PARTNERSHIP

Quality and timely deliveryJIT conceptPractice of continuous process improvementQuality assurance systems (ISO 9000, etc.)

PRINCIPLES OF

CUSTOMER/SUPPLIER RELATIONS 1. Both the customer and the supplier are fully responsible for

the control of the quality2. Both the customer and the supplier should be independent

of each other and respect each other’s independence.3. The customer is responsible for providing the supplier with

clear and sufficient requirements so that the supplier can know exactly what to produce.

4. Both the customer and the supplier should enter a contract with respect to quality, quantity, price, delivery method, and terms of payments.

5. The supplier is responsible for providing the quality that will satisfy the customer and submitting necessary related with customer’s needs.

PRINCIPLES OF CUSTOMER/SUPPLIER RELATIONS (Cont.)

6. Both the customer and the supplier should decide the method to evaluate the quality of the product or service to satisfaction of both parties

7. Both the customer and the supplier should establish a settlement method in the contract.

8. Both the customer and the supplier should continually exchange information, sometimes using multifunctional teams, in order to improve the product or service quality.

9. Both the customer and the supplier should perform business activities such as procurement, production and inventory planning, and etc.

10. When dealing with business transactions, both the customer and the supplier should always have the best interest of the end user in mind.

PARTNERING

Partnering is along-term commitment between two or more organizations for the purpose of achieving specific business goals and objectives by maximizing the effectiveness of each participant’s resources.Benefits:Improved qualityIncreased efficiencyLower costIncreased opportunity for innovationContinuous improvement of products or services

PARTNERING (Cont.)

Key elements for partnering relationship:Long-Term CommitmentTrustShared Vision

SOURCING

A sole source of supply implies that the organization is forced to use only one supplier.

Multiple sourcing is the use of two or more suppliers for an item.

Single sourcing is a planned decision by the organization to select one supplier for an item when several sources are available. Benefits for organization: reduced business and production costs, complete accountability, supplier loyalty, and betterbetter end product with less variability. Benefits for supplier: new business from the customer and reduced the cost of business and production processes.

SUPPLIER SELECTION

1. The supplier understands and appreciates the management philosophy of the organization.

2. The supplier has a stable management system.3. The supplier maintains high technical standards

and has the capability of dealing with feature technological innovations.

4. The suppliers can provide those raw materials and parts required by the purchaser and those supplied meet quality specifications.

5. The supplier has the capability to produce the amount of production needed.

SUPPLIER SELECTION (Cont.)

6. There is no danger of the supplier breaching corporate secrets.

7. The price is right and delivery dates can be meet.

8. The supplier implements contract provisions.9. The supplier has an effective quality system

and improvement program such as ISO/QS 9000.

10. The supplier has a track record of customer satisfaction and organization credibility.

SUPPLIER CERTIFICATION

1. The customer and supplier shall have agreed on specifications2. The supplier shall have no product-related lot rejection for a

significant period of time or significant number of lots.3. The supplier shall have no nonproduct-related rejections for a

stated period of a time or number of lots.4. The supplier shall have no negative nonproduct-related incidents

for a stated period or number of lots.5. The supplier shall have a fully-documented quality system.6. The supplier shall have successfully passed an on-site system

evaluation.7. The supplier must conduct inspections and tests.8. The supplier shall have the ability to provide timely inspection

and test data.

SUPPLIER RATING

The customers rates suppliers to:Obtain an overall rating of supplier

performanceEnsure complete communications with

suppliers concerning their performance of quality, service, delivery, and etc.

Increase the relationship between the customer and supplier

SUPPLIER RATING (Cont.)

Three key factors for a successful supplier rating system:An internal structure to implement and confirm the rating programA regular and formal review processA standard measurement system for all suppliers

RELATIONSHIP DEVELOPMENT

Inspection: the goal is to eliminate, reduce, or automate the inspection activity. Its phases are 100% inspection, sampling, audit, and identity check

Training: trainings and the types of courses may be a requirement for partnership

Team Approach: Customer/Supplier teams are established in product design, process design, quality system, and etc.

Recognition: Works in quality improvement are presented on a TQM bulletin board.

PERFORMANCE MEASURES

Objectives: Establish standard measures and show trends Determine which process need to improved Show process gains and losses Compare goals with actual performance Provide information for individual and team

evaluation. Provide information to make decisions Determine the overall performance of the

organization.

CRITERIA FOR NEW PERFORMANCE MEASURE

Simple Few in number Develop by users Relevance to customer Improvement Cost Visible Timely Aligned Results

PERFORMANCE MEASURE PRESENTATION

Time Series Control Chart Capability Index Taguchi’s loss function Quality Costs Malcolm Baldridge National Quality Award

QUALITY COSTS

Quality cost is the cost of poor quality.Quality costs are used by management for quality improvement, customer satisfaction, market share, and profit enhancement

High quality cost ineffective management

A quality cost program, Warns dangerous financial situations.Quantifies the magnitude of the quality problemIdentifies opportunities for quality improvement and establish funding prioritiesAdds credence to management’s commitment to qualityIdentifies hidden and buried costs in all functional areas

QUALITY COST CATEGORIES

Preventive cost category: Prevention costs include the cost of all activities to prevent recurrence same errors or failures in other products or services

Appraisal cost category: Appraisal costs include all costs incurred in the planned conduct of product or service appraisal and determine compliance to requirements.

Internal failure cost category: Internal failure costs include all costs required to evaluate, dispose of, and either correct or replace nonconforming product or services prior to delivery to the customer.

External failure cost category: External failure costs include all costs incurred due to actual or suspected nonconforming product or service after delivery to the customer.

COLLECTION AND REPORTING

Quality costs should be collected by product line, projects, departments, operators, nonconformity classification, and work centers.

Quality costs are reported by comparing current costs with historical costs. Also by comparing actual quality costs with budgeted costs, favorable and unfavorable variances can be determined.

ANALYSIS

Trend Analysis includes comparing present cost levels to past levels.

Trend analysis providesInformation for long-range planningInformation for instigation and assessment

of quality improvement programPareto analysis is made using pareto

diagram. It is used to determine the most important problem (or highest quality cost)

OPTIMIZING COSTS

To make comparisons with other organizations.

To optimize the individual categories. To analyze the relationship between cost

categories.

QUALITY IMPROVEMENT STRATEGY

Reduce failure costs by problem solving Invest in the right prevention activities Reduce appraisal costs where suitable Continuously evaluate and redirect the

prevention effort to gain further quality improvement.

MALCOLM BALDRIGE NATIONAL QUALITY AWARDMBNQA is an annual award to recognize U.S. organizations for performance excellence. Criteria for performance excellence are leadership, strategic planning, customer and market focus, information and analysis, and human resource focus.The award promotes:Understanding of the requirements for performance excellence and competitiveness improvementSharing of information on successful performance strategiesBenefits derived from using these strategiesThree awards may be given in each year in each category (manufacturing, service, small business, health care, and education)Many organizations, who ignored awards, uses these categories as a technique to measure their TQM effort.