How to Select a Supplier Quality Management System

Why the hesitation to act? >>

Strategic Decision-making in Selecting a Supplier Quality System: Facing up to Ambiguous Threats

The dismantling of vertically integrated value chains through decentralization, acquisitions and outsourcing has turned supplier quality into a new challenge and a new management disciple. Enough time has passed since the first waves, in which so many enterprise production value systems were disaggregated, that a volume of research has accumulated which profiles how companies have responded to the challenge. It suggests many companies engage in supply chain tracing and tracking using a number of methods mostly paper-based or Excel supported. Whether this is to be considered actively engaged in supplier quality management or not depends on one’s perspective. Most efforts are focused on 1st tier suppliers. However, this conscientiousness drops off steeply when it comes to 2nd and 3rd tier members of their supply chain or multi-tier supplier network.

The consequences of this drop-off at tier 1 are not hard to find in news items about recalls for cars, tires, and food, and worker safety violations or environmental disasters such as oil spills on land or sea. Many of those events produce iconic images of CEO’s attempting to explain the actions of 2nd or 3rd tier suppliers. Because customers own most well-known brands, those tend to be the ones that grab the headlines, even if a breakdown originated somewhere in a supplier’s processes or in one of their upstream suppliers’ facilities.

Consulting companies that are focused on quality processes or on deploying supplier quality management systems advocate for the implementation of all available tools, including enterprise quality systems (EQMS) and QMS software compliance systems, and then urge companies to refine all aspects of such systems. That includes reviewing and updating supplier quality metrics , scorecarding, and the amount and timing of supplier quality audits. But that model of quality management does not address the bigger picture.

Supply chain tracing tools employing Certificates of Analysis (COA) and Certificates of Compliance (COO), and other best-practices for quality assurance are being developed to deal with the increasing complexity of the disaggregated value chains. At this time, quality management tools such as GSQA® exist to manage the quality in this new world of supply networks. Quality certifications such as ISO 9001 have become marketing insignia and have produced a set of tools specific to them, or that can function as ISO software to support the maintenance of the certifications. The GSQA® approach is much more planted in the topology of the supply network and its transactions including the multiple tiers of suppliers and all their locations, materials and all their quality characteristics, enterprise locations, co-manufacturers, the movement of materials in the supply chain and the analysis of all supply chain partners and their products’ performance. The goal: lower cost and reduced defects of an enterprise’s finished products.

Visible versus Manageable

Let us consider the geographic dispersal of production with all its advantages in lowering the costs of production that has fueled concern about ‘visibility’. Manual methods and cobbled together “systems” cannot compete with the amount of data required for quality assurance in decentralized production. However, long distances are not the only threats to quality. Supplier impact, either positive or negative, can be felt directly when enterprise feeder plants act as suppliers to other company facilities. Even within a company’s four walls phases of production hand-off “in-house” to downstream phases. The issue there is not really visibility, but manageability. Just because it is “in-house” does not guarantee manageability if no tools are used to manage quality in the internal supply chain. The impact of a work stoppage due to a breakdown in material performance while moving through production phases within a factory can be as destructive as a nonconforming supplier quality metric ringing alerts on cell phones.

A comprehensive approach to supplier quality management includes material validation, supply base regulatory compliance and product genealogy, and for global accessibility must be a software-as-a-service (SaaS) solution. A major corporation in the nuclear-industry has a security standard that now allows data access online via SaaS GSQA®. The SaaS service makes geographic distance almost irrelevant, because remote suppliers as well as in-house production departments, access data and workflows through a secure supplier quality portal such as offered with the GSQA® service. This puts supply chain partners and in-house production units on the same footing with equal power to prevent the kinds of breakdowns that can stop a production line, threatening an enterprise’s financial and reputational well-being, as well as a breakdown in a supplier’s process two tiers upstream and several borders away.

Why the hesitation to act?

Since the costs of breakdowns far outweigh the costs of systems for supplier quality management, the hesitation to provide for fully functioning state-of-the-art supplier quality management systems may have to do with the balancing of priorities in the decision-making processes in companies. Those types of deliberations are known to be subject to cognitive biases human beings all have in common.

Taking a cue from lessons in space travel

Breakdowns in any supply chain are not perceived as a certainty. The further “away” from the center of decision-making a link in the chain appears to be, the less certain or the less formed the threat appears to be, until they seem far enough away to be invisible. If invisible, then those processes are not controllable, and that is how supply chains are tainted with counterfeit, fraudulent and contaminated materials/parts. Even modest material variations can result in problems downstream. Quality and its sibling Safety are different issues, but in one way, they are the same: an inadequate relationship with either can result in breakdowns leading to loss of resources, health and sometimes lives.

Seventeen years after the shuttle Challenger exploded, the program suffered a second accident, a foam-strike that destroyed the Columbia. The repetition of such a disaster was all the more shocking when it was revealed that the source of the disaster was, once again, primarily organizational rather than purely physical or technical.

One of the hallmarks of an intelligent culture is the ability to transfer knowledge and lessons learned from one arena to another that may not be related on the surface. In this case, we assert that the same mental mechanisms of risk assessment that can lead to disasters also influence the steep drop-off in the commitment to implementing sufficiently robust supplier quality management systems.

According to analysis done by the Columbia Accident Investigation Board Report, and corporate decision-making experts such as Dr. Michael A. Roberto of Bryant University, human beings have certain tendencies when confronted with threats, and in this case, with ambiguous threats. These tendencies can be viewed in a light that can explain the underinvestment in supply chain quality management systems and supplier quality assurance systems as well as a lack of commitment to supply chain tracing beyond the 1st tier suppliers. They include the following:

Infrastructure Level

Lessons from the Submarine Navy

The Columbia Accident Investigation Board recommended a benchmarking approach using the Navy Submarine and Reactor Programs as standards. Each of the components of these best practices dealt with human cognitive biases powerfully and proactively.  Their approach had led (up to 2003 when the report was written) to years of experience without a reactor accident.  Their conclusions, which are valid not only for managing safety but for aiming at the delivery of quality products, include:

Looking for lessons to learn across many disciplines, along with sensible investments in state-of-the-art supplier quality and supply chain quality management systems, builds the capacity to not only avoid costly breakdowns but to also build a better enterprise.

Columbia Accident Investigation Board report, August 2003

How the GSQA® Finished Products Module
Electronic Certificate of Analysis
How to Reduce Material Variability?
Quality Management System

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