OSCM Ch 8, 9,and 10
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chapter_8_supplier_quality_management.pptxSupplier Quality Management
Chapter 8
OSCM 3660:002 Strategic Sourcing
Spring 2016
Sandeep Jagani
PURCHASING & SUPPLY CHAIN MANAGEMENT, 5e
© 2012 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.
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Chapter Overview
Overview of supplier quality management
Factors affecting supply management’s role in managing supplier quality
Supply quality management using a TQM perspective
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Chapter Overview
Pursuing Six Sigma supplier quality
Using ISO standards and MBNQA criteria to assess supplier quality systems
Basic contents of a supplier quality manual
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What Is Supplier Quality?
Ability to meet or exceed current and future customer expectations or requirements within critical performance areas on consistent basis
Keys to supplier quality
Ability to meet or exceed
Current and future expectations and requirements
Critical performance on a consistent basis
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Why Be Concerned with Supplier Quality?
Supplier impact on quality
Continuous improvement requirements
Outsourcing of purchase requirements
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Factors Affecting Supply Management’s Role
Ability of supplier to affect buyer’s total quality
Resources available to support supplier quality management and improvement
Ability of buying firm to practice world-class quality
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Factors Affecting Supply Management’s Role
Supplier’s willingness to work jointly to improve quality
Supplier’s current quality levels
Buyer’s ability to collect and analyze quality-related data
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Key Principles of TQM
Define quality in terms of customers and their requirements
Deming’s 14 Points
Pursue quality at the source
Stress objective rather than subjective analysis
Emphasize prevention rather than detection of defects
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Key Principles of TQM
Focus on process rather than output
Basics of process capability
Strive for zero defects
Cost of quality
The Seven Wastes
Establish continuous improvement as way of life
Make quality everyone’s responsibility
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Quality: The Customer’s Perspective
Nonconforming supplier quality is often due to inconsistent communication and resultant misunderstanding of specifications, expectations, and requirements within supply chain
Need for clear specifications and unambiguous performance requirements
Sharing of final product requirements
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Developing Clarity
Ability of buying company to succinctly identify, clearly define, quantify, or specify its technical and sourcing requirements
Buyer’s ability and initiative to effectively communicate these requirements to supplier
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Deming’s 14 Points
Create a vision and demonstrate commitment
Learn the new philosophy
Understand inspection
Stop making decisions purely on the basis of price
Improve constantly and forever
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Deming’s 14 Points
Institute training
Institute leadership
Drive out fear
Optimize the efforts of teams
Eliminate exhortations
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Deming’s 14 Points
Eliminate numerical quotas and measurement by objective
Remover barriers to pride in workmanship
Encourage education and self-improvement
Take action
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Summary of Deming’s Philosophy
Variation is primary source of quality nonconformance
To reduce variation, the search for improved quality is a never-ending cycle of design, production, and delivery followed by surveying customers
Then starting all over again
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Summary of Deming’s Philosophy
Although quality is everyone’s responsibility, senior management has ultimate responsibility for quality improvement
Interacting parts of system must be managed together as a whole, not separately
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Summary of Deming’s Philosophy
Psychology helps manager understand employees and customers, as well as interactions between people
Intrinsic motivation is more powerful than extrinsic motivation
Predictions must be grounded in theory which helps to understand cause-and-effect relationships
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Quality at the Source
Evaluate key value-adding points in process where defects could occur, including supplier facilities
Product and process design
Early supplier design involvement (ESDI)
Issue of sharing proprietary information
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Objective Measurement and Analysis
Make decisions on facts, not feelings
Rigorous measurement system
Develop a preferred supplier list
Award future business
Identify continuous improvement opportunities
Provide feedback to support corrective action
Track results from improvement initiatives
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Prevention of Nonconformance
Need for process consistency and reduced variation
Reduce reliance on appraisal, inspection, and detection activities
Non-value-adding activities
Supplier certification program
Use of corrective action requests
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Focus on Process, Not on Output
Move from product orientation to process orientation
Quality processes quality output
Supplier must provide evidence of process capability
Structured, companywide supplier evaluation and selection system
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Focusing on Sample Inspections
What supplier would knowingly submit a poor sample?
How many parts did supplier produce to get an acceptable sample?
Are samples representative of process operating under normal conditions?
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Focusing on Sample Inspections
Did supplier use same process, methods, and materials that will be used in normal production?
Or was prototype made under controlled laboratory conditions?
Did supplier or subcontractor actually produce sample?
Do samples show enough evidence of capacity or process capability?
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Basics of Process Capability
Ability of process to generate outputs that meet engineering specifications or customer requirements
Must be in state of statistical control
Output must fall between pre-established upper/lower specification limits
No special causes of variation present
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Basics of Process Capability
99.73% of all output falls between ± 3 standard deviations of process mean
Stable process, in statistical control, can be expected to produce virtually all of its output within these natural tolerance limits
Process’s natural limits must fall within specification limits to be capable
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Which Process Is Capable?
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Specification
Specification
Specification
Specification
Natural Variation
Natural Variation
(a)
(b)
Natural Variation
Natural Variation
(c)
(d)
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Striving for Zero Defects
Conformance to requirements (Crosby)
Key metrics to identify improvement opportunities
Supply base rationalization and optimization
Average supplier quality improves as lower performers are eliminated from supply base
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Cost of Quality
Appraisal costs
Direct costs of measuring quality
Failure costs
Internal – occur before product or service is provided
External – occur following production or after customer takes possession
Prevention costs
Keep defects from occurring
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Appraisal Cost Examples
Laboratory testing of samples
Inspection activities during production
Supplier quality audits
Incoming material inspections
Other forms of monitoring
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Internal Failure Cost Examples
Troubleshooting
Re-inspection following detection of defects
Production downtime caused by defects, scrap, and process waste
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External Failure Cost Examples
Warranty costs
Replacement of defective products
Product liability lawsuits
Loss of customer goodwill
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Prevention Cost Examples
Quality planning
Equipment calibration
Quality training
Maintenance of quality management system
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Common Causes of Waste
Inadequate processes
Inadequate tools or equipment
Inefficient layouts
Lack of training
Inadequate suppliers
Lack of standardization
Poor management decisions
Mistakes by operators
Inadequate scheduling
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The Seven Wastes
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Over-production
Idle time
Delivery
Waste in the work itself
Inventory
Wasted operator motion
Waste from rejected parts
Continuous Improvement as a Way of Life
Value analysis/value engineering (VA/VE)
Supplier development
Supply base rationalization and optimization
Supplier incentive and reward systems
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Supplier Incentives
Longer-term contracts
Higher share of purchase volume
Public recognition and awards
Shared cost savings
Access to new technology
Early insight to new business and product development plans
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Supplier Incentives
Early participation in new product and process development projects
Use of buyer’s supply agreements to obtain favorable pricing
Participation in executive buyer-supplier councils
Listed as preferred supplier with first opportunity for new business
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Quality: Everyone’s Responsibility
Aligned vision and goals
Physical co-location with suppliers
Executive-level buyer-supplier councils
Shared technologies
Joint projects
More collaborative buyer-supplier relationships
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Pursuing Six Sigma Quality
Proven quality principles and techniques
Virtually error-free performance
Expressed as 3.4 defects per million opportunities (DPMO)
Increasing customer expectations
Focus on defect prevention, cycle time reduction, and cost savings
Use of Six Sigma Black Belts
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The DMAIC Model
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Define
Measure
Analyze
Improve
Control
The DMAIC Model
Define
Improvement activity and goals
Measure
Existing system, establish metrics, and identify performance baseline
Analyze
System and develop causal hypotheses
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The DMAIC Model
Improve
Develop ideas, test solutions, and implement new process, structure, and system
Control
Establish standard measures and procedures to ensure new system stays in control
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Using ISO and MBNQA Criteria
Widely accepted quality management frameworks
ISO 9000:2008
ISO 14000:2004
Malcolm Baldrige National Quality Award
Criteria are often used as basis for supplier certification programs
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ISO 9000:2008
Originally developed in European Common Market in 1987
Updated in 1994, 2000, and 2008
Third-party registration process
Internationally accepted and recognized process quality standards, not product standards
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Main Sections of ISO 9000:2008
Quality management system (QMS)
Management responsibility
Resource management
Product realization
Measurement, analysis, and improvement
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Quality Management System
Activities and steps required to implement ISO 9000:2008
Clearly delineate and document …
Process and related activity interaction and sequencing
How processes are operated and controlled
How supporting information is generated and disseminated
How measurements and process analysis are conducted
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Quality Management System
Consists of …
Quality manual
Related procedures
Work instructions
Common templates are available
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Management’s Responsibility
Information on firm’s quality policy and objectives
Must demonstrate quality responsibility and authority through organization
Standardized job descriptions
Common quality-oriented language
Senior manager with specific authority and responsibility for entire organization
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Resource Management
Resources necessary to implement, maintain, and improve QMS
Address human resources needs and customer satisfaction in resource allocation
Quality improvement
Training
Personnel development needs
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Product Realization
How an organization designs and delivers its goods and services
Design
Production
Evaluation
Handling
Shipping
Customer requirements goods and services
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Measurement, Analysis, and Improvement
Metrics, measurements, and monitoring processes
Internal audit procedures
External supplier audits
Customer feedback mechanisms
Most important section
Manage by fact, not conjecture
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Eight Principles of ISO 9000:2008
Customer focus
Leadership
Involvement of people
Process approach
System approach to management
Continual improvement
Factual approach to decision making
Mutually beneficial supplier relationships
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Supplier’s Benefits of ISO 9000:2008
Buyers have immediate confirmation of supplier’s registration
May substitute for variety of individual buyer certification programs
Included on master list of certified firms and may garner additional business
Helps address ANSI standards
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Buyer’s Benefits of ISO 9000:2008
Does not have to create its own comprehensive supplier certification audit system
Supplier assumes responsibility for meeting ISO 9000:2008 standards and paying own registration fees
Supplier demonstrates higher quality
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ISO 14000:2004
Established in 1993 to promote environmental awareness and protection as well as pollution prevention
Used to analyze supplier’s ability to proactively manage its environmental impact and carbon footprint
Ranges from environmental management systems to addressing auditing, labeling, and product standards
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ISO 14000:2004
Set of voluntary standards
Classifications
Process-oriented standards
Product-oriented standards
But it does not …
Build on existing governmental regulations
Establish emissions and pollution levels
Detail any specific testing methods
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ISO 14000:2004
Helps develop firm’s environmental management system (EMS)
Labeling
Performance evaluation
Life cycle analysis
Communication
Auditing
Buyers may require suppliers to comply with ISO 9000:2008 and ISO 14000:2004
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EMS Guidance
How to …
Evaluate its environmental impact
Improve its environmental performance
Implement a systematic approach to environmental issues, including monitoring and measurement
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Benefits of ISO 14000:2004
Fewer pollutants generated
Reduced liability risk
Improved regulatory compliance
Better public and community relations
Lowered insurance premiums
Enhanced profitability through:
Improved resource management
Reduced waste generation
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The Malcolm Baldrige National Quality Award
Established in 1987 - competitive
Acts as de facto definition of TQM and competitive set of criteria
More comprehensive set of quality-related criteria than ISO 9000:2008
Implies that an organization excels not only in quality management but also in quality achievement
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The Malcolm Baldrige National Quality Award
Much of current criteria is used internally as quality management tool and not for award purposes
May take 8 – 10 years to adequately prepare competitive quality system
Built upon continuous improvement philosophy
Both process and results oriented
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MBNQA Criteria Items
Leadership
Organizational leadership
Public responsibility and citizenship
Strategic planning
Strategy development
Strategy deployment
Customer and market focus
Customer and market knowledge
Customer satisfaction and relationships
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MBNQA Criteria Items
Information and analysis
Measurement of organizational performance
Analysis of organizational performance
Human resource focus
Work systems
Employee education, training, and development
Employee well-being and satisfaction
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MBNQA Criteria Items
Process management
Product and service processes
Support processes
Supplier and partnering processes
Business results
Customer focused results
Financial and market results
Human resource results
Supplier and partner results
Organizational effectiveness results
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Basic Contents of a Supplier Quality Manual
Quality control and process management procedures
Metrics and measurement protocols
Testing and acceptance procedures
Documentation control
Basic responsibilities of both buyer and supplier
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Basic Contents of a Supplier Quality Manual
Minimum process required for supplier regarding …
Inspections
Use of statistical process control
Continuous improvement
Testing
Sample evaluations
Performance improvement
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Basic Contents of a Supplier Quality Manual
Description of supplier selection and evaluation process
Conduct of buyer audits
Description of buyer’s quality improvement programs and activities
Copies of relevant forms along with instructions
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Basic Contents of a Supplier Quality Manual
Requirements and procedures for control of proprietary information
Including nondisclosure agreements
Description of production parts approval process and/or sample acceptance procedures
Description of engineering change order process
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Basic Contents of a Supplier Quality Manual
Description of process capability study process
How to handle and/or store non-conforming products
Description of claims process
How to develop and submit corrective action plans
Supplier certification process
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