NOT THERE YET!
By Cheryl C Lewis -- Purchasing, 2/12/1998
For years, purchasing pros in the CPI have talked about how total quality management was the basic foundation upon which their supply strategies were built. So we decided to take a look at just how far the industry has come in its efforts to measure and improve supplier quality. We sent out a survey to buyers requesting information on their supplier quality performance programs.The results were startling. Supplier quality--and supplier-quality management by purchasing pros--in the CPI has undoubtedly improved over the years, but there's still a very long way to go. Although 85% of those responding to the survey have seen improvements in supplier quality, some by as much as 50%, only 5% rated their supplier-quality measurement plan as "exemplary." Forty-six percent said they have a good plan. But a whopping 39% characterized their measurement system as only okay, and another 10% feel their plan needs help.
We turned to experts to assist in making sense of the data; some of their opinions won't make CPI purchasing pros feel real good.
"The chemical industry is behind the state of the art in supplier-quality management compared to other industries," says Ken Stork, president of Ken Stork & Associates, Naperville, Ill. In particular, Stork points out, the electronics industry is a champion of supplier-quality improvement. The automotive industry also has strong supplier-quality measurement programs in place.
So why is the CPI behind in supplier-quality management? The reasons differ from company to company, and from industry to industry. One reason may be necessity. "The chemical industry may not be as competitive as the electronics industry, so supplier quality isn't as critical," says Stork. "Manufacturers in the electronics industry need it to survive."
Company size also can make a difference in where a company is in measuring supplier performance. Large companies have more resources--in the form of money and manpower--with which to develop quality programs. They also tend to be more enlightened in terms of innovative business tools and practices. The chemical processing industries include a large number of small to mid-size firms.
Computerization is another hindering force. Thirty-one percent of survey respondents that listed areas where they feel their supplier-quality measurement plan could be improved included computerization. "Computer equipment and technology generate a lot of promise and problems," says Amy Zuckerman, principal of A-Z International Associates and Technology Information International, Amherst, Mass.
Many companies in the CPI have undergone a number of mergers and acquisitions. This has left divisions within companies without the ability to communicate with each other because of the wide array of computer equipment and software that is incompatible. As a result, for some purchasing departments, computerizing supplier-quality performance programs isn't currently a viable option.
What about ISO 9000?
For the past several years, CPI companies and purchasing departments have emphasized ISO 9000 standards and certification. But what does ISO really mean in terms of supplier-quality management? Are companies getting what they want or need out of these initiatives?
Some in industry don't think ISO 9000 initiatives are all they're cracked up to be. "ISO 9000 is really a highly expensive, generally ineffective approach to actually improving supplier performance," says Stork. "It tends to be merely an audit to see if a company is in compliance at that moment in time." Stork also points out that ISO initiatives are not typically linked to measures of supplier performance.
Others agree. "ISO 9000 is a real mixed bag for quality," says Zuckerman. ISO 9000 has some purpose, but it's been overhyped. ISO assures a buyer that a supplier has specific documentation systems in place; it doesn't provide any assurance about actual quality levels. "The sharing of information that ISO 9000 should promote is its best result," believes Zuckerman.
On the down side, initiatives such as ISO 9000 have stopped quality from being the focal point during the last few years. "ISO 9000 deflected a certain amount of quality efforts," sums up Zuckerman. "We must refocus on it."
So what can the CPI do?
Purchasing in the CPI needs to reevaluate where supplier-quality programs are today, and where they're going tomorrow. To do this, some companies may want to consider taking a fresh approach to reviewing their systems. Several tools could be used.
One tool the industry could utilize is benchmarking. "The chemical industry would benefit by benchmarking or looking outside of the industry to evaluate best practices," believes Stork. "They would find some very meaningful and useful ideas."
Companies also may want to bring in outside consultants or other experienced professionals to review their supplier-quality processes. "This can be a rapid way to understand what the gaps are and where improvements are necessary," says Stork. "This is an excellent way to close the gap in performance.
Here's one area where the CPI is strong. Purchasing departments in the CPI have embraced quantitative supplier-quality measurement methods whether they have a formal or informal process.
Many purchasing departments in the CPI still are working to set up and formalize supplier-quality measurement systems. Just over half of those polled have a formal supplier-quality measurement plan. A glaring 19% of respondents have only an informal supplier-quality measurement process. Of those that do not have a formal supplier-quality measurement system, close to 40% say they are developing aformal plan.
This is shocking, and buyers recognize that it's an area to work on. Many buyers listed computerization of their quality process as an area where their process could be improved. Not only does computerization improve efficiency, it cuts down on paperwork and helps other corporate functions accept a formal measurement system.
Frequency of measurement and reporting is another relatively strong area for the CPI. Some respondents even measure supplier-quality performance on a weekly or per-shipment basis. Only 5% check out supplier quality on a yearly basis. Almost 30% say they don't have a set schedule to measure supplier performance, and many do not review all aspects of their suppliers' quality performance.
Another area where purchasing could improve supplier-measurement systems. Despite the fact that quality is a team effort, only 55% of buyers polled say they involve their quality department in evaluating supplier performance, and it goes down hill from there. Only 33% ask for help from their manufacturing department, and 21% involve shipping and receiving.
This is a good indicator of how far the CPI still has to go in supplier-quality management. Only 5% of those surveyed feel they have an exemplary supplier-quality measurement plan in place. To improve their process, buyers listed the following items: computerization, manpower, raising baselines, using trend analysis, increasing number of suppliers measured, and better equipment.
As expected, consistent quality and delivery time are high on the list of criteria included in supplier-quality measurement plans. Almost 30% of those surveyed do not assess service when measuring supplier quality.
Another area that needs improvement. Only 28% of those polled measure the quality of value-added services. Why? It's much more difficult to measure qualitative factors such as value-added services and technological innovation than it is to measure on-time delivery and product consistency. Yet, these services from suppliers can give a buyer's company a strong competitive edge.
Only half of buyers polled ask suppliers for help when measuring raw-material quality. Some of the things buyers ask for include self-evaluations, standard test methods, statistical process control data, certificates of analysis, documentation, and safety reports.
Incredibly, product consistency and delivery continue to remain at the top of the list of areas where suppliers could improve on their quality performance. This is despite years of badgering from buyers for suppliers to boost product quality and improve delivery performance. Other areas include timely and accurate product information, better customer service, and more honesty and integrity.
Quality efforts are worth it. Eighty-five percent of those polled say supplier quality has improved as a result of quality-measurement plans. Those with formal programs get the best bang for their buck. Many buyers with formal programs say their supplier quality has improved 10%-50%.
Only 14% of those surveyed have a formal quality-supplier award program. In general, there are few who do hand out plaques and certificates to winning suppliers on an annual basis. For the most part, however, buyers in the CPI are not formally recognizing outstanding suppliers. Of these 86% of buyers who don't formally reward suppliers, many provide suppliers with things like preferred supplier status, more business, continued business, and long-term contracts.
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