SupplierQuality2.jpg‘Failure of a supplier to deliver goods on time and of high quality’ ranked third in an AMR Research study of the top supply chain risks for businesses in a global environment.Ranked fourth was ‘product quality failure’.With all the concerns facing global supply chains, one of the largest is product quality. Ensuring quality down the supply chain can have a critical effect on many businesses in the global economy. What stands between you and knowing your supplier quality?

Lack of visibility

A quality system is only effective if it produces a high-quality product. Many organisations streamline quality operations within their organisation-improving processes, taking corrective action, maintaining compliance, and more. But as demand grows, these organisations must outsource to suppliers to provide them with the components they need to continue to meet such demand. If supplier quality is poor, then the overall product suffers.

Visibility into the supplier’s quality system enables companies to ensure a high-quality product.

Cost of poor supplier quality

When a product fails to meet quality standards, it is often the parent company (or brand owner) that must incur the liability. Organisations will track the cost of poor quality (COPQ), but often fail to track the full cost of poor supplier quality (COPSQ).

Many organisations will track material costs as they relate to suppliers, but the non-material costs such as quality department overhead, inspection overhead, supplier communication and administrative costs are often overlooked. As a result, the overall COPQ becomes inaccurate owed to supplier quality issues above and beyond materials costs. Organisations often attribute this to cost of doing business, leading to higher unit costs.

Making suppliers liable for both material and non-material costs can help to recover costs incurred from poor quality.

Lack of communication

When organisations enter into a supplier relationship, certain procedures and practices are agreed upon. But without a continual auditing process, there is no way for the brand owner to effectively ensure that the agreed-upon practices are being followed.

Without constant supplier collaboration, processes such as non-conformance and corrective actions can ultimately misalign the supplier’s practices with the brand owner’s, leading to quality gaps in the supply chain.

Technology prevents integrated relationships

Often, technology plays an important role in how your systems integrate with those of your suppliers. If your systems differ, there may be technology hurdles to overcome. It is sometimes difficult and costly to bridge the technology gap and many companies are either reluctant or find that it is not cost-effective to make the effort to integrate. This results in gaps in communication from one system to the next and overall traceability of quality processes suffers.

Being able to communicate with your supplier on a technology level is critical in maintaining a consistent system.

Security concerns/fears

Supplier relationships should be interconnected, but there is a certain level of fear, uncertainty and doubt when allowing suppliers into your systems. While it is important for suppliers to be involved in your process, it can be a detriment if too much access is granted. So many organisations opt to not integrate with suppliers owed to security concerns or fears they may “know too much.” While a valid concern, eliminating your suppliers completely from your system can harm your efficiencies in the relationship, increase gaps in communication and limit quick resolution of quality issues.

Lack of visibility down the supply chain can lead to increased cost of poor quality, limited liability in poor supplier quality and a breakdown of best practices down the supply chain.

Do any of these prevent you from knowing your supplier quality?