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
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
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.
Review Results with Suppler
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.
Develop joint Action Plans 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.
Reevaluate the Supplier
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 companyxoerformance.