STUDENTS

COPY
B.Sc. (Engg) Industrial Engineering &
Management,
6th Semester (Session: 2008-2012)
Dated: 03.11.2011

CUSTOMER
SUPPLIER
RELATIONSHIP
QUALITY
PURCHASING

Ref: 1)

Total Quality Management, 3rd Edition by

Besterfield D.H., Besterfield C.M., Besterfield G.H.,
Besterfield S.M. (Page 165-175)

Ref: 2)

Effecting a Quality Change by Swift S.W. (Page

33-37)

D:\Dr. Nasir\BSIM\TQM 6th Semester (2008-12)\Slides\07-Customer

Supplier Relationship-Quality Purchasing.ppt

Introduction

Vendor/sub-supplier Organization
Customer
An organization spends a substantial portion
on the purchase of raw materials,
components, and services;
Substantially affect the overall cost & quality;
Customer to work with suppliers in a
partnering atmosphere;
Customers and suppliers have the same goal
to satisfy the end user.
60-70% of cost of sales comes from purchases;
2

Continue

Quality is an important basis for

price fixation;
Another force changing supplier
relations was the introduction of the
just-in-time (JIT) concept;
Minimum inventory-related costs;
Continuous process improvement;
3

Principles of
Customer/Supplier
Relations

Dr. Kaoru Ishikawa has suggested:

Both the customer and the supplier are
fully responsible for the control of quality.
Both the customer and the supplier
should be independent of each other and
respect each others independence;
Customer responsible for providing the
supplier with clear and sufficient
requirements/data;

Continue

Customer and the Supplier should enter into

a non-adversarial contract with respect to
quality, quantity, price, delivery method, and
terms of payments.
Supplier responsible for providing the quality
that will satisfy the customer and submitting
necessary data upon the customers request.
Customer and the Supplier should decide the
method to evaluate the quality of the product
or service to the satisfaction of both parties.

Continue

Customer and Supplier should establish

in the contract the method for amicable
settlement of any disputes.
Customer and the Supplier should
continually exchange information,
sometimes using multifunctional teams,
in order to improve the product or
service quality.

Continue

Customer and the Supplier should

perform business activities such as
procurement, production and inventory
planning, clerical work, and systems so
that an amicable and satisfactory
relationship is maintained.
When dealing with business
transactions, the customer and supplier
should always have the best interest of
the end user in mind.

Partnering

Long term commitment;

Achieving specific business goals and
objectives by maximizing the
effectiveness of each participants
resources;
Trust, dedication to common goals and
objectives Shared Vision;
Participants expectations and values;
Improved quality, increased efficiency,
lower cost;
8

Sourcing

Three types:
Sole;
Multiple;
Single;

Supplier Selection

How critical is the item to the design of the

product or service?
Does the organization have the technical
knowledge to produce the items internally? If
not, should that knowledge be developed?
Are there suppliers who specialize in producing
the item? If not, is the organization willing to
develop such a specialized supplier?

Answered in terms of cost, delivery, quality, safety,

and the acquisition of technical knowledge.

10

Continue

Selection and evaluation of suppliers:

Understands and appreciates the
management philosophy of the
organization;
Stable management system;
Maintains high technical standards;
Capacity of dealing with future
technological innovations;
Can provide those raw materials and parts
required by the purchaser, and those
supplied meet the quality specifications;

11

Continue

Capability to produce the amount;

No danger of the supplier breaching
corporate secrets;
Price is right;
Delivery dates;
System to trace the product;
Sincere in implementing the contract
provisions;
Effective quality system;
Track record;

12

Supplier Certification

Agreed upon specifications;

With new products, the design team can
significantly impact lead times and
quality;
Design specifications, manufacturing
assembly, and packaging instructions;
No product-related lot rejection for a
significant period;
No non-product-related rejections for a
stated period of time, say, three months;
13

Continue

Number of lots, say, five. Non-productrelated non-conformities;

Wrong count or a billing error are not as
serious;
No negative non-product-related
incidents for a stated period, say, six
months or number of lots, say, ten;
Notified of the incident by memorandum
or other written communication;
Fully documented quality system;
14

Continue

Passed an on-site system evaluation;

Conduct inspection tests;
The ability to provide timely
inspection and test data;
Necessary to decertify a supplier as
a result of a major problem. It is
suggested that a supplier is allowed
one failure before decertification;
15

Supplier Rating

Obtain an overall rating of supplier

performance;
Ensure complete communications with
suppliers concerning their performance in the
areas of quality, service, delivery , and any
other measure the customer desires;
Provide each supplier with a detailed and
factual record of problems for corrective
action;
Enhance the relationship between the customer
and the supplier;
16

Continue

An internal structure to implement

and sustain the rating program;
Regular and formal review process;
Standard measurement system for
all the suppliers;

17

Relationship
Development

Inspection;
Training;
Team Approach;
Recognition

18

CASE STUDY PREFERRED

SUPPLIER PROCESS
Purpose to improve your (supplier) performance
jointly.
What is the process encompassing your entire CQI
cycle business operation.

Joint identification of key opportunities.

Jointly agree on levels of achievement (supplier)

There are three elements against which you

will be assessed:

Statistical process control

A detailed business assessment

Measurement of your performance

19

Continue

Award Preferred Supplier

Status

Supplier Completes
Business Assessment
Questionnaire

Continuous Improvement
Plans Implemented

OK

Successful Completion of
on Site Business
Assessment and SPC
Evaluation
Upgrade when Higher Award
Criteria is Met

NEW

Establish Performance
Levels (Jointly) Including
SPC

Measure Supplier
Performance and
Processes

Upgrade when Higher

Award Criteria is Met

FLOW CHART FOR PREFERRED SUPPLIER PROCESS

20

MINIMUM CRITERIA FOR QUALIFYING IS

BRONZE STANDARD IN EACH CATEGORY

B U S IN E S S
ASSESSM EN T

SPC

PER FO R M ANC E

BRONZE AW ARD

SILVER AW AR D

G O LD AW AR D

PROCESS FOR UPGRADATION

21

BENEFITS TO SUPPLIER
AND CUSTOMER

improved product quality;

improved delivery times;
increased business viability;
involvement at the design stage if
appropriate;
communication and sharing of best
practice;
enhanced customer satisfaction.

22

BAe/Supplier
Agree Key
Characteristic
Issue
BAe/Supplier SPC
Standard
Supplier Given
Information on
Areas Requiring
Improvement

NO

BAe on Site
Evaluation
Visit

Revisit for
Silver or
Gold Level

Silver or
Gold SPC
Certification
Granted

Meet
Requiremen
t for Bronze
Level

On Site
Evaluation
by BAe

Periodic
Review of
SPC
Systems by
BAe

YES
Supplier Given
Information on
Areas Requiring
Improvement

Bronze
Level
Certification

Meet
Silver or
Gold
NO
Requiremen
t

YES

SPC PROCESS

23

MANAGEMEN
T
Organization

QUALITY

DELIVERY

COST

TECHNOLOG
Y

Quality
Policies and
Procedures

Delivery
System
Integration

Labour and
Materials

Product
Development

Personnel
Management
Process
Control
Customer
Satisfaction
Business
Integration
Supplier
Management

Problem
Prevention
Detection and
Correction
Supplier
Quality
Process

On-time
Manufacturing
Delivery
Systems
Packaging
Shipping and
Receiving

Rates
Accounting
and
Other Costs
Performance
Processes and
Communicati
on

Product
Design
Definition
Manufacturing
Equipment
Test and
Rework

Proposal and
Pricing
Financial
Condition

BUSINESS ASSESSMENTS AND SUB-ELEMENTS

24

SUPPORT
Organization
Logistics
Support
Development
Field
Maintenance
Support

PERFORMANCE
Certificatio
n Level

Quality

Delivery

Acceptanc
e Percent

Period
Months

Acceptanc
e Percent

Period
Months

Gold

99 100

12

99 100

12

Silver

97 98

12

95 98

Bronze

95 96

12

90 94

1)

2)

Also requires
rating.
Performance
complexity.

acceptable responsiveness assessment

guidelines

may

vary

with

PERFORMANCE STANDARDS
25

product