Chapter 9
Managing Supplier Quality in
the Supply Chain
S. Thomas Foster, Jr.
Boise State University
PowerPoint
prepared by
Dave Magee
University of Kentucky
Lexington Community College
©2004 Prentice-Hall
Chapter Overview
• The Value Chain
• Supplier Partnering
• Applying the Contingency Perspective to Supplier
Partnering
• A Supplier Development Program: QS 9000
• Acceptance Sampling and Statistical Sampling
Techniques
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-2
The Value Chain
Slide 1 of 4
• The Value Chain
– A tool that disaggregates a firm into its core activities to
help reduce costs and identify sources of
competitiveness.
• Value System
– Consists of a network of value chains.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-3
The Value Chain
Slide 2 of 4
Figure 9.1
Firm infrastructure
Support
Activities
Human resource management
Technology development
(Hidden
factory)
Procurement
Inbound
logistics
Operations
Outbound
logistics
Marketing
and sales
Service
Core Activities
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-4
The Value Chain
Slide 3 of 4
• The Chain of Customers
– Looking at the activities along the value chain
sequentially, we see that the links in the value chain are
really people performing different functions.
– The chain of customers is revealed when you view the
next step in the chain after you as your own customer.
– This means that if you work at workstation 4 in a
process at the core of the value chain, you will make
sure that the work you do is absolutely impeccable
before you release it to your “customer” in workstation
5.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-5
The Value Chain
Slide 4 of 4
• Managing the Supply Chain
– The concept of supply chain management extends the
economic concept of value chain.
– One of the most significant aspects of the value chain is
the linkage between a series of suppliers and
consumers.
– This linkage is especially tenuous because it involves
the complex interaction of logistics, systems, and
human behavior.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-6
Supplier Partnering
Slide 1 of 5
• Supplier Partnering Concept
– Several approaches to improving suppliers result in
what is called supplier partnering.
– Inspired by JIT purchasing approaches learned from
Japanese industry, supplier-partner relationships have
emerged that treat suppliers as de facto subsidiaries of
the customer organization.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-7
Supplier Partnering
Slide 2 of 5
• Supplier Development Approaches
– Single sourcing
– Dual sourcing
– Supplier evaluation
– Souring filters
– Supplier development
programs
– Supplier audits
– Partnering
• ISO 9000:2000
• MBNQA
– Supplier certification or qualification programs
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-8
Supplier Partnering
Slide 3 of 5
• Supplier Partnering Approaches
– Single sourcing
• Refers to narrowing down the list of approved supplier for a
single component to just one supplier.
– Dual Sourcing
• Companies that are uncomfortable with using a single supplier
may use dual sourcing where the number of approved suppliers
is reduced to just a few.
– Supplier Evaluation
• Is a tool used by many firms to differentiate and discriminate
between suppliers.
• Supplier evaluations are often recorded on report cards in
which potential supplier are rated on criteria such as quality,
technical capability, or ability to meet schedule demands.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-9
Supplier Partnering
Slide 4 of 5
• Supplier Partnering Approaches
– Sole-Source Filters
• That are used in many companies rely on external validation of
quality programs.
• Two of the most common filters are the Baldrige criteria and
ISO 9000:2000.
– Supplier Evaluations
• Many companies perform lengthy inspections of their
suppliers. These programs are often called supplier
certification or qualification programs if the focus is entirely
on evaluation.
– Supplier Development
• If the focus is on helping the supplier improve, then the
programs are called supplier development programs.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-10
Supplier Partnering
Slide 5 of 5
• Supplier Partnering Approaches
– Supplier Audit
• Similar to supplier certification except that a team of auditors
visits the supplier and then provides results to the customer.
• Performed to ensure that product quality and procedural
objectives are being met.
• Tend to not have the developmental component that is found in
supplier development programs.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-11
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-12
Electronic Data Interchange
• Electronic Data Interchange
– Is a system that aids customer and supplier
communication by linking together supplier and
customer information systems.
– Customer now are helping suppliers to isolate
bottlenecks in operations, balance production systems,
and reduce setup times in an effort to reduce lead times.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-13
Supply Chain Priorities
Table depicts relative priorities between auto assemblers, their direct suppliers and
their indirect suppliers.
Ranks
Factors
Auto
Assemblers
Importance
Direct
Suppliers
Importance
Indirect
Suppliers
Importance
Consistency
1
1
1
Reliability
2
3
3
Relationship
3
2
2
Technological capability
4
4
4
Flexibility
5
5
4
Price
6
6
6
Services
7
7
7
Finances
8
8
8
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-14
A Supplier Development Program:
QS 9000
• QS 9000
– A supplier development program developed by a
Chrysler/Ford/GM supplier requirement task force.
– The task force was impaneled to develop standard
reference manuals, reporting formats, and technical
terminology.
– The goal of QS 9000 is to enhance quality systems for
suppliers while eliminating redundant requirements and
reducing costs.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-15
QS 9000 Requirements
Slide 1 of 10
Requirement
Section Number
Management responsibility
4.1
Quality system
4.2
Contract review
4.3
Design control
4.4
Document and data control
4.5
Purchasing
4.6
Control of customer-supplier product
4.7
Product identification and traceability
4.8
Process control
4.9
Inspection and testing
4.10
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-16
QS 9000 Requirements
Slide 2 of 10
Requirement
Section Number
Control of inspection, measuring, and test equipment
4.11
Inspection and test status
4.12
Control of nonconforming product
4.13
Corrective and preventive action
4.14
Handling, storage, packaging, preservation, and delivery
4.15
Control of quality records
4.16
Internal quality audits
4.17
Training
4.18
Servicing
4.19
Statistical techniques
4.20
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-17
QS 9000 Requirements
Slide 3 of 10
• Management Responsibility
– Supplier management is responsible for defining and
documenting its policies for quality along with its
objectives and its level of commitment.
• Quality System
– The supplier firm is required to establish, document,
and maintain a quality system so that the product
conforms to requirements.
• Contract Review
– The supplier examines the steps associated with
contracting with its own suppliers.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-18
QS 9000 Requirements
Slide 4 of 10
• Design Control
– This standard focuses on designing processes. To meet
requirements, suppliers establish and maintain
procedures for controlling the design of the product.
• Document and Data Control
– Includes the procedures or approvals used in issuing
documents and data and making changes to such data.
• Purchasing
– To satisfy requirements for purchasing, the supplier
must establish and maintain documents of procedures to
ensure that purchased products conform to specified
standards.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-19
QS 9000 Requirements
Slide 5 of 10
• Control of Customer-Supplied Product
– The standard for this part of the QS 9000 standard is
worded as follows, “Suppliers must establish and
maintain documented procedures for the control of
verification, storage, and maintenance of customersupplied product provided for incorporation into
supplies or for related activities.”
• Product Identification and Traceability
– QS 9000 requires documented procedures for product
traceability during all stages of the production process.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-20
QS 9000 Requirements
Slide 6 of 10
• Process Control
– The element relating to process control establishes that
suppliers identify and plan the production, installation,
and servicing processes that result in quality products.
• Inspection and Testing
– These activities are put in place to ensure that specified
requirements for products are met.
• Control of Inspection, Measuring, and Test
Equipment
– Suppliers must establish and document procedures to
control, calibrate, and maintain test equipment.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-21
QS 9000 Requirements
Slide 7 of 10
• Inspection and Test Status
– The QS 9000 standard requires that inspection test
status be maintained throughout the production process,
installation process, and service processes of the
product.
• Control of of Nonconforming Product
– When nonconforming products are produced, they can
be
•
•
•
•
reworked to meet specified requirements
accepted with or without repair concessions
regraded for alternative applications
rejected and scrapped.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-22
QS 9000 Requirements
Slide 8 of 10
• Corrective and Preventive Action
– When problems result in defective products, a standard
process for addressing them is needed so that corrective
and preventive action can take place in a disciplined
way.
• Handling, Storage, Packaging, Preservation, and
Delivery
– This standard addresses logistics and inventory control.
– Among the areas to be documented are inventory
control methods, such as models, the way inventory
turnovers are optimized and how inventory levels are
minimized.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-23
QS 9000 Requirements
Slide 9 of 10
• Control of Quality Records
– The records control standard states that the supplier
must establish and follow documented procedures for
identifying, collecting, indexing, accessing, filing,
storing, maintaining, and disposing of quality-related
records.
• Internal Quality Audits
– Suppliers are required to perform internal quality audits
to ensure compliance with QS 9000 requirements.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-24
QS 9000 Requirements
Slide 10 of 10
• Training
– A supplier firm must have documented procedures for
assessing training needs and for training all personnel
who might impact a company’s quality.
• Servicing
– This requirement states that servicing efforts should
meet the customer’s specified requirements.
• Statistical Techniques
– SPC and process capability measures must be
maintained. Appropriate statistical techniques are
chosen during advanced quality planning and must be
maintained in the control plan.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-25
Reflecting on QS 9000
• QS 9000 is fundamentally different from ISO
9000.
• QS 9000 is specifically designed to help
automakers prove they have standardized
processes for dealing with their customers.
• There is much more guidance given to suppliers in
the QS 9000 standard.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-26
Acceptance Sampling
Slide 1 of 4
• Acceptance Sampling
– Technique used to verify that incoming goods from a
supplier adhere to quality standards.
– Acceptance sampling inspection can range from 100%
of the delivery to a relatively few items from which the
receiving firm draws inferences about the whole
shipment.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-27
Acceptance Sampling
Slide 2 of 4
Examples of when acceptance sampling might be needed
When dealing with new or unproven suppliers.
During start-ups and when building new products.
When products can be damaged in shipment.
When dealing with extremely sensitive products that
can be damaged easily.
When products can spoil during shipment.
When problems with a certain supplier have been
noticed in the production process that bring the
supplier’s performance into question.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-28
Acceptance Sampling
Slide 3 of 4
• Acceptance Sampling Fundamentals
– We define acceptance sampling as a statistical quality
control technique used in deciding to accept or reject a
shipment of input or output.
• Producer’s and Consumer’s Risk
– Producer’s risk is the risk associated with rejecting a lot
of materials that has good quality.
– Consumers risk is the risk associated with accepting a
lot of materials that has poor quality.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-29
Acceptance Sampling
Slide 4 of 4
S tate o f N atu re
O u tco m e
P roduct is
G ood
P roduct Is
D efective
C onsum er
A ccepts P roduct
OK
C onsum er’s
risk (β )
T ype II E rror
C onsum er
R ejects P roduct
P roducer’s
R isk (α )
T ype I E rro r
OK
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-30
Statistical Sampling Techniques
Slide 1 of 8
• Acceptable Quality Level (AQL)
– The maximum percentage or proportion of
nonconformities in a lot or batch that can be considered
satisfactory as a process average.
• Lot Tolerance Percent Defective (LTPD)
– The level of poor quality that is included in a lot of
goods.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-31
Statistical Sampling Techniques
Slide 2 of 8
• n and c
– Assignment of AQL, LTPD, alpha and beta is a
management decision for the most part.
– These values define the sampling plan
• n = the sample size of a particular sampling plan
• c = the maximum number of defective pieces for a sample to
be rejected
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-32
Statistical Sampling Techniques
Slide 3 of 8
• OC Curves
– The operating characteristic (OC) curve provides an
assessment of the probabilities of acceptance for a
shipment, given the existing quality of the shipment.
– Constructed to show the probability of accepting
individual lots.
– Higher values of c lead to higher probabilities of
accepting bad shipments (consumer’s risk).
– Higher values of n create a greater confidence that a
good shipment has been accepted.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-33
Statistical Sampling Techniques
Slide 4 of 8
Pa
Probability of acceptance
1.00
P’
.01
.02
.03 .04
Lot fraction nonconforming
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-34
Statistical Sampling Techniques
Slide 5 of 8
Various OC Curves
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Figure 9.4
Slide 9-35
Statistical Sampling Techniques
Slide 6 of 8
• Building an OC Curve
– Binomial distribution
– Poisson distribution.
• Estimating AQL and LTPD
– OC curves can be used to estimate both AQLs and
LTPDs. The figure on the next slide (Figure 9.8 in the
text) shows an OC curve for a single sampling plan
with n = 50 and c = 1.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-36
Statistical Sampling Techniques
Slide 7 of 8
OC Curve of Single Sampling Plan n = 50 and c = 1
Figure 9.8
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-37
Statistical Sampling Techniques
Slide 8 of 8
• More Complex Sampling Plans
– Multiple sampling plans have advantages over single
sampling plans.
– Samples sizes will be smaller on average with the same
amount of protection.
• Developing Double Sampling Plans
– Although OC curves can be used to develop double
sampling plans, the calculations to develop the OC curves
are much more complex than for single sampling plans.
– The textbook uses a standard approach that is used by
many practitioners. The main limitation of this plan is
that sample sizes must be specified, as well as AQL,
LTPD, producer’s risk, and consumer’s risk.
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-38
Summary
• The Value Chain
• Supplier Partnering
• Applying the Contingency Perspective to Supplier
Partnering
• A Supplier Development Program: QS 9000
• Acceptance Sampling and Statistical Sampling
Techniques
Managing Quality: An Integrative Approach; 2nd Edition
© 2004 Prentice-Hall
Slide 9-39