For complex manufacturers, their definition of quality is predicated on how well they stay aligned with the demanding, diverse and unique requirements of their customers while staying in compliance with regulatory requirements. Keeping the entire value chain of a business well-orchestrated and focused on supplier quality needs to start with a clear, consistent strategic plan about suppliers as co-creators of a series of product generations, not just selectively sourced from based on cost alone (Szwejczewski, Goffin, Lemke, Pfeiffer, Lohmuller, 2001). Suppliers need to be chosen more for their orchestrated role in delivering auditable, consistently high performance, not just cost reductions alone (Szwejczewski, Goffin, Lemke, Pfeiffer, Lohmuller, 2001)
Studies of successful Supplier Quality Management (SQM) frameworks consistently shows that the orchestration of supplier alliances, supplier development and supplier monitoring are the three foundational elements to a globally scalable, secure supplier network (I-Ki, Chin, 2004).
The intent of this blog post is to provide seven key ideas for making supplier quality management a competitive advantage in complex manufacturing.
Building a Foundation of Continual Supplier Quality Management Improvement
Complex manufacturers globally are having to contend with an exponentially increasing number of regulatory compliance reporting requirements. From the regional requirements across various nations to globally-based compliance requirements of their specific industries, manufacturers are now required to provide audit data several layers deep into their supply chains. Contending with the many requirements of 21 CFR PART 11 compliance, SEC Conflict Minerals, REACH, RoHS, CA Proposition 65, and WEEE are just a few of many of the compliance and quality management constraints complex manufacturers must contend with daily on a global basis.
Add in AS9100 Rev. C requirements which define traceability, document control and record storage, in addition to International Traffic in Arms Regulations (ITAR) requirements in aerospace and defense (A&D) industries and the role of supplier quality management becomes even more critical. A&D manufacturers must continually strive to deliver accurate reporting and successful audits to stay in good standing with the Department of Defense (DOD), Defense Contract Audit Agency (DCAA) and Truth in Negotiations Act (TINA).
Making Supplier Quality Management Pay
For complex manufacturers selling into commercial markets, the new product development and introduction (NPDI) process contributes on average 60% of net new revenue. Many studies completed by Gartner underscore just how critical the NPDI process is for complex manufacturers, showing how the majority of product costs are often locked in before the first prototype is built. For A&D manufacturers looking to transition out of contracting-dominated based business models, managing suppliers to quality levels throughout the NPDI process is critically important to expanding into new markets.
Complex manufacturers competing in commercial markets and A&D manufacturers looking to diversify from their contract-based business models both need to define supplier quality management strategies that contribute to successful new product development and launch. Doing this makes supplier quality management pay dividends beyond just delivering compliance reporting alone. With so much revenue riding on new products, having supplier quality management strategies and systems provide the necessary visibility several layers deep into the supplier network is critical.
Seven key strategies for improving supplier quality management in complex manufacturing include the following:
- Managing suppliers to consistent, high quality standards on a global basis is ranked as the most effective quality cost reduction strategy there is (Weiss, 1998). Too often manufacturers fall into allowing specific supplier bases to lapse on quality standards, when the rigorous applying of consistent, clear quality goals is needed. Not allowing certain program or product suppliers to fall behind their peers is essential to continually driving down extraneous, avoidable costs by enforcing consistent quality across the entire supplier network.
- Not allowing siloed, legacy and homegrown systems to slow down quality management and compliance across supply chains is essential if any manufacturer is going to reach their growth goals. The bottom line is that without tight integration of quality management, ERP, PLM, supply chain, pricing, service and MRO systems, any manufacturer is going to be at a disadvantage compared to competitors. To compete today and in the future, manufacturers need to think in terms of accuracy, speed and tight orchestration of suppliers, even if it means breaking down the longstanding barriers that is keeping valuable data locked away in legacy systems.
- Complex manufacturers getting the most value from their compliance and quality management systems take into account supplier quality levels, tooling requirements, and create Corrective Action Preventative Action (CAPA) workflows to create a cycle of continuous improvement. Complaints from customers, process variations and production inconsistencies need to be managed using the CAPA process. Data captured, analyzed and acted on using CAPA also needs to be measured over time and provide benchmarks for further corrective action performance improvements. CAPA can be a catalyst of continued improvement when integrated into the daily operations of a manufacturer.
- Manufacturing compliance and quality management system needs to track and report variability reduction, cycle time reduction and risk mitigation across each manufacturing plant or location. These three factors are foundational to achieving compliance and quality management objectives (Weiss, 1998). Supplier quality management strategies that measure defects, corrective actions, improvements in quality, traceability and first article inspection performance are the single greatest contributors to reducing the cost of quality. Unifying all of these factors together into a single dashboard delivers insights into supplier performance unavailable through manually-based approaches (Theodorakioglou, Gotzamani, Tsiolvas, 2006).
- Supplier audits and the data they produce need to be published on a corporate Intranet site, with a series of analytics and metrics included to track trends in their performance over time. Studies by Gartner, IDC and others show supplier audits are very effective in driving down quality costs, increasing quality levels, and improving overall production performance when they are used enterprise-wide. Manufacturers making the most progress towards their supplier quality management goals are using these performance results to change their cultures daily, engraining a high performance mindset into their organizations.
- Implementing a Non-Compliance/Corrective Action (NC/CA) program to evaluate supplier’s inbound orders often reduces defective raw materials shipments, wrong orders and minimizes late deliveries. NC/CA data shared across all manufacturing centers and with suppliers also leads to benchmarking and corrective action strategies based on agreed-upon improvement goals. NC/CA databases are useful for seeing what lessons have been learned in the past that are applicable to new production lines and specific engineer-to-order projects requiring unique suppliers as well.
- Suppliers need to be in compliance with AS9102 when there is a significant change in the composition or nature of the components they are delivering, and this needs to be reported in First Article Inspection. For A&D manufacturers selling Mil-Spec assemblies and components, having first article inspection reports compliant to AS9102 are being required by many buyers including Teledyne. For commercial off-the-shelf (COTS) products, AS9102 is not needed however. To get an idea of what Teledyne expects of its suppliers please see the Supplier Quality Requirements from Teledyne Printed Circuits here.
Agus, A., & Hassan, Z. (2008). The strategic supplier partnership in a supply chain management with quality and business performance. International Journal of Business and Management Science, 1(2), 129-145.
I-Ki, Y., & Kwai-Sang Chin. (2004). Critical success factors of supplier quality management. Asian Journal on Quality, 5(1), 85-109.
Szwejczewski, M., Goffin, K., Lemke, F., Pfeiffer, R., & Lohmuller, B. (2001). Supplier management in German manufacturing companies: An empirical investigation. International Journal of Physical Distribution & Logistics Management, 31(5), 354-373.
Theodorakioglou, Y., Gotzamani, K., & Tsiolvas, G. (2006). Supplier management and its relationship to buyers’ quality management. Supply Chain Management, 11(2), 148-159.
Weiss, M. S. (1998). How to ensure supplier quality from your supplier management program. Hospital Materiel Management Quarterly, 19(3), 1-10.
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