Supplier Quality Management: Drive Value by Safeguarding Value

Fall is in the air.

Pumpkins are chunkin’, the leaves are changin’ and Thanksgiving cornucopias are being filled by the second. There’s something about autumns crisp air that makes me romanticize the ‘coziness’ of it all, but can you blame me?

As an ex-pat American, I sometimes forget that my associations with the autumn season don’t align with those of my friends here in Stockholm, Sweden. But, if there’s one thing we’ve all come to an agreement upon, it’s that Thanksgiving dinner is a must.

I introduced the tradition a few years ago and it’s been an annual event since then, hosted at my place- in potluck fashion. I fix the bird, stuffing, and taters, and each attendee stands for their own dish. It is a feast of epic proportions, and there’s a spread of food big enough to feed Coxey’s Army (as my Grandmother always says).

There’s something about the collaboration and gathering amongst friends that makes the night so special. Each person has a responsibility to make a dish that they will serve. Some bring sides, some bring desserts, some bring drinks, and in the end everyone has a hand in the success of the night. But, what would happen if someone forgets the pumpkin pie? Or, burns the green bean casserole? Though it’s a friendly dinner, Thanksgiving’s success is heavily dependent on the harmonization of multiple moving parts.

Input of effort, time and focus by participants during – and previous to – the dinner proves to be indicative of the output of the experience for everyone involved.

If we can draw a comparison between Thanksgiving dinners and procurement, they are essentially an every day example of why supplier quality management is important.

What is SQM?

Supplier quality management (SQM) is individual to each organization, and the procurement organization’s business-critical goals, but in the larger definition: supplier quality management is an overall evaluation of delivery and performance within the boundaries of agreed upon terms and conditions of supplier and buyer.

Supplier quality management seeks to pinpoint, and help leverage, the suppliers that fit demands and costs, from the buyer, without being demanding upon internal resources (minimal need for inspection or development). A quality fit can help a procurement team create top-line growth and customer satisfaction. But, ignoring SQM can just as easily cause major problems in an organization’s value chain.

The input of a supplier’s quality is indicative of a customer’s satisfaction. If that input can be managed, fine-tuned, and streamlined… well you’re on your way towards procurement excellence.

What is it costing you to have poor suppliers?

The first step for creating a comprehensive strategy, for managing supplier quality, is to understand the cost of working with poor suppliers.

Quality will cost. That’s a fact. But, identifying/quantifying the sum of resources (time and money) being put into fixing the mistakes of poor suppliers will allow you to evaluate the worth of prevention costs. This can be quantified and labeled as the Cost of Poor Quality (COPQ).

“COPQ in the supply chain cannot be eliminated completely – since no supplier is perfect calculating these metrics can help you identify opportunities for cost savings, as well as problem areas to address. For instance, by understanding how the COPQ is affected by delays in supply delivery, you can proactively work with suppliers to expedite future deliveries. The COPQ metrics can also help you calculate supplier charge-backs accurately, and thereby recover costs faster (metricstream 2018)”.