Cameron Gray Quality Continuous Improvement Specialist Valiant TMS Agenda The Importance of Developing a Supplier Management System Supplier Selection Supplier Qualification Supplier Evaluation ID: 636572
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ORGANIZATIONAL SUPPLIER MANAGEMENT
Cameron Gray
Quality Continuous Improvement Specialist
Valiant TMSSlide2
Agenda
The Importance of Developing a Supplier Management
System
Supplier Selection
Supplier Qualification
Supplier Evaluation
Supplier Classification
Supplier Development
Supplier RemovalSlide3
Auto Industry Average Spend
Automobile Engineering Partners,
April 2015Slide4
The Importance of Developing a Supplier Management System
Procurement costs often highest in company
Delivery of supplier material directly impact delivery of final product
Supplier material often integrated into final product
Therefore, quality, delivery, and price of incoming material directly impact relationship with customerSlide5
Supplier Selection at TGI Friday’sSlide6
The Supplier Lifecycle
Supplier Selection
Supplier Removal
Supplier ManagementSlide7
Supplier Selection
Determine Strategy
Single Source or Multi Source
Short Term vs Long Term Agreements
Local or Foreign
Determine key purchase criteria
Quality?
Delivery?
Price?
Very often, an improvement in quality and delivery can drive an increase in price
Purchasing and Supply Chain Management
, 3e
Monczka
/Trent/Handfield 2005Slide8
Supplier Selection: Case Study 1
Technetium-99 is an isotope used in healthcare as a radiotracer
Widely used in healthcare worldwide since the 1960s
66 hour half life prohibits stockpiling
At peak production, isotope was multi-sourced
Today, Chalk River production facility is the only North American supplier and is being shut down
Multiple new facilities are being brought online in 2018
Current global shortage due to poor sourcing strategy
Physics World
, H. Johnston 2016Slide9
Things Change in 60 yearsSlide10
Story Time!Slide11
Supplier Qualification
Supplier Quality to verify the supplier’s ability to meet company and customer requirements
Calibre of their
quality
management system
Certified to required standard? (ISO9001
,
TS16949, ISO14001)
Ability to meet customer requirements
Sophistication
of continuous improvement program
Ability
to address
non-conformances in a timely mannerWillingness to collaborate in the supplier development programSlide12
Supplier Qualification (Cont’d)
Procurement responsible for ensuring:
Capacity to meet requirements on schedule
Alignment with strategic business goals
Total cost of dealing with the supplier
Material cost
Communications methods
Inventory requirements
Incoming verification requirements
Accounting responsible for ensuring:
Financial
stabilitySlide13
Supplier Qualification (Cont’d)
Supplier Quality validate capabilities
Visit/Audit Supplier
Confirm status of Quality Management System
Confirm status of certification to required standards
Discuss supplier performance with other customers (when appropriate)
Review of supplier through industry source databases
Evaluate through prototyping/sampling (when appropriate)
Provider feedback to supplier on opportunities for improvementSlide14
Supplier Qualification (Cont’d)
Procurement
Forward all relevant documentation to Supplier Quality
Submit
Request for Quote
Ensure promised capacity exists and is available (via SQ audit as necessary)
Upon successful qualification, add
s
upplier to Approved Supplier List (if new supplier)
Accounting
Obtain financial report or credit check
Upon successful qualification, add supplier to material management systemSlide15
Ex. Supplier Selection and Qualification Process
Supplier identified to fill need
Eliminate supplier from candidacy
Select Supplier
Meet sourcing strategy?
New Supplier?
Review Past Supplier Evaluations
Good Delivery and Price?
Issue Request for Quote
Initiate Supplier Qualification Process
Meet Quality and Spec
Req’s
?
Yes
Yes
Yes
Yes
No
No
No
NoSlide16
Supplier Qualification: Case Study 2
In 2010 SEC
mandated all companies
using
tantalum, tin, tungsten, and gold must report on
conflict mineral usage
Apple Computers now requires all suppliers be 100% conflict mineral free
Apple’s
supply
base
now
100% conflict mineral free
Apple
conducting qualifying audits to ensure compliance4 suppliers removed since 2014Slide17
Story Time 2.0! The Story Strikes BackSlide18
Supplier Evaluation
Gives purchasing ability to make informed decision
Before creating an evaluation:
Determine Evaluation Frequency
Determine Evaluation Criteria
Quality
Delivery
Cost
Supplier Relationship (subjective)Slide19
Supplier Evaluation (Cont’d)
Effective Evaluation Systems often exhibit the following characteristics:
They allow for flexibility in rating
Internal customers evaluate supplier performance
Evaluations are acknowledged by supplier
Evaluations are based on measurable criteria
Best suppliers are highly rated
Evaluations provide early performance warnings
Evaluations benchmarked against best practice suppliers
Supply
Chain
Management Review
, Robert J. Trent
2010Slide20
Supplier Evaluation (Cont’d)Slide21
Supplier Evaluation: Case Study 3
AMD Inc. implemented a comprehensive scorecard system
Included objective and subjective metrics
Importantly included rates of organizational learning by providing supplier targets
Intended to determine best
practices and
identify optimal strategic
partners
F
ound
to be
most
effective at driving process development
Allows AMD to drive internal and external changeSlide22
Story Time 3! Return of the StorySlide23
Supplier Categorization
Categorizing supplier’s into different classifications or types is helpful when comparing them
If all supplier’s are evaluated against the same criteria, it is difficult to get a clear picture of how they actually performed
Common categories include
Custom material
Commodity items
Resources and ServicesSlide24
Supplier Development and Continuous Improvement
Supplier Qualification and Evaluation should provide insight into areas of improvement for many suppliers
By categorizing issues, high level problems can be reduced
High frequency non-conformance issues
Non-conformances with large impact on deadlines
High cost non-conformances
Late deliverySlide25
Supplier Development and Continuous Improvement (Cont’d)
Define
area for improvement
5W2H
Measure
benchmark current performance and
test the existing process
Analyze
root
cause
Improve
by
implementing solutions
Control by maintaining gains or re-initiating cycle
DMAICSlide26
Supplier Development: Case Study 4
In 2014, Tesla Motors published all of its patents
Suppliers, Customers, Competitors have access
Threats
Reduced Brand Differentiation
Increased Competition
Reduced Margins
Opportunities
Positive PR
More widespread availability of charge stations
Supplier knowledge spurs innovation
Drives Down Cost
Improved reliability of supply
Wharton University of Pennsylvania Magazine ,
June 2014Slide27
Story Time 4! The Story AwakensSlide28
Supplier Removal
Supply bases grow large over time
Supply base management costs resources
Eliminate suppliers to maintain manageability
Elimination Techniques
Arbitrary Reduction
80/20 Reduction
Best in Class
Quality and Delivery Threshold Elimination
Inactive ReductionSlide29
Questions?