Father of modern quality Dr. W. Edwards Deming drew up a 14-Point Philosophy of Quality. Point #4 reads:
“End the practice of awarding business on the basis of price. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.”
More simply, this principle calls for the end of granting supplier contracts to the lowest bidder. While manufacturers want to boost profitability by cutting costs, hiring a less expensive supplier may end up costing the business more money in the long run.
Inferior parts and lackluster supplier performance may trigger costly recalls and delay the delivery of products to customers. Supply Chain Management ensures that suppliers meet strict criteria so that the highest-quality parts will be used in manufacturing and that new product delivery schedules are met.
The supplier vetting process is crucial for manufacturers. A completed product is only as good as the parts that are used to construct it. For example, cars are manufactured using thousands of smaller parts supplied by companies all over the world, all of which must be of high quality to ensure the vehicle runs properly.
While manufacturers may try to give supplier contracts to the lowest bidder, it is far more important that they work with suppliers who can follow industry compliance regulations for producing quality parts. The automotive industry must meet industry-wide compliance standards, such as International Automotive Task Force (IATF) 16949:2016, International Organization for Standardization (ISO) Standards 14001, and ISO 9001, among others.
Materials Management Operations Guidelines (MMOG) define a global set of industry best practices for supply chain management. To meet these guidelines, manufacturers must assess their supply chain processes, as well as implement and track improvements in supplier performance.
Production Part Approval Process (PPAP) is a system that has been put in place to ensure that suppliers produce quality products, particularly in the automotive manufacturing industry, and demonstrate good manufacturing practices (GMP).
Speeding Products to Market
Manufacturers also need to work with suppliers that are reliable. If a supplier doesn’t ship its parts quickly, the manufacturer can’t meet production deadlines. This means products won’t get to the customer site in time to fulfill orders.
An unreliable supplier also prevents manufacturers from introducing new products quickly. Manufacturers rely on new product introductions (NPIs) to stay competitive and profitable. If an NPI is unsuccessful because of a defective part or a weak link in the supply chain, a manufacturer will come across as unreliable and untrustworthy, leading it to lose its standing in the market.
Cutting Costs and Reducing Risk
When manufacturers choose compliant, reliable, and trustworthy suppliers, they take a proactive approach to quality and profitability. Instead of saving money on the contract, manufacturers save money overall by avoiding recalls, potential litigation, and customer attrition due to lack of satisfaction and loss of reputation.
As automotive recalls have shown, a single defective part can trigger a massive recall and put customers’ lives in danger. The National Highway Traffic Safety Administration (NHTSA) reminds us that the ongoing recall of tens of millions of cars was caused by a faulty seal on an airbag inflator. This nonconformance in a small part can cause the airbag to explode without warning or fail to operate during a collision.
When a company experiences a recall, customers may lose trust in it and turn to competitors for products in the future. Once your company has lost customers, they are expensive to replace.
Recalls such as this can also cost automotive and medical device manufacturers billions in repair costs, parts replacements, and litigation. MedTech Dive, a medical technology news source, reported that Cardinal Health suffered a $96 million loss after they recently recalled surgical gowns and other equipment that was packaged with them. These surgical gowns were supplied by a Chinese company that did not maintain sterile conditions during manufacture. This recall has occurred at the worst time because PPE supply chain is already struggling to keep up with demand.
Harnessing Supply Chain Management
Supply chain management software is a way to ensure that suppliers are meeting safety and performance requirements. With supply chain management, manufacturers can automate many of the processes involved in monitoring and tracking supplier performance.
QAD CEBOS offers a Supplier Quality Management (SQM) Application as part of our Enterprise Quality Management Software (EQMS). QAD CEBOS SQM oversees parts and materials received from the supplier and conducts performance reviews.
SQM allows for visibility into supplier information, such as approved supplier lists, audit schedules, and supplier certifications. With SQM, manufacturers can also manage part nonconformances and the chargebacks that result from poor parts quality.
SQM helps manufacturers find and retain the most reliable and cost-effective suppliers so they can produce excellent products, stay profitable, and grow.
Take a deep dive into the business benefits of EQMS. Read our eBook The Manufacturer’s Guide to Optimizing Production: How to Reduce Risk, Spur Innovation, and Boost Profits