The quality of purchased items is increasingly important to the buyer’s organization:
This step of supplier relations on the spiral of quality activities concerns the purchase of products (goods or services from suppliers).
Purchases are of two main types:
(1) those which became a part of the product marketed by the buyer, and
(2) non-product purchases such as equipment used for plant services, supplies for plant operations, and office supplies and equipment.
Importance of supplier quality:
The Quality of purchased items is extremely important for several reasons:
1. Amount of purchased product: for many original equipment manufacturers, at least half of the materials embodied in their products are purchased from other companies or from divisions of the parent company. Many manufacturers of products now design the total product, manufacture a chassis or frame, and then purchase and assemble most of the remaining items going into the product.
2. High cost associated with poor quality supplier items: for one home appliance manufacturer, 75% of all the warranty claims were traced to purchased items.
3. Interdependence of buyers and suppliers: some buyers are highly integrated with the facilities of the supplier. For example, a producer obtains the components from a supplier whose plant is literally next-door to their facility. It can be manufactured by the supplier at 7 AM and is transported to the customer, then shipped by 12 noon.
4. Other cases of interdependency involve technological skills: The buyer may be completely dependent on the knowledge of the supplier in designing or manufacturing the item. But the supplier is also dependent on the buyer for complete information on how the supplier product needs to function in the buyer’s product.
5. Internal factors of the buyer’s organization: one example is inventory reduction. The just-in-time inventory concept aims to receive items from suppliers only in the quantity and at the exact time that they are needed for production. Such tight scheduling makes it imperative that the purchase products meet quality requirements. If a portion of the purchase product is defective, then a major disruption may occur at the buyer’s plant due to the lack of sufficient back-up inventory. Under conventional purchasing, supplier quality problems can be hidden by excess inventory and bringing material in early.
6. In the case of a supplier who sent poor quality material for four years. Under the just-in-time concept, the supplier was replaced. A second example is control of internal cost for the buyer, e.g., incoming inspection costs.
7. Therefore, supplier relations are worthy of review by upper management (Quality Audits by Upper Managers are critical for mission success).
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