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Taking Quality Outside your Four Walls: Supplier Quality, Part 2


supplier lo 2In Part 1 of this series, we looked at the various challenges associated with supplier quality Management, and how these challenges can inhibit an organization in building a system to interact with their supply chain. Now, let's look at the ways technology can help overcome these challenges.

Real-time Participation in the Quality Process

Ultimately, the key to providing a true supplier quality management system is to include your suppliers in your quality process. By providing real-time visibility, suppliers will be able to participate in your processes, filling out their portion of the quality process quicker than using “offline” methods.

Most companies are not going to give full access to a supplier into their quality system. To avoid security concerns, many companies will use limited access based on the supplier type to their system. Many software systems are able to set up access rights based on user profiles to limit access to applications, forms, even fields. Look for a system that can provide access points for your suppliers into your system, but in such a way that they will not be able to see anything other than the data that is relevant to them.

This real-time participation can reduce time to correct quality issues in notifying suppliers via email of assignments. Web based software systems allow suppliers to access your quality system with little to no client requirements.

Limited access is not the only way. Many software systems have integration tools that take offline forms, such as Microsoft Word and excel and export them to suppliers. Suppliers fill out their part, and the form is imported directly into the system. This is a less real-time option, but will allow suppliers visibility into your system.

Integrated Receiving and Inspection Tied to Supplier Rating
In the dynamic and complex environment of supplier management, there are many touch-points in which supplier goods must adhere to your quality standards. From receiving and inspection to nonconformance and deviation, it is important to maintain the highest level of quality from your suppliers.

In many systems, these elements are dispersed among several business systems (MRP, ERP, QMS, etc.), with little to no integration. This results in an inconsistency of data, often relying on manual methods to effectively track the supplier relationship from receiving to production. Having a singular, integrated and automated system to track supplier goods from start to finish is key to creating traceability in the quality system, and accurately determining the overall supplier rating.

Look for a system that not only automates the quality process with respect to dispositioning defective supplier goods, but also automates the receiving and inspection process. There is often a data gap between when the supplier goods are received and inspected, and when a defect is found and the quality process takes over. This disconnect can result in critical gaps in identifying the lots, materials, samples and other details related to the defective goods. This can affect the overall supplier rating, and may result in a double entry of defects to the supplier’s rating profile.

supplier rating
Having a system that handles both the Receiving and Inspection as well as the Nonconformance, Deviation and Corrective Action processes is key to successfully tracking supplier quality. By integrated these elements into a holistic system, supplier quality is tracked seamlessly throughout the entire lifecycle of the supplier goods as they enter your system. Furthermore, this integration automatically provides traceability into the supplier’s goods, and provides an accurate method of building the supplier rating in real-time.

Understanding the Process: Tracking Supplier Goods from Receiving to Production
As supplier goods are shipped to the warehouse, they are tracked in a receiving record. The Receiving department will determine the correct quantity and whether an inspection is needed. Inspections often follow a specific protocol unique to suppliers and supplier goods, and have unique sampling plans and specifications associated with them. In an Integrated system, this is automatically determined and triggers an Inspection record, with all the relevant data regarding that particular inspection - skip lot profiles, supplier profiles, sampling plans based on Acceptable Quality Levels (AQL) and more. The results of the inspection will determine the quality of the goods provided, and affect the overall supplier rating. If an inspection fails, the system should automatically trigger a nonconformance, and look for any planned deviation records corresponding to the goods. If there is a planned deviation, the goods are used as is - if not, then a nonconformance disposition type is determined, and reviewed by a material review board (MRB). This can result in a Supplier Corrective Action (SCAR), updates to the supplier rating, or Risk-Based Analysis on the supplier goods.

With real-time visibility, suppliers can be a step in the Corrective Action, filling in their part of the investigation, without any bottlenecks associated with communication of this investigation. They can simply log into your QMS using limited access, and see which Corrective Actions are assigned to them. A Corrective Action that is drafted can be addressed within your company and with your suppliers in the same day it was issued. This eliminates the administrative overhead in seeking out the supplier’s processes and communicating “offline” about the issue - the suppliers are already filling out their part into the system.

Supplier Ratings are affected by the quality of goods provided. The supplier rating is automatically updated in real-time as the goods are delivered, received, inspected and processed. This automation eliminates any mishandling on qualitative data related to the supplier rating, and streamlines the entire process of supplier management to the quality system. As a result, processes associated with Quality are directly and automatically inherited into the supplier rating. This data is now added to the supplier scorecard, which is made visible to the supplier.

Supplier Quality Management

Supplier Scorecards & Supplier Exchange
The ultimate goal of Supplier Management is two-fold - Use the best supplier goods for your product, and enable the supplier to improve their operations. By virtue of automated and integrated inspection, the quality of supplier goods is tracked and evaluated in real-time, reducing defects in finished products related to poor supplier quality. Using this data, the supplier scorecard is automatically generated and sent to the supplier, notifying them of their rating, and allowing them to improve their deficiencies and remain competitive for your business.

Many companies are using Web-based technologies to provide visibility into the supplier relationship through portal extranets called Supplier Exchanges. These portals enable suppliers to log into the system and view their overall supplier scores in real-time, and any deficiencies that may have caused low ratings. The benefit of this supplier exchange portal is that suppliers are able to take corrective action on deficient goods faster than by more manual means, and turn out better quality products faster, allowing them to remain competitive and maintain a high level of quality.

Adding Risk Assessment to the Supplier Rating and Supplier Scorecard

As stated above, the ability to effectively rate your suppliers and provide visibility into their quality of goods is critical to quality in your business. Many best-in-class companies are taking supplier rating to the next level by using Risk Assessment to understand not only the risk of quality events, but derive supplier risk from their daily quality activities. While supplier ratings are integrated into the receiving and inspection process, quality events that occur after the product is finished and distributed can still arise. Using Risk Assessment, you can attribute supplier quality to events that occur after the product is released.

Let’s take a step back to understand what Risk Assessment means in a quality management system. Typically, when an event - whether Nonconfomances, Audits, or Complaints - enter the quality system, many companies use Risk Assessment to categorize these events. They want to know the severity, frequency, or even detectability of that event, and identify the high-risk versus the low-risk events. This helps them to assign CAPAs to the event with the highest risk first, and prioritize their quality system accordingly.

During the quality process, data is collected on quality events, whether it is affected products, customer information, product information, supplier information, and more. This data is used to determine which production lines incur the highest risk events, which products may have the most high-risk events and more. Following this logic, by collecting supplier information and doing a Risk Assessment on quality events within the system, a history of high-risk events can be built with visibility into which suppliers are attributed to those events.

The result is a “risk portfolio” indicating the supplier relationships that incur the highest risk in quality events. If a supplier relationship is associated with a large number of high-risk events, then this will affect the supplier rating profile. The benefit of building risk portfolios is that the supplier rating is affected in real-time by post-production quality events that relate to specific supplier goods. Potential supplier risks can be identified more quickly, and more immediate actions can be taken to lower overall risk down the supply chain.

supplier risk

Supplier ratings and scorecards can now have a risk level associated with them. This provides quantitative evidence of their quality of product, efficiency of the process, and overall rating as a supplier to your company, both as their goods are received and inspected, and in a post-production capacity.

Maintaining the Supplier Relationship
Like any relationship, ongoing maintenance is required to ensure that your suppliers are following proper procedures, providing you with high-quality goods, and holding themselves to the same quality standards.

Supplier management should not only involve the process from a production and post-production perspective, but should also be preventative, using tools to audit your suppliers. A best-in-class quality management system should have the ability to schedule and execute continuous audits of your various supplier relationships, in order to ensure suppliers are held to the standards you require.

Much like you would audit your own processes or conduct maintenance on your systems, suppliers should be maintained in this fashion. Web-based tools have made this process simple and effective, providing a centralized resource for building and executing audits, and reporting and analyzing this data. If a supplier fails an Audit, you can issue corrective actions automatically to correct potential issues. The last thing you want as a brand owner is to have a poor supplier process hold up your production. By automating the auditing and corrective action process, you can not only identify and mitigate potential quality gaps quickly, but can automate the process so that the gaps are filled efficiently, with little time lost due to administrative tasks and communication bottlenecks.

Free White Paper
Taking Quality Outside your Four Walls: An Integrated Approach to Supplier Quality ManagementTaking Quality Outside your Four Walls: An Integrated Approach to Supplier Quality Management

You will learn
• Best practices to consider when integrating your QMS with your supply-chain
• How to overcome challenges of the lack of visibility into a supplier's process
• How one company incorporated their automated Quality Management System to include supplier management tool to ensure their overall product compliance

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