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Supplier Quality, Cost, and Delivery
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Supplier development, supplier certification, supplier partnership, and "partnering" are terms that are widely used to describe how two com­panies conduct business with one another. The APICS Dictionary de­fines supplier partnership as "the establishment of a working relation­ship with a supplier organization whereby two organizations act as one." My corporation defines it as "an approach to business that in­volves close cooperation between the supplier and the customer. It pro­vides benefits and responsibilities that each party must recognize and work together to realize."

These two definitions help us to understand how important it is for supplier and customer to work together to accomplish mutual, self-sustaining goals. This is the "partnering" required of such a relation­ship. By adding measurement to the partnership, we can recognize those suppliers that meet or exceed expectations of the relationship. Cus­tomers hope that by recognizing their best suppliers, the best will strive to get better, and the underachievers will strive to become one of the best. Some of the reasons companies strive for recognition from their customers include

      ease of conducting business

      opportunities for increased business

      new product development opportunities

      recognition for a job well done.

As companies partner with each other, and as they become more open with each other, their business relationship will allow them to conduct business more efficiently and with less effort. Both will learn the importance each places on the various aspects of their business and will focus their efforts on those areas. Every level within the two orga­nizations will work closely together to simplify their processes.

TRADITIONAL RELATIONSHIPS

It has long been the practice of most purchasing organizations to select suppliers based on cost alone, or cost within required lead times. Once a buyer-supplier relationship was established, each party would work together to ensure delivery schedules were met and to address any qual­ity issues that might arise. Typically each year, the supplier would make an attempt to increase prices to meet his company's goals for profits. You might think that this traditional approach to supplier partnering is fading away, but I contend that much of it remains today.

Many companies today still rely on traditional measurements for evaluating their suppliers on quality, delivery, and costs. Quality is measured by the number of parts rejections versus the number of parts received in many companies. Delivery is measured by the number of production line stoppages, or by the adherence to a fixed schedule, i.e. one day before and two days after a specified due date on a purchase order. And finally, cost is measured by the buyer's weekly or monthly measurement of purchase price variance. If a supplier should attempt to increase a buyer's price on a part, the buyer would seek prices from other suppliers until a lower price was found, and then force the cur­rent supplier to hold prices based on a competitive quote. In today's fast-paced business environment, we simply do not have time for this traditional approach to supplier partnerships.

SUPPLIER DEVELOPMENT

What is supplier development? How do we measure our suppliers and even ourselves toward continuous improvement? What is more impor­tant—total costs or purchase price variance? Where should buyers be allocating their time for the overall good of the corporation? How should we measure improvements in quality, delivery, and cost?

 

First, we need to recognize that our company's success is depen­dent upon the success of our suppliers and of our customers. With this in mind, we must commit ourselves to the forging of mutually benefi­cial "partnerships" with both our suppliers and our customers. A part­nership is like a marriage—both sides must work hard to make the relationship work. The foundation of the partnership is to adopt and nurture a total quality culture based on continuous improvement.

 

A total quality culture is one in which the commitment to quality governs all other aspects. It is where quality is defined as the complete fulfillment of customer expectations. Levels of customer expectations must be clearly defined and understood, and anything short of meeting this level is unacceptable. In short, supplier parts must meet our expec­tations for quality, delivery, and cost, which in turn meets our customer's expectations for quality, delivery, and cost.

 

Supplier development is then defined as those actions undertaken by both the supplier and the buyer to strive for continuous improve­ment in the quality, delivery, and cost of the supplier's delivered prod­ucts or services. As previously stated, relationships must be nurtured and cultivated. They do not just happen overnight. Part of the develop­ment process for your suppliers is clearly articulating your expecta­tions for the products or services to be provided. In order to develop your supplier, you must ensure that they know your total expectations for quality, delivery, and cost. Now that I have drilled QDC into you, let's review what is included within these areas, as well as typical mea­surements to ensure that continuous improvement is a part of the over­all process.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 10


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