Elevating supplier management for optimal performance

When it comes to managing suppliers, a one-size-fits-all method can be a big mistake. Rick Jones, a respected quality management consultant with more than 25 years of experience, talked about supplier management in more detail during a recent CWB Group webinar. He stressed how important it is to use a risk-based approach in the framework of a quality management system based on a standard like ISO 9001.

The key to this approach is to classify suppliers based on how much risk they pose to your business and record how they’ll be controlled. Tough oversight is needed for high-risk suppliers who provide mission-critical goods or services. For example, a provider that ships the wrong grade of steel for fabrication is a big risk that can have a direct effect on the quality of the final product and your reputation. Others, such as suppliers of printer paper or lawn maintenance, are considered low risk because their products or services are easy to replace. They don't need as many strict controls.

Classifying suppliers according to risk and documenting risk-appropriate supplier controls can help when you run into quality issues.

Evaluation and Re-Evaluation of Suppliers

There are two important checkpoints to the process of managing suppliers: the original evaluation and regular re-evaluation. The first step in the evaluation process is to perform a full assessment on a potential supplier before you begin working with them. This step is very important, whether they’re a new supplier or someone the business is getting back in touch with after a long break. Re-evaluation, on the other hand, is an ongoing process that checks in on a supplier's work at set times. As Jones said, “Evaluation is when you ask if you want to do business with that supplier. Re-evaluation is when you ask how it’s going now that you are doing business with them.”

Low-risk suppliers may only need to be re-evaluated once a year, but high-risk suppliers need to be assessed more often, if not all the time.

Handling supplier evaluation in the context of a quality management system means the reviews are structured and unbiased. Create clear criteria for judging suppliers, so the review isn't based on opinion, and put it in writing. This process can look different, from on-site audits, which are useful with underperforming suppliers, to remote audits when it's not possible to visit in person. This thorough evaluation looks at more than just price, speed, and quality. It also looks at things like on-time delivery, working together to fix mistakes, and how a supplier’s performance affects a business’s processes and timelines.

How Internal Processes Can Impact Supplier Performance

One often-forgotten aspect of supplier management is how your internal processes affect how well your suppliers perform. Jones said that issues with how your business communicates and works with suppliers can make it harder for a supplier to perform at its best. Lack of clarity about dates or material requirements, for example, can cause problems in the supply chain.

Jones recommends that your and your suppliers work together to solve problems. Businesses can greatly improve partner performance by carefully looking at and improving their internal processes. This mutually beneficial arrangement not only makes the products better and more reliable, but also makes the relationships with suppliers stronger.

Risk-Based Receiving: An Important Part of Quality Management

Receiving processes are an important part of managing suppliers in the context of a standard like ISO 9001. On this topic, Jones stressed how important it is to consider risk when instituting inspections and controls. How closely each product or service needs to be looked at depends on what might happen if there’s a problem. Some important things to think about are the risk that comes with the specific product or service, how well the business can inspect the product, and how well the supplier has performed in the past.

The receiving process boils down to three essential parts according to Jones:

• Comparing the delivery to the shipping papers.
• Making sure the delivery matches the purchase order.
• Ensuring the delivery conforms to the requirements.

However these processes are handled, be sure to take a consistent approach that fits your business’s needs and capacity.

A Strategic, Collaborative Approach to Managing Suppliers

As Jones explained, managing suppliers is a critical process based on relationship management. It requires a strategic and risk-based approach, thorough review methods, and an understanding of how your business and its suppliers depend on each other. Establishing a quality management system and keeping good records not only lowers risks but also improves your business’s overall performance.

Bottom line: A quality management system based on a standard like ISO 9001 will help you manage your suppliers for more consistent quality, fewer risks, and better performance.

CWB Group helps businesses identify ways to improve processes and save money through auditing services and registration to ISO standards so they can reach operational goals. Learn more about our registration services at www.cwbgroup.org.

Maria Hypponen is communications advisor at CWB Group. She can be reached at maria.hypponen@cwbgroup.org, 800-844-6790 Ext 295, cwbgroup.org.