ĐẠI HỌC FPT CẦN THƠ

Supply Chain Management

SCM201

Chapter 8
Supplier Quality Management
 Chapter Overview

• Overview of Supplier Quality Management

1

• Factors Affecting Supply Management’s Role in Managing

2 Supplier Quality

• Supplier Quality Management Using a Total Quality

3 Management Perspective

• Pursuing Six Sigma Supplier Quality

4

Chapter 8: Supplier Quality Management 2

 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 or requirements
Critical performance on a consistent basis

Chapter 8: Supplier Quality Management 3

 Why Be Concerned with Supplier Quality?

Supplier impact on quality

Continuous improvement requirements
Outsourcing of purchase requirements

Chapter 8: Supplier Quality Management 4

 Factors Affecting Supply
Management’s Role

Ability of supplier to affect buyer’s total quality

Internal resources available to support ongoing supplier
quality management and improvement
Ability of buyer to practice world-class quality
Supplier’s willingness to work jointly to improve quality
Supplier’s current quality levels
Buyer’s ability to collect and analyze quality-related data

Chapter 8: Supplier Quality Management 5

 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

Chapter 8: Supplier Quality Management 6

 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

Chapter 8: Supplier Quality Management 7

 Quality: The Customer’s Perspective

Nonconforming supplier quality is often due to inconsistent

communication and resul tant mi sunderstandi ng o f
specifications, expectations, and requirements within supply
chain
Need for clear specifications and unambiguous performance
requirements
Sharing of final product requirements

Chapter 8: Supplier Quality Management 8

 Developing Clarity

Ability of buying company to succinctly identify, clearly

define, quantify, or specify its technical and sourcing
requirements
B u y e r ’s a b i l i t y t o e f fe c t i v e l y c o m m u n i c a t e t h e s e
requirements to suppliers, including change orders

Chapter 8: Supplier Quality Management 9

 Deming’s 14 Points

Chapter 8: Supplier Quality Management 10

 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
Although quality is everyone’s responsibility, senior
management has ultimate responsibility for quality
improvement

Chapter 8: Supplier Quality Management 11

 Summary of Deming’s Philosophy

Interacting parts of system must be managed together as a

whole, not separately
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 that helps to
understand cause-and-effect relationships

Chapter 8: Supplier Quality Management 12

 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

Chapter 8: Supplier Quality Management 13

 Objective Measurement and Analysis

Make decisions on facts, not feelings

Rigorous supplier measurement system
Develop a preferred supplier list
Award future business
Identify continuous improvement opportunities
Provide feedback to support corrective action or future
development
Track results from improvement initiatives

Chapter 8: Supplier Quality Management 14

 Prevention of Defects

Need for predictable consistency and reduced process

variation
Reduce reliance on appraisal, inspection, and detection
activities
Non-value-adding activities
Supplier certification program
Use of corrective action requests

Chapter 8: Supplier Quality Management 15

 Focus on Process, Not on Output

Move from product orientation to process orientation

Quality process → quality output
Supplier must provide ongoing evidence of process capability
Structured, companywide supplier evaluation and selection
system

Chapter 8: Supplier Quality Management 16

 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?
Others

Chapter 8: Supplier Quality Management 17

 Basics of Process Capability

Ability of process to generate outputs that meet engineering

specifications and/or customer requirements
Must be in a state of statistical control
Output must fall between stated upper/lower specification
limits
No special causes of variation present

Chapter 8: Supplier Quality Management 18

 Basics of Process Capability

99.7% 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

Chapter 8: Supplier Quality Management 19

 Which Process Is Capable?

Chapter 8: Supplier Quality Management 20

 Process Capability Study Information

Determine the operating baseline of a process

Prioritize potential quality improvement projects
Provide evidence of process performance to a customer

Chapter 8: Supplier Quality Management 21

 Striving for Zero Defects

Conformance to requirements (Crosby)

Key p e r fo r m a n c e m et r i c s to i d e nt i f y i m p ro ve m e nt
opportunities
Supply base rationalization and optimization
Average supplier quality improves as lower performers are
eliminated from supply base

Chapter 8: Supplier Quality Management 22

 Cost of Quality

Really is cost of “poor” quality

Often aggregated into overhead accounts
Impact
Costs of nonconformance
Costs of improvement and avoidance of poor quality
Highly complex issue

Chapter 8: Supplier Quality Management 23

 Cost of Quality

Appraisal costs
Direct costs of measuring quality
Failure costs
Internal – occur before product or service is provided to customer
External – occur following production or after customer takes
possession
Prevention costs
Keep defects from occurring

Chapter 8: Supplier Quality Management 24

 Common Causes of Waste

Poor management decisions

Inadequate processes Mistakes by operators
Inadequate tools or equipment Inadequate scheduling
Inefficient layouts
Lack of training
Inadequate suppliers
Lack of standardization

Chapter 8: Supplier Quality Management 25

 The Seven Wastes

Chapter 8: Supplier Quality Management 26

 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

Chapter 8: Supplier Quality Management 27

 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

Chapter 8: Supplier Quality Management 28

 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

Chapter 8: Supplier Quality Management 29

 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

Chapter 8: Supplier Quality Management 30

 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

Chapter 8: Supplier Quality Management 31

 The DMAIC Model

Chapter 8: Supplier Quality Management 32

 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

Chapter 8: Supplier Quality Management 33

 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

Chapter 8: Supplier Quality Management 34

 Main Sections of I S O 9000:2008

Quality management system (Q M S) Management responsibility

Resource management Product realization

Chapter 8: Supplier Quality Management 35

 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
…
Consists of …
Quality manual
Related procedures
Work instructions
Common templates are available
Chapter 8: Supplier Quality Management 36
 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-level manager with specific authority and responsibility for
entire organization

Chapter 8: Supplier Quality Management 37

 Resource Management

Resources necessary to implement, maintain, and improve Q

MS
Address human resources needs and customer satisfaction in
resource allocation
Quality improvement
Training
Personnel development needs

Chapter 8: Supplier Quality Management 38

 Product Realization
How an organization designs and delivers its goods and
services
• Design
• Production
• Evaluation
• Handling
• Shipping

Customer requirements → goods and services

Chapter 8: Supplier Quality Management 39

 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

Chapter 8: Supplier Quality Management 40
 Eight Principles of ISO 9000:2008

Customer focus
Leadership
Involvement of people
Process approach
Systems approach to management
Continual improvement
Factual approach to decision making
Mutually beneficial supplier relationships
Chapter 8: Supplier Quality Management 41
 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

Chapter 8: Supplier Quality Management 42

 Buyer’s Benefits of ISO 9000:2008

Does not have to create its own comprehensive supplier

certification audit system
Supplier assumes responsibility for meeting I S O 9000:2008
standards and paying own registration fees
Supplier demonstrates higher quality

Chapter 8: Supplier Quality Management 43

 ISO 14000:2004

Established in 19 93 to promote environmental awareness

and protection as well as pollution prevention
Used to analyze supplier’s ability to proactively manage its
environmental impact, sustainability, and carbon footprint
Intentionally broad and general

Chapter 8: Supplier Quality Management 44

 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

Chapter 8: Supplier Quality Management 45

 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 I S O 9000:2008
and ISO 14000:2004

Chapter 8: Supplier Quality Management 46

 Benefits of ISO 14000:2004

Fewer pollutants generated

Reduced liability
Improved regulatory compliance
Better public and community relations
Lowered insurance premiums
Enhanced profitability through:
Improved resource management
Reduced waste generation
Chapter 8: Supplier Quality Management 47
 The Malcolm Baldrige National Quality Award

Competition established in 1987

De facto definition of TQM and competitive set of criteria
More comprehensive set of quality-related criteria than I S O
9000:2008
Implies that an organization excels not only in quality
management but also in quality achievement

Chapter 8: Supplier Quality Management 48

 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

Chapter 8: Supplier Quality Management 49

 MBNQA Criteria Items
Organizational Profile:
Environment, Relationships, and
Challenges

5
2 Human
Strategic Resource
Planning Focus

1 7
Leadership Business
Results

3
Customer & 6
Market Focus
Process
Management

4
Measurement, Analysis, and Knowledge Management

Chapter 8: Supplier Quality Management 50

 MBNQA Criteria Items

Chapter 8: Supplier Quality Management 51

 Basic Contents of a Supplier
Quality Manual

Quality control and process management procedures

Metrics and measurement protocols
Testing and acceptance procedures, definitions, and
documentation control
Basic responsibilities of both buyer and supplier

Chapter 8: Supplier Quality Management 52

 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

Chapter 8: Supplier Quality Management 53

 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

Chapter 8: Supplier Quality Management 54

 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

Chapter 8: Supplier Quality Management 55

 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

Chapter 8: Supplier Quality Management 56

Supply Chain Management
SCM201

Chapter 8: Supplier Quality Management 57