April 12, 2023 | Supplier Management Strategy
Supply chain leaders know how crucial supplier quality management is for a business’s bottom line, brand reputation, productivity of operations and customer satisfaction. Supplier quality management transcends mere purchasing of good quality products to nurturing relationships with suppliers with mutual respect and trust.
Here are the five key elements of effective supplier quality management:
Defining clear and concise quality standards is the first element of effective supplier quality management. Quality standards are a vital (and surprisingly, often ignored) metric – they help measure the quality of goods received from the suppliers. It is essential to explicitly communicate set quality standards to suppliers, so that they know what is needed from them. Without doing so, your business will eventually end up receiving subpar products and having poor or no supplier relationship.
For instance, an electronic components manufacturer may set quality standards denoting the minimum acceptable level of performance needed for each component. Suppliers will lose the business if their product quality does not meet the set standards.
Therefore, clearly articulated quality standards are vital for maintaining quality consistency and ensuring that suppliers show no negligence in product quality.
Another key element of effective supplier quality management is conducting regular quality audits. Quality audits help identify whether suppliers are meeting the needed quality standards at any given point of time. These audits should be conducted frequently to ensure that suppliers are consistent in maintaining quality.
Typically, during audits, procurement teams quality-check the goods received by suppliers to see if these meet the standards. They will further review the supplier’s facilities and processes for any loopholes and opportunities for improvement.
For instance, a food manufacturer may conduct regular quality audits of its suppliers to ensure they maintain high-level food safety. During these audits, inspectors may check the suppliers’ facilities, review their food safety plans and test their products to ensure these are free from contaminants.
Measuring supplier performance helps identify areas where they are excelling and areas that need improvement.
Supplier performance measurement can be done in various ways. One common approach is to use key performance indicators (KPIs) to track supplier performance over time. KPIs may include metrics such as on-time delivery, defect rates and customer satisfaction.
One of the best ways to measure supplier performance is using score cards. Scorecards help enable procurement teams to measure, analyze and manage supplier performance. Supplier scorecards can help track subjective and objective performance, both of which help create sustainable long-lasting supplier relationships.
Moreover, they provide a structure for documentation, track KPIs (which measure supplier performance) and establish a common language for internal and external communications. The findings are used to build a framework for action items or targets for suppliers to meet.
Businesses can also put a reward system in place to recognize when suppliers excel expectations. Training opportunities can also be employed for supplier performance improvement.
Another key element of effective supplier quality management is creating strong supplier relationships. Forming better supplier relationships help keep the suppliers motivated to always meet the quality standards. When suppliers feel they are part of the company’s team, a sense of responsibility stems in them — and this will make them strive to meet the set quality standards.
Strong supplier relationships can be effectively formed by clear communication and consistent feedback. Keep communication channels open with suppliers and ensure the right people on both sides have access to each other to communicate – discuss bottlenecks and opportunities to improve. Also, create avenues which allow opportunities for feedback frequently. This is essential to ensure everyone is on the same page.
Leveraging data is one of the most critical aspects of supplier quality management. Data analytics enables you to make data-driven decisions to efficiently improve supplier quality. By analyzing data on suppliers’ performance metrics such as quality of goods, timeliness of goods, defect rates and more businesses can spot bottlenecks and opportunities to improve.
Prescriptive and predictive analytics tools can be used to take proactive supplier quality management approaches. For instance, predictive analytics can help you find patterns in suppliers’ performance to identify pitfalls and opportunities, as mentioned earlier. And prescriptive analytics can help you go beyond this data-driven forecast and prescribe you proactive actions to take to boost the bottom line.
For instance, an automotive parts manufacturer can use data analytics to identify patterns in supplier defect rates. This data could be used to identify suppliers that consistently deliver high-quality products and those that may need additional support to improve their performance.
Supplier quality management is a critical aspect of creating successful supply chains. The quality of suppliers in terms of goods they deliver, their timeliness and the relationship you have with them has a direct effect on business. Efficient supplier quality management leads to more sales, efficient operations and happier customers. Effective supplier quality assessment measures include frequent audits of product quality, clear communication and feedback, tracking performance through scorecards and offering training, amongst other things. Leveraging data is a powerful and essential way to see patterns in enhancing supplier quality management, predict better outcomes and take proactive actions, all of which will eventually add to the bottom line.