Supplier Management Handbook

308 Pages·2004·2.67 MB·English

by  Bossert

The Supplier
Management
Handbook
Sixth Edition
James L. Bossert, Editor
Customer–Supplier Division, ASQ
ASQ Quality Press
Milwaukee,Wisconsin
American Society for Quality,Quality Press,Milwaukee 53203
©2004 by ASQ
All rights reserved. Published 2004
Printed in the United States of America
12 11 10 09 08 07 06 05 04 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
The supplier management handbook / James L. Bossert,editor.—6th ed.
p. cm.
Includes bibliographical references and index.
ISBN 0-87389-629-7 (hard cover,case bound :alk. paper)
1. Industrial procurement—United States—Quality control—Handbooks,
manuals,etc. 2. Quality control—United States—Handbooks,manuals,etc.
I. Bossert,James L.,1951–
HD39.5.S87 2004
658.7'2—dc22 2004009629
Copyright Protection Notice for the ANSI/ISO 9000 Series Standards:These
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pertaining to the ANSI/ISO 9000 Series Standards should be submitted to ASQ.
ISBN 0-87389-629-7
No part of this book may be reproduced in any form or by any means,electronic,
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Foreword
T
here has never been a more important time for you to refer to our
sixth edition of The Supplier Management Handbook. Why,you ask?
It’s quite simple.
In past editions,we have focused on the business service/manufacturing
base primarily within the United States. Our orientation was that of enhanc-
ing the quality support mechanisms that provided for improved products,
services,and customer satisfaction.
That has all changed. The American economy is now a global one. It
has become more and more focused on price due to overseas competition.
The hard question is, where does quality now fit in with all of this? It is
obvious that quality will have to adapt to these changes,and,more impor-
tantly,for the right reasons.
We,as quality professionals,can either evolve and continue to lead with
commitment or become a secondary participant, due to factors or forces
that will end up leading the global corporate community. We must be com-
mitted to leading such change. If we are going to lead,we must do this with
global thinking. We are no longer an island.
In the old days, the sales rep would argue features and benefits over
price. He got the sale this way. We may find ourselves discovering that we
will have to justify,more than ever,what it is that quality will deliver,both
today and in the future. The key is,like the old-time sales rep,the argument
can be made!
It is for this reason, and many others, that our membership is kept
informed of this ongoing evolution in quality. In reading our sixth edition
of the Supplier Management Handbook,you are participating in this ongo-
ing migration toward business excellence. As always, your feedback and
participation makes all of this possible. Together,we will make history for
the Customer–Supplier Division learning community.
Much success to all of you in your personal and business lives.
William (Bill) Mizak
Customer–Supplier Division Chairman
ix
Table of Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . x
Chapter 1 Why Procurement Quality?
James L. Bossert and Janet R. Raddatz . . . . . . . . . . . . . . . 1
The Changing/Transitional Role of Purchasing . . . . . . . . 2
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Chapter 2 How Do You Appear to Your Suppliers?
Michael Zimmer . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Chapter 3 Basic Issues:Specifications
James L. Bossert and Janet R. Raddatz . . . . . . . . . . . . . . . 25
Quality Management Specifications . . . . . . . . . . . . . . 29
Government Quality Specifications and Standards . . . . . . 30
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Chapter 4 Basic Issues:Record Keeping
James L. Bossert . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Chapter 5 Basic Issues:Site Inspection
James L. Bossert . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Endnote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 6 Basic Issues:Measurement Assurance
James L. Bossert and Janet R. Raddatz . . . . . . . . . . . . . . . 47
Analytical Data Accuracy . . . . . . . . . . . . . . . . . . . 47
Routine Testing . . . . . . . . . . . . . . . . . . . . . . . . . 51
Chapter 7 Basic Issues:Supplier Rating
James L. Bossert,Arthur Blank,and Brian Margetson . . . . . . 55
Reasons for Rating . . . . . . . . . . . . . . . . . . . . . . . 55
v
vi Table of Contents
Use of Rating . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Potential Rating Problems . . . . . . . . . . . . . . . . . . . 61
Example of a Supplier Rating Scheme . . . . . . . . . . . . . 62
A Final Word on Supplier Ratings . . . . . . . . . . . . . . . 72
Endnote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Chapter 8 Basic Issues:Communications
James L. Bossert and Janet R. Raddatz . . . . . . . . . . . . . . . 73
Chapter 9 Basic Issues:From Ship-to-Stock to Just-in-Time
Richard J. Laford . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Endnote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Chapter 10 Basic Issues:Data Evaluation
James L. Bossert and Janet R. Raddatz . . . . . . . . . . . . . . . 83
Chapter 11 Supplier Certification
James L. Bossert and John O. Brown . . . . . . . . . . . . . . . . 91
Step 1. Document the Process . . . . . . . . . . . . . . . . . 93
Step 2. Select Suppliers for the Process . . . . . . . . . . . . 93
Step 3. Establish Partnership for Improvement . . . . . . . . 94
Step 4. Perform Initial Quality Systems Validation . . . . . . 94
Step 5. Establish Approved Suppliers . . . . . . . . . . . . . 95
Step 6. Establish Preferred Suppliers . . . . . . . . . . . . . 95
Step 7. Review for Certification . . . . . . . . . . . . . . . . 96
Step 8. Certify Suppliers . . . . . . . . . . . . . . . . . . . . 96
Step 9. Recognize Suppliers . . . . . . . . . . . . . . . . . . 96
Step 10. Maintain Certification . . . . . . . . . . . . . . . . 97
Business Sector Applicability . . . . . . . . . . . . . . . . . 97
Chapter 12 How to Conduct a Supplier Survey
Vendor-Vendee Technical Committee . . . . . . . . . . . . . . . 101
Goals of a Survey . . . . . . . . . . . . . . . . . . . . . . . 102
Preparation for the Survey . . . . . . . . . . . . . . . . . . . 103
Team Organization . . . . . . . . . . . . . . . . . . . . . . . 104
The Use of Quantification in the Evaluation Format . . . . . 106
Opening Conference . . . . . . . . . . . . . . . . . . . . . . 107
How to Gain the Most from a Plant Tour . . . . . . . . . . . 111
Evaluation of a Record System . . . . . . . . . . . . . . . . 112
Closing Conference . . . . . . . . . . . . . . . . . . . . . . 114
Final Report . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Follow-Up to Supplier Qualification Surveys . . . . . . . . . 116
Post-Survey Team Critique . . . . . . . . . . . . . . . . . . . 117
Table of Contents vii
International Suppliers . . . . . . . . . . . . . . . . . . . . . 120
Supplier Information and Reassurance . . . . . . . . . . . . . 121
Chapter 13 How to Evaluate a Supplier’s Product
Vendor-Vendee Technical Committee . . . . . . . . . . . . . . . 123
Preaward Conference . . . . . . . . . . . . . . . . . . . . . . 124
Initial Production . . . . . . . . . . . . . . . . . . . . . . . . 127
Product Qualification . . . . . . . . . . . . . . . . . . . . . . 128
Process Identification . . . . . . . . . . . . . . . . . . . . . 129
Process Audit . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Qualification by Suppliers . . . . . . . . . . . . . . . . . . . 130
Qualification by Independent Laboratory . . . . . . . . . . . 130
Certification Program . . . . . . . . . . . . . . . . . . . . . 131
Incoming Inspection . . . . . . . . . . . . . . . . . . . . . . 131
Utilizing Supplier Data . . . . . . . . . . . . . . . . . . . . . 138
Nonconforming Product . . . . . . . . . . . . . . . . . . . . 140
Supplier Total Performance Evaluation . . . . . . . . . . . . 141
Chapter 14 How to Establish Effective Quality Control
for the Small Supplier
Bruce Kelsey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Quality Control and the Small Supplier . . . . . . . . . . . . 145
Planning for Quality . . . . . . . . . . . . . . . . . . . . . . 149
Organizing for Quality . . . . . . . . . . . . . . . . . . . . . 151
Ensuring Quality . . . . . . . . . . . . . . . . . . . . . . . . 160
Product Certification,Documentation,and Traceability . . . 170
Planning for a Customer Quality Survey . . . . . . . . . . . 174
Chapter 15 Procurement Quality in the Food Industry
Janet R. Raddatz . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Bulk Materials . . . . . . . . . . . . . . . . . . . . . . . . . 185
Destructive Testing . . . . . . . . . . . . . . . . . . . . . . . 187
Qualitative Methods . . . . . . . . . . . . . . . . . . . . . . 189
Limited Shelf Life . . . . . . . . . . . . . . . . . . . . . . . 190
Food Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Chapter 16 Management of Service Suppliers
Ricardo Fierro . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Why Pay Attention to Services? . . . . . . . . . . . . . . . . 197
The Service Supplier Management Process . . . . . . . . . . 199
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
viii Table of Contents
Chapter 17 Software Acquisition and Software Supplier
Management
Bruce Kelsey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
The Three Phases of Software Supplier Management . . . . . 227
Auditing A Software Supplier . . . . . . . . . . . . . . . . . 242
Appendix A Procurement Quality Definitions . . . . . . . . . . 247
Appendix B Audit Guidelines . . . . . . . . . . . . . . . . . . . 253
Appendix C Food Industry Associations . . . . . . . . . . . . . 261
Appendix D Federal Government Agencies Involved
with Food Safety . . . . . . . . . . . . . . . . . . . . . . . . . 265
Appendix E Prior Contributors . . . . . . . . . . . . . . . . . . 269
Bibliography and Suggested Reading . . . . . . . . . . . . . . . . 273
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
1
Why Procurement Quality?
James L. Bossert and Janet R. Raddatz
Summary
• The evolution of procurement quality
• The new role of procurement
• The basic requirements of a procurement system
• The consideration of primary business goals
• The development of a supplier strategy
• The benefits attained from a sound supplier system
T
oday the word quality appears on almost every product we come
across—food, appliances, automobiles, and software. No matter
where you turn,you see or hear about quality. In fact,we demand a
certain level of quality in everything that we buy. This is evident in the
increase of consumer complaint features in newspapers and on television.
What is meant by the word quality? TheAmerican Society for Quality
(ASQ) defines quality as “the totality of features and characteristics of a
product or service that bear on its ability to satisfy given needs.”1
The features and characteristics of any product are how we as con-
sumers evaluate how good that product or service is. For example, in a
restaurant,the amount we leave as a tip is a direct reflection on the quality
1
2 Chapter One
of the service that we have received. Satisfying given needs can include the
quantity, price, or purity of something. Quality is what we as consumers
have defined as our minimum acceptable standard. If,for example,there is
a need for a chemical with a 99.9 percent purity level,but that level cannot
be obtained unless we pay an exorbitant amount,that need may have to be
redefined to a level that is more cost-effective. So,the need for good spec-
ifications is established. These specifications will give the supplier the per-
formance features that the customer requires.
ASQ states that:
Specifications for the manufacture of a product or the delivery of a
service are a translation of these features and characteristics into
manufacturing or performance terms. The features and characteris-
tics often are considered in relationship to the design and specifi-
cation of the product or service; to the conformance of the product
or service to specifications and to the compliance of the supplier of
the product or service to requirements.2
This approach serves as a reminder of the distinction between the func-
tional and implemented aspects inherent in the design concept and specifi-
cations and in the conformance and compliance aspects of the product and
implementation process.
So, now our definition of quality has expanded beyond the traditional
designing and conformance aspects to the implementation and delivery of
the product. Where does the product fit? How do we perceive it? How can
we buy it? How do we know what we are buying? We need to answer these
questions in the design reviews before manufacturing the product. Then and
only then should we have confidence in the components we are purchasing.
THE CHANGING/TRANSITIONAL ROLE
OF PURCHASING
Years ago,before the industrial revolution,products were made by skilled
craftspeople. Only the highest quality was made and sold to those who
could afford those products. The feedback to manufacturers was immediate
because they could see if the quality was unacceptable by the expression on
the consumers’ faces. Only when Eli Whitney developed the concept of
interchangeability of parts did the need for procurement quality begin.
As the complexity of products has increased,so has the need for qual-
ity. With this, purchasing agents have assumed the added responsibility of
quality assurance. Traditionally, the role of the purchasing agent has been
Why Procurement Quality? 3
one of getting the product at the lowest cost. Potential suppliers were eval-
uated in terms of their ability to provide the following:
1. The desired quality defined as the suitability of product or service
for use as intended
2. The total number of products required,including the schedule by
which the product or service is required
3. Tangible and intangible services that are benefits over and above
quality and price
4. Price,which is a measure of value
Purchasing agents also took into account additional factors that supple-
mented these four requirements. These included such things as geographic
location,labor relations,the supplier’s internal facilities,the supplier’s reserve
or backup facilities, capability of the supplier’s management services, sup-
plier’s service capability,and supplier’s financial status.
After this information was compiled, the purchasing manager might
draw together a team to conduct plant visits for the prospective suppliers.
This would be done only after the number of suppliers had been reduced to
a manageable number. This on-site visitation might be used to appraise fac-
tors such as production control,cost control,morale,and the quality of the
materials management activities.
Purchasing agents also might be asked to evaluate or rate suppliers.
Supplier rating can take many forms, some simple and some complex. In
Chapter 7,supplier rating will be examined more closely.
When analyzing supplier performance, a purchasing agent evaluates
how a supplier measures up to a defined set of performance standards that
the purchasing agent applies to all suppliers. This enables a differentiation
between good and marginal suppliers. A good system has guidelines that
provide assistance in scoring all areas of resource selection. Any past expe-
rience with a supplier’s quality and delivery performance is important
because it is quantifiable data. Any past experience with technical,financial,
and managerial services also can help in making an assessment. Price is not
considered at this time. In fact,any quoted prices must be referred back to
quality and delivery performance to have any validity. We need to know
what to expect to determine the total cost of a purchased product accurately.
Performance standards reflect the cost that purchasing agents must
incur in the satisfying of user requirements. For example,suppliers may be
rated on quality in terms of three categories: cost of defect prevention,
defect detection, and defect prevention. The sum of these costs for each