Effective supplier chain management adds value to your operations by increasing efficiency, mitigating risks and ensuring more quality products are delivered within deadline specifications. As the market continues to evolve, supplier management and development strategies need to adjust. With proven methodology and systematic procedures, you can lead suppliers toward a culture of continuous improvement and zero-defects.
What Is Supplier Management?
Supplier management is a critical part of the manufacturing process. It fuels long-lasting strategic supplier relationships as well as quality assurance to cut costs, reduce defects and manage risks. It is also critical to implementing a continuous improvement philosophy throughout the supply chain.
Supplier management processes can include many functions, including:
- Establish policies for a supplier management and sourcing strategy.
- Development of proper requirements flowdown including terms for contracts.
- Use proactive supplier surveillance to ensure suppliers produce goods and render services following expectations.
- Proactive supplier development of critical processes.
- Use of and adherence to approved vendors lists including NADCAP certified special process suppliers.
- Set targets and goals for suppliers that align with and contribute to targets set by the quality and purchasing organization.
- Monitor, measure and analyze supplier performance against established performance metrics.
- Providing routine feedback to the supplier on their quality and delivery performance.
- Keep up-to-date supplier records and information.
- Manage and develop relationships with suppliers and their tiers to ultimately, improve supplier performance.
Well-defined and executed supplier management strategies lead to more predictability and improvement in supplier performance. The customer receives high-quality goods on-time. While lack of accountability places risks associated with product defects and delays at each step of the value stream, effective supplier management gives visibility and drives process improvements. Effective supplier management works to identify and mitigate sources of risk throughout the supply base.
Why Is Effective Supplier Management Important?
Traditional supplier relationships and processes have followed a quality control (QC) methodology. Finished products are inspected at receiving for defects, and any nonconforming items are then dispositioned for scrap or rework. The number of and types of discrepancies are unpredictable, leading to unexpected delays throughout the supply chain. In today’s market, responding to supplier defects isn’t enough. You need a way to prevent them before they occur. The answer lies in supplier management and production part approval process (PPAP), which uses performance metrics and process control respectively to help suppliers eliminate defects.
Supplier management can improve quality assurance, reduce costs and drive operational efficiency throughout the supply chain. Consider the outcomes an organization can achieve:
- Improved program execution and customer confidence.
- Improved manufacturing operations, cost reduction and delivery performance.
- Decrease in escapes and costs associated with scrap, rework and repairs.
- Fewer disruptions and out-of-station work due to supplier defects.
A case study from an NTS Unitek aerospace client revealed that improvements to supplier management processes led to measurable results, such as:
- 20% increase in the number of suppliers who reached a 100% quality-rating or zero-defects.
- 68% decrease in supplier escapes.
- 69% decrease in unplanned scrap, rework and repair costs and hours on the aircraft production line.
3 Supplier Management Strategies for Organizations
While there are many approaches to supplier management, these three strategies are proven to minimize risks throughout the supply chain.
1. Build Long-Term Relationships With Suppliers
Historically, decreases in demand within the aerospace and defense industries has often caused suppliers to shift their capacity to other sectors. When demand eventually increases, that reduced capacity leads to longer lead times and other issues within the supply chain. Organizations must maintain supplier relationships that can withstand changes in the market to prevent depletion of resources, capability, capacity and reduced quality over time.
Here are supplier relationship management strategies you can take as a customer:
- Ensure predictable budgets: Cutting back on spending with suppliers will shift subcontractor attention to other sectors. While it’s not always possible, the more consistency you can ensure in your production volume with suppliers ensures these relationships can stay intact over the long term.
- Plan, Do, Check, Act: Develop your Supplier Management plan and evaluate it for its effectiveness. Engage your supply base and report their performance to them on a consistent basis. Monthly score carding is a good way to give direct feed back on the suppliers Quality and Delivery performance. Based on their performance data, determine what area’s do they need to improve upon thru supplier development.
- Proper planning and adequate lead times: Proper production planning and good communication ensure the suppliers production is aligned with your own. If changes do occur to planning, the more time suppliers have to respond to requests, the more likely they are to meet deadlines. Include suppliers in your discussions of projected needs and let them know when program plans and production requirement change.
2. Enact Proactive Quality Management Processes
Reactive quality control includes practices such as final product inspections, documentation of problems and corrective actions. These procedures react to errors and manage the results of process variability. Proactive supplier quality management seeks instead to reduce the opportunities for issues. There are many methods for quality management, including:
- Process standardization: Define procedures and train personnel to follow them appropriately. Ensure systems align with engineer and design specifications and provide visual aids to clarify work sequences.
- In-process inspection: Insert inspection points throughout the manufacturing process, as early as is reasonable. Use historical data to decide on critical inspection points and frequency of inspections.
- First Article Inspection (FAI): Inspect the essential attributes of the first finished items produced from a new design or after a significant change in process. In the aerospace sector, use the Aerospace Standard 9102 First Article Report Form.
- Data-driven goals: Use data-driven objectives for the plant and in the evaluation of personnel to drive continuous improvement. Goals such as 100% quality or defects under a specified percentage drive accountability and enhancements.
- Data-informed statistical process control: Use big data and predictive analytics tools to detect and manage variation, changes and inefficiencies. Statistical studies can help you discover patterns and determine the factors that affect key quality outcomes. In manufacturing, real-time data from sensors combined with historical data make up a majority of big data. Tools such as statistical programs, artificial intelligence (AI) and machine learning (ML) and data mining can then be used to create actionable knowledge to drive better decision-making and improve quality.
3. Include Sub Tier Contract Flow Downs
You can encourage accountability at all tiers of the supply chain by including the right flow downs in contract language. Your contract might contain non-negotiable flow downs required of all subcontractors if you’re a contracted manufacturer for another purchasing organization. In this case, these flow downs must be included in all contracts with your suppliers. It’s also critical to include flow downs for any areas where not flowing down requirements can put the prime contractor at risk of contract breach.
By making these requirements clear within the language of the contract, all parties at every tier of the supply chain can remain accountable for following end-customer specifications. Flow downs should include an approved vendor and product list since any variations in procurement can result in product defects and contract non-compliance.
In the Aerospace and Defense industry, be sure to include language on special procedure approval processes. The National Aerospace and Defense Contractors Accreditation Program (NADCAP) acts as an approval body for any special processes. Flow downs must have specific language, ensuring suppliers use only NADCAP-approved special processes. Flow downs should also include terms concerning the incorporation of Production Part Approval Process (PPAP) on new product development. These procedures contribute to process control and are used by manufacturers and suppliers to communicate and get approval from customers before beginning production.
Supplier Improvement Services From NTS Unitek
NTS Unitek’s supplier development procedures are based on proven strategies to manage and improve supplier performance. Our services take a strategic, methodical and analytical approach to improve supplier relationships, cut costs and reduce risks associated with supplier defects. The NTS Unitek Supplier Development team can support the development of Standard Operating Procedures (SOPs), perform root cause and process gap analysis, monitor operations in real-time and train personnel.
A complex supply chain needs a comprehensive approach to supplier improvement activities to ensure products comply with quality standards and arrive on time. Our services are geared toward quality-critical industries in the aerospace, defense, medical energy and transportation sectors. With more predictability, saved time and reduced costs from suppliers, your organization can focus on your core competencies. NTS Unitek can simplify the supply chain quality process and gear it towards a trajectory of continuous improvement. Learn about our complete range of supplier development services.
Partner With NTS Unitek for Supplier Development
NTS Unitek has over 45 years of experience in supplier risk management and driving process improvements with suppliers. Our proactive approach helps suppliers prevent defects and stop them before they occur through process monitoring, corrective action planning and implementation, test engineering, error proofing and similar services.
Contact us to learn more about our supply chain quality services.