imp Supplier Management Partnership.pptx

imp Supplier Management Partnership criteria

1. SUPPLIER PARTNERSHIP

2. Introduction COGS Composition Shift There's been a significant shift in the composition of the Cost of Goods Sold (COGS) from 1970 to 2000, with purchased goods increasing from 20% to 60%, emphasizing the need for quality management in supplier relationships to control costs. 2. Quality through Partnership High-quality products and services are the result of collaborative efforts between customers and suppliers, aiming for consistent quality levels across the board, which in turn enhances supplier positions and end-user satisfaction.

3. Introduction 3 . Collaboration amidst Resource Constraints : Both parties face resource limitations, necessitating a partnership approach to maximize returns on investment. 4. Evolution of Supplier Relations : Historically, supplier selection was price-driven, often at the expense of quality and delivery. However, the adoption of 'just-in-time' (JIT) and continuous improvement practices has shifted the focus towards more strategic partnerships that prioritize quality and efficiency.

4. @reallygreatsite www.reallygreatsite.com Principles of C ustomer/ Supplier Relations Quality as a Shared Goal Quality control is a joint responsibility, requiring collaborative efforts between customers and suppliers. 2. Mutual Independence and Respect While maintaining their independence, customers and suppliers must respect each other’s autonomy. 3. Clarity in Requirements Customers should clearly define their requirements to ensure suppliers can meet expectations. 4. Transparent Contracting Contracts must clearly state all terms, including quality, quantity, and delivery, to ensure transparency. 5. Supplier’s Quality Obligation Suppliers are obliged to deliver quality products and provide relevant data as requested by customers.

5. @reallygreatsite www.reallygreatsite.com Principles of C ustomer/ Supplier Relations 6. Agreed Quality Evaluation : Both parties should concur on the methods for assessing the quality of products or services. 7. Amicable Dispute Resolution : Contracts should include agreed-upon methods for resolving disputes peacefully. 8 . Ongoing Communication : Continuous exchange of information and collaboration across functions is vital for quality improvement. 9. Joint Business Efforts : Both customers and suppliers should participate in various business activities to foster a strong relationship. 10. Focus on End User Satisfaction : The ultimate goal of both parties should be to serve the best interests of the end user.

6. Partnering Long-Term Commitment Successful partnerships are built on a long-term commitment, requiring time to solve problems and improve processes. Total involvement from all organizational levels is key, and risks should match the rewards. A prime example is Maruti Suzuki India Limited’s 25-year relationship with its vendors, fostering continuous quality improvement and mutual growth. Trust Trust forms the cornerstone of partnerships, allowing for the sharing of resources and knowledge. Aligning purchasing functions with relationship goals and maintaining open communication are vital. Access to business plans and technical information should be mutual, ensuring fairness and win-win outcomes. Shared Vision Partnerships must be driven by a shared vision to satisfy the end customer, with open communication about needs and expectations. Goals and objectives should be aligned with each party’s mission, and decisions should be made collaboratively for the common good.

7. @reallygreatsite www.reallygreatsite.com Sourcing Single Sourcing Definition : Single sourcing involves relying on only one supplier for a specific item or component. Reasons : Factors like technical specifications, raw material availability, or the existence of a sole producer can lead to single sourcing. Challenges Delivery disruptions (especially with JIT processes). Limited flexibility in responding to unexpected changes . Multiple Sourcing Definition : Multiple sourcing uses two or more suppliers for the same item. Theory : Competition among suppliers should lead to better quality, lower costs, and improved services. Reality : Adversarial relationships can develop, but multiple sourcing helps mitigate supply disruptions.

8. @reallygreatsite www.reallygreatsite.com Sourcing Partnering and Long-Term Contracts Benefits Reduced costs. Enhanced product quality. Supplier loyalty. Challenges : Delivery disruptions (especially with JIT). Balancing guaranteed future volume with flexibility. Examples Xerox ( Zerox ) achieved remarkable quality improvement by consolidating suppliers. Merck also reduced its supplier base, aiming for similar benefits .

9. Supplier selection Strategic Decision to Outsource 1. Assess the criticality of the item to product/service design. 2. Evaluate internal technological capability to produce the item. 3. Consider developing necessary technological knowledge if not available. 4. Identify or develop specialized suppliers for the item. 5. Make decisions based on cost, delivery, quality, safety, and technical knowledge.

10. Supplier selection criteria Philosophical Alignment : Suppliers must resonate with the client’s management philosophy. Management Stability : A well-implemented quality policy, clear responsibilities, and regular system reviews are essential. Technical Excellence : Suppliers should be capable of adapting to future technological advancements. Material Quality : Only suppliers meeting the required quality standards for materials and parts are considered. Production Proficiency : The ability to meet production demands and scale up is crucial .

11. Supplier selection criteria 6. Ethical Compliance : Suppliers must adhere to all regulatory standards without fail. 7. Cost and Delivery : Competitive pricing and dependable delivery systems are key factors. 8. Contract Adherence : Suppliers are expected to honor contract terms and manage any discrepancies effectively. 9. Quality Commitment : A robust quality system with a focus on continuous improvement is mandatory. 10. Customer Focus : A history of customer satisfaction and credibility is vital. Industry Standards : Japan and the US are benchmarks for top-tier automotive supplier plants, setting industry standards for supplier excellence .

12. Supplier certification Mutual Agreement : Specifications must be co-developed, clear, and justified, including all design, manufacturing, and packaging details. Lot Acceptance : No product-related lot rejections for a significant period, such as a year or 20 lots. Product Quality : No known product-related rejections within a specified timeframe, like three months or five lots; minor issues should be correctable. Incident Management : No negative incidents unrelated to the product within a set period, such as six months; all issues should be documented. Quality Documentation A fully documented quality system is required, with ISO 9000 as a suggested framework.

13. Supplier certification 6. Evaluation Compliance : Passing an on-site system evaluation by third parties or customers is necessary. 7. Data Provision : Capability to conduct inspections, tests, and provide timely data. 8. Decertification Terms : One major failure is permissible before decertification; excellence is expected for preferred supplier status . Certification Benefits: Inspection Waiver : Certified suppliers can bypass receiving inspections, enabling direct shipping to customer inventory. Partnership Responsibility : Certification fosters a partnership where each party is accountable for their quality. Supplier Optimization : Reduces the supplier count to a manageable number, cutting down overhead costs.

14. Part level Quality Assurance 1. Specifications Suppliers must have up-to-date specifications, including technical drawings, standards for inspection, testing, and packaging. 2. Process Review A thorough review of the supplier’s manufacturing process and equipment is required. 3. Risk Analysis FMEA should be performed to anticipate potential failures in processes and designs, with capable measurement systems in place. 4. Capability Assessment Process capability must be evaluated to ensure an acceptable capability index and that components pass validation tests.

15. Part level Quality Assurance 5. Resource Evaluation Suppliers should have sufficient resources, equipment, and manpower to meet production demands. 6. Approval Standards Suppliers must adhere to PPAP, which includes 19 elements as per AIAG guidelines. 7. Quality Status After PPAP approval, parts may receive STU status, and internal customer feedback can lead to issuance to the production line via the Green Channel.  

16. Supplier Rating Communication & Feedback : Maintain open communication with suppliers regarding their performance and provide detailed feedback for improvements. Performance Reviews : Implement a structured program for consistent and regular supplier performance evaluations. Scoring System : Adopt a clear scoring system, like the traffic light standard, for easy issue identification and use web-based platforms for accessible scorecards.

17. Relationship Development Quality Inspection and Training: Inspection Phases : Start with full inspection, progress to sampling, then audit with random checks, and finally, conduct identity checks for inventory control. Quality Training : Essential for small and large organizations to foster quality partnerships, with training led by customers, consultants, or in-house .

18. Relationship Development Collaboration and Recognition Teamwork : Form joint teams for product and process design, involving suppliers early for better cooperation. Supplier Recognition : Acknowledge and incentivize suppliers for quality efforts through awards and commendations. Standardization and Relationship Building Sampling Standards : Adhere to Indian Standard IAS 2500 for consistent inspection procedures. Long-Term Trust : Aim for a quality level based on identity checks, fostering continuous improvement and trust over approximately five years.

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