Portrait of Supplier Quality Management

An epidemic of product recalls points to a need for more visibility into the supply chain.

One of the key issues in supply chain management is ensuring the quality of the goods provided by your Tier One suppliers, as well as suppliers further down the chain. "Manufacturers struggle to manage supplier quality at a holistic level," point out Aberdeen Group analysts Mehul Shah and Matthew Littlefield," often never finding the root cause of adverse events due to the lack of visibility into supplier performance."

In a recent study of 160 manufacturing executives, Aberdeen Group identified that the main pressure point when it comes to supplier management is the need to ensure product quality and consumer satisfaction. That's hardly surprising, given the seemingly endless parade of headlines announcing various product defects and recalls. Besides the obvious erosion of a company's brand identity, these represent significant financial setbacks both for the supplier and its customers.

For best-in-class companies, the leading strategic action is to improve control of quality processes across manufacturing operations and the supply chain, explain Shah and Littlefield. That requires improving visibility into those quality processes, which can be enabled by various technology tools, such as statistical process control (SPC) tools and supplier dashboards. The five benchmarks Aberdeen Group uses to distinguish best-in-class manufacturers from average or laggard companies are: supplier defect rate; successful chargebacks on supplier defects; supplier complete and on-time shipments; response time to non-conforming shipments; and overall equipment effectiveness (OEE).

The accompanying PACE (pressures, actions, capabilities and enablers) chart illustrates how manufacturers can progress from identifying a problem to focusing on a solution, and as a result become best-in-class themselves.

Pressures
• Ensure product quality and consumer satisfaction
• Reduce cost of quality

Actions
• Improve visibility into quality processes across manufacturing operations and supply chain
• Improve control into quality processes across manufacturing operations and supply chain

Capabilities
• Business processes are in place for collaborating with suppliers on quality
• Standardized escalation procedures for supplier quality and non-compliance events
• Executive priority to improve supplier quality management across the enterprise
• Supplier quality data is maintained and managed in a data historian application
• Risk-based approach used to prioritize corrective and preventive actions related to suppliers
• Supplier audits are performed regularly and benchmarked to improve performance

Enablers
• Supplier quality management
• Statistical process control (SPC)
• Supplier dashboards
• Supplier scorecard
• Supplier corrective action
• Supplier enabled e-kanban
• Supplier risk management
• Advanced product quality planning

Source: Aberdeen Group

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