Developing supplier relationships
Best practices in supplier quality management
Supplier quality management (SQM) is a critical activity for any business that relies on suppliers in the provision of their goods or services. It involves managing, monitoring and responding to changes in the supplier's ability to fulfil customer's needs on time and to the agreed quality specification.
Key practices for managing supplier quality
You can use several strategies to monitor and improve quality throughout your supply chain. For example, you can:
- Measure the cost of quality - find out how much it costs to manufacture a quality product. Then look at how much poor quality costs - for example, scrap, rework, sorting and processing, warranty and recall costs.
- Introduce a cost recovery system - agreeing a cost recovery process can boost accountability throughout the supply chain. It may allow you to recover the cost of poor quality from a supplier, and encourage them to look at and address issues causing poor quality quickly and efficiently.
- Audit your supplier - agree a procedure to quality check your supplier against non-conformances in manufacturing, quality, service provision, compliance etc. Audits can identify areas for improvement and help you agree corrective actions, response and resolution processes and targets, etc.
- Introduce supplier scorecards - standardised scorecards may give you a way to rate suppliers on performance and benchmark one supplier against another. Scorecards can measure supplier's key performance indicators (KPIs), non-conformance or risks. They can help you track improvements or failures in quality over time and identify areas for improvement, as well as agree corrective actions to minimise quality risks in the future.
- Integrate IT processes - instead of separate financial, quality and operational systems, an integrated enterprise solution can enable communication, collaboration and quality control across the supply chain from procurement to delivery.
How to monitor supplier's performance
In monitoring the performance of suppliers, it often helps to keep track of critical metrics and KPIs, such as the percentage of:
- returned products
- products delivered on time and complete
- products in compliance with regulations or quality standards
- new products introduced in the market that met time, volume, and quality targets
Other supplier performance metrics may include: order fill rate, lead-time variance, received vs ordered units, ordered price vs invoiced price, accuracy of advanced shipment notifications, etc. Find more tips to help you review your suppliers' performance.
Supplier quality assurance and certification
Some suppliers may have a quality-related accreditation, such as the ISO certification. This is a globally recognised mark of quality excellence, which declares that the supplier:
- is operating to verifiable standards
- has a solid quality management system in place
Choosing quality-certified suppliers offers you reassurance that they have the right processes in place to provide you with consistent, reliable, quality service. See more on quality management standards and choosing the right suppliers.
Importance of supplier quality management
Managing your supplier quality can bring many benefits to your business. It can increase your product quality, boost your bottom line and enhance your business' reputation. On the other hand, poor supplier quality can lead to lost sales, costly recalls, penalties for non-conformance or legal action.