Lean Manufacturing Quality

The final Total Quality Logistics tool is Supplier Quality Management. For too long, logistics organizations have stockpiled inventory and inspected incoming receipts due to poor supplier performance. They have to live with inaccurate billings and non-responsive supplier customer service departments. In fact, many companies feel resigned to the fact that they have no control over supplier performance.

Supplier Quality Management works within the overall framework of building supplier partnerships. Supplier partnerships are formed with the goal of working only with suppliers that deliver defect-free material, in the right quantity and on-time. Created correctly, supplier partnerships reduce costs and provide great benefits to both the customer and the supplier.

Supplier Performance Evaluation systems concentrate on all areas of supplier performance, not just product quality. Other areas of the supplier/customer relationship add hidden and often unnecessary costs. Areas of the supplier relationship such as pricing and invoicing problems, delivery and packaging, and customer service functions are also areas for significant improvement.

Supplier Performance Evaluation programs should measure supplier performance in the key areas that are important to a company's overall operations. Effective Supplier Performance Reporting systems provide a scorecard to the supplier regarding the overall performance during a reporting period. The various categories may be weighted in areas of importance, so that product quality still is recognized as the most important area to consider in the supplier / customer partnership.

Typical elements of the Supplier Performance Evaluation score-card may include (percentages indicate weighing factors):

1. Quality of Products and Related Technical Support (35%): This area measures the supplier's predyct quality and reliability. Other important considerations-in this area are the supplier's product support capabilities, such as technical assistance, warranty and replacement procedures and training.

2. Quality of Delivery and Packaging (35%): This area Measures the supplier's on-time delivery performance. Afsp, this segment reports whether the supplier effectively packX ages the product for shipment, including clearly marked address labels.

3. Quality of Pricing and Invoicing (10%): This area reports the accuracy of the supplier's invoicing. It also provides feedback on the supplier's efforts to quickly resolve invoice disputes and to provide advance notice of price changes and promotions.

4. Quality of Outside Sales Support (10%): This areas rates the effectiveness of the supplier's outside sales function. It deals with issues such as whether the outside sales staff is knowledgeable about the company's products and procedures, is prompt in resolving problems, and provides effective training in the company's products.

5. Quality of Customer Service Department (10%): This area rates the supplier's customer service function in providing prompt responses to requests for information and problem resolution.

Supplier Performance Evaluation programs will typically be a evaluation of a combination of factors that can and cannot be easily quantified. Computer programs can be written to monitor quality rejects or late deliveries. Many systems now have customer service modules that can track and report the frequency of billing errors or returns due caused by incorrect packaging and labeling. Survey forms are used to rate the suppliers in categories where quantitative data does not exist.

The Company's key suppliers should be rated at least every six months. The results of the quantitative reports and qualitative ratings are compiled onto a scorecard to review with the supplier's key representatives. Each of the criteria listed above are rated on a scale that differentiates Excellent, Good, Average, Below Average and Poor performance by the supplier. An additional section should be attached to the scorecard to provide specific comments and documentation, such as copies of incorrect invoices, to support the ratings.

The results of the supplier rating should be reviewed with key executives of the supplier's management team. The best results are produced by meeting with the supplier's top representatives from sales, customer service, quality control and distribution functions. The review session should also be used to recognize exceptional performance from the supplier, not simply highlight areas for improvement.

The output from the review meetings should be joint action plans for correcting the areas for improvement listed in the scorecard. The action plans should be realistic, and indicate specific individuals, actions to be taken and target dates for the corrective actions. The areas for improvements will not be corrected unless specific responsibilities are assigned to take the corrective actions.

The Supplier Performance Evaluation program cannot be a one-shot attempt at improving supplier performance. Each supplier in the program should be reevaluated on a published schedule. The action items must be carried out and the results reviewed. Only through a long-term commitment can true improvements in supjjier performance be accomplished. The overall results of the program should be dramatic improvements in product quality, on-time^delivery performance and overall customer service from the suppliex

Logistics organizations are looking for new and more effective ways to improve customer service. In many cases, the Company's survival depends on radically changing the ways that customers' needs are met. Total QualitjKLogistics tools of Business Process Reengineering, Distribution Resource Planning, Electronic Data Interchange and Supplier Quality\Management provide proven means for improving customer sen^e, inventory management, supplier relations and overall company^{xoerformance.}