TOTAL QUALITY MANAGEMENT

Supplier Partnership
Lecture 6
INSTRUCTOR: A NADEEM SHAREEF

Learning Objectives
 Introduction  Principles

of Customer/Supplier

Relations  Partnering  Sourcing  Supplier Selection  Supplier Certification  Supplier Rating

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Learning Objectives
 Relationship
 Inspection  Training

Development.

approach  Recognition  TQM Exemplary Organisation

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 Team

Introduction
 An

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organisation spends a substantial portion every sales earned on the purchase of raw materials, components and services. This is as much as 60% of the cost of product/service consist of purchased goods.  Supplier quality can substantially affect the overall cost of product or service.
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Introduction


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One of the keys to obtained high quality products and services is for the customer to work with suppliers in a partnering atmosphere to achieve the same quality level as attained within the organisation.
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Introduction
 Customers

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and suppliers should have the same goal i.e. to satisfy the need of end user. The better the suppliers quality, the better the suppliers long term position, because the customer will have better quality.
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Introduction
 Since

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both the customer and the supplier have limited resources, they must work together as partners to maximise their return on investment.

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Principles of Customer/Supplier Relations



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Dr. K Ishikawa has suggested ten principles to ensure quality products and services and eliminate unsatisfactory conditions between the customer and the supplier; 1. Both the customer and supplier are fully responsible for the control of quality.
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Principles of Customer/Supplier Relations

2.

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The customer is responsible for providing the supplier with clear and sufficient requirements so that the supplier can know precisely what to produce.
Both the customer and the supplier should enter into a nonadversarial contract with respect to quality, quantity, price, delivery method and terms of payments.
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3.

Principles of Customer/Supplier Relations 3/4

4.

5.

Both the customer and the supplier should decide the method to evaluate the quality of product or service to the satisfaction of both parties. Both the customer and the supplier should establish in a contract the method by which they can reach an amicable settlement of any disputes that may arise.
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Principles of Customer/Supplier Relations 4/4

6.

7.

Both the customer and the supplier should continually exchange information, sometimes using multifunctional teams, in order to improve the product or service quality. When dealing with business transactions, both the customer and the supplier should.
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Partnering
 Partnering

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is a long term commitment between two or more organisations for the purposes of achieving specific business goals and objectives by maximising the effectiveness of each participants resources.  This relationship should be based upon trust, dedication to common goals and objectives.
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Partnering
 Partnering

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is a multifaceted relationship requiring constant nurturing to achieve continuous improvement and maximum benefit.  There are three key elements to a partnering relationship;
Long Term Commitment.  Trust  Shared Vision.

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Partnering


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Long Term Commitment.

Long term commitment provides the needed environment for both parties to work toward continuous improvement. There must be total organisational involvement from CEO to the workers.  Each party contributes its unique strength to the processes. When these strengths are not sufficient, investment in new equipment, system or personnel are required.

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Partnering


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Trust.
Mutual trust forms the basis for a strong working relationship.  It should be viewed as a business paradigm shift and begins with the purchase contract that is nonadversarial.  Open and frequent communication avoids misdirection and disputes while strengthening the relationship.  Both parties becomes mutually motivated when WIN-WIN solution are sought.

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Partnering


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Shared Vision:  Each of the partnering organisations must understand the need to satisfy the final customer.  Shared goals and objectives ensure a common direction and must be aligned with each partys mission.  Employees of both parties should think and act for their common good.  Each partner must understand the other partners business so that equitable decisions are made.
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Sourcing
 Sourcing

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refers to a number of procurement practices, aimed at finding, evaluating and engaging suppliers of goods and services.

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Sourcing


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There are three types of sourcing;

A

sole source of supply implies that the organisation in forced to use only one supplier. This is due to factors such as patents, technical specifications, raw material location, only one organisation producing item. Whether the supplier is willing to work to satisfy the end user.
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Sourcing
 Multiple

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sourcing is the use of two or more suppliers for one item. Usually three suppliers are selected and their portion of the business is a function of their performance in term of price, quality and delivery.
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Sourcing
 Single

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sourcing is a planned decision by the organisation to select one supplier for an item when several sources are available. It results in large and long term contacts and a partnering relationship, with guaranteed future volume, the supplier can direct its resources to improve processes.
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Supplier Selection
 Choosing

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the right supplier involves much more than scanning a series of price lists. Your choice will depend on a wide range of factors such as value for money, quality, reliability and service. How you weigh up the importance of these different factors will be based on your business priorities and strategy.
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Supplier Selection


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Once the decision has been made to outsource, then the supplier must be selected.  Following are ten conditions for selection and evaluation of suppliers.
The supplier understands and appreciate the management philosophy of the organisation.  The supplier maintains high technical standards and has the capacity of dealing with future technological innovations.

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Supplier Selection
 The

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supplier can provide those raw materials and parts required by the purchaser and those supplied meet the quality specifications.  The supplier has the capability to produce the amount of production needed or can attain that capacity.  The supplier has an effective quality system and improvement programme such as ISO?QS 9000.
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Supplier Certification
 After

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supplier selection and approval, the next step is the certification process, which starts after the supplier begins shipment of product.  Criteria;
 The

organisation and supplier shall have agreed upon specifications that are mutually developed, justifiable and not ambiguous.
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Supplier Certification
 The

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supplier shall have no product related lot rejection for a significant period of time, e.g. One year.  The supplier shall have a fully documented quality system. ISO 9000 is an excellent model to built a system even if registration is not the goal.  The supplier shall have successfully passed an on-site system evaluation.
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Supplier Certification
 The

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supplier must conduct inspections and tests.  Occasionally it may be necessary to decertify a supplier as a result of a major problem. It is suggested that a supplier is allowed one failure before de-certification.
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Supplier Rating
 The

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Supplier Rating System (SRS) is a critical component of our overall Supplier Relationship Management strategy as more and more companies rely on their suppliers to provide an ever-increasing portion of the value delivered to customers.
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Supplier Rating


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A successful supplier rating system requires three key factors;

An internal structure to implement and sustain the rating programme.  A regular and formal review process.  A standard measurement system for all the suppliers.


A supplier rating system is usually based on quality, delivery and service sometimes also machineability and cost.
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Supplier Rating


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Supplier Rating Level 98% to 100% 95% to 97% 90% to 94% 80% to 89% <80%

Supplier Performance Level

Exceptional Very Good Satisfactory Marginal Unsatisfactory

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Relationship Development
 In

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all the previous slides of Partnering, Supplier Selection, Customer/Supplier relationship and periodic rating contribute to the establishment of relationship.

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Relationship Development


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Additional topics of;  Inspection is to eliminate, substantially reduce or automate the inspection activity.  Training: in small organisations many senior managers have no expertise in quality or ability to train the work force, so must start training process for the enhancement and better understanding of partnership.
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Relationship Development
 Team

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Approach: Customer/Supplier teams are established in a number of areas, e.g. production design, process design and the quality system. It is a good idea to involve suppliers when the team is first assembled rather than at the end of its activities.
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Relationship Development


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Recognition: creating incentives for suppliers is a way to ensure that they remain committed to a quality improvement strategy. Incentives may be in the form of a preferred supplier category with its rewards;  It is usually as publication of outstanding contributions in the Organisations newsletter.  A letter of recommendation that can be posted on the TQM bulletin board, etc.
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 TQM

Exemplary Organisation (must be read by all students)

 Questions

?
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