SUPPLIER PARTNERSHIP

1. SUPPLIER PARTNERSHIP
An organization (or customer) purchases its requirements,
raw materials, components, and services, from supplier.
Better supplier’s quality  Better product’s quality
A partnership between customer and supplier is one of
the keys to obtaining high quality products and services.
Customers and suppliers have the same goal –to satisfy
the end user. They must work together as partners to
maximize the return on investment because they have
limited resources.

2. REASONS FOR PARTNERSHIP
Quality and timely delivery
JIT concept
Practice of continuous process improvement
Quality assurance systems (ISO 9000, etc.)

3. PRINCIPLES OF
CUSTOMER/SUPPLIER RELATIONS
1. Both the customer and the supplier are fully responsible
for the control of the quality
2. Both the customer and the supplier should be
independent of each other and respect each other’s
independence.
3. The customer is responsible for providing the supplier
with clear and sufficient requirements so that the supplier
can know exactly what to produce.
4. Both the customer and the supplier should enter a
contract with respect to quality, quantity, price, delivery
method, and terms of payments.
5. The supplier is responsible for providing the quality that
will satisfy the customer and submitting necessary related
with customer’s needs.

4. PRINCIPLES OF CUSTOMER/SUPPLIER
RELATIONS (Cont.)
6. Both the customer and the supplier should decide the
method to evaluate the quality of the product or service
to satisfaction of both parties
7. Both the customer and the supplier should establish a
settlement method in the contract.
8. Both the customer and the supplier should continually
exchange information, sometimes using multifunctional
teams, in order to improve the product or service quality.
9. Both the customer and the supplier should perform
business activities such as procurement, production and
inventory planning, and etc.
10. When dealing with business transactions, both the
customer and the supplier should always have the best
interest of the end user in mind.

5. PARTNERING
Partnering is along-term commitment between two
or more organizations for the purpose of achieving
specific business goals and objectives by
maximizing the effectiveness of each participant’s
resources.
Benefits:
Improved quality
Increased efficiency
Lower cost
Increased opportunity for innovation
Continuous improvement of products or services

6. PARTNERING (Cont.)
Key elements for partnering relationship:
Long-Term Commitment
Trust
Shared Vision

7. SOURCING
 A sole source of supply implies that the
organization is forced to use only one supplier.
 Multiple sourcing is the use of two or more
suppliers for an item.
 Single sourcing is a planned decision by the
organization to select one supplier for an item
when several sources are available. Benefits for
organization: reduced business and production
costs, complete accountability, supplier loyalty,
and better end product with less variability.
Benefits for supplier: new business from the
customer and reduced the cost of business and
production processes.

8. SUPPLIER SELECTION
1. The supplier understands and appreciates the
management philosophy of the organization.
2. The supplier has a stable management
system.
3. The supplier maintains high technical
standards and has the capability of dealing
with feature technological innovations.
4. The suppliers can provide those raw materials
and parts required by the purchaser and those
supplied meet quality specifications.
5. The supplier has the capability to produce the

9. SUPPLIER SELECTION (Cont.)
6. There is no danger of the supplier breaching
corporate secrets.
7. The price is right and delivery dates can be
meet.
8. The supplier implements contract provisions.
9. The supplier has an effective quality system
and improvement program such as ISO/QS
9000.
10. The supplier has a track record of customer
satisfaction and organization credibility.

10. SUPPLIER CERTIFICATION
1. The customer and supplier shall have agreed on
specifications
2. The supplier shall have no product-related lot rejection for
a significant period of time or significant number of lots.
3. The supplier shall have no nonproduct-related rejections
for a stated period of a time or number of lots.
4. The supplier shall have no negative nonproduct-related
incidents for a stated period or number of lots.
5. The supplier shall have a fully-documented quality system.
6. The supplier shall have successfully passed an on-site
system evaluation.
7. The supplier must conduct inspections and tests.
8. The supplier shall have the ability to provide timely
inspection and test data.

11. SUPPLIER RATING
The customers rates suppliers to:
Obtain an overall rating of supplier
performance
Ensure complete communications with
suppliers concerning their performance of
quality, service, delivery, and etc.
Increase the relationship between the
customer and supplier

12. SUPPLIER RATING (Cont.)
Three key factors for a successful supplier
rating system:
An internal structure to implement and
confirm the rating program
A regular and formal review process
A standard measurement system for all
suppliers

13. RELATIONSHIP DEVELOPMENT
 Inspection: the goal is to eliminate, reduce, or
automate the inspection activity. Its phases are
100% inspection, sampling, audit, and identity
check
 Training: trainings and the types of courses may
be a requirement for partnership
 Team Approach: Customer/Supplier teams are
established in product design, process design,
quality system, and etc.
 Recognition: Works in quality improvement are
presented on a TQM bulletin board.

14. PERFORMANCE MEASURES
Objectives:
 Establish standard measures and show trends
 Determine which process need to improved
 Show process gains and losses
 Compare goals with actual performance
 Provide information for individual and team
evaluation.
 Provide information to make decisions
 Determine the overall performance of the
organization.

15. CRITERIA FOR NEW PERFORMANCE
MEASURE
 Simple
 Few in number
 Develop by users
 Relevance to customer
 Improvement
 Cost
 Visible
 Timely
 Aligned
 Results

16. PERFORMANCE MEASURE
PRESENTATION
 Time Series
 Control Chart
 Capability Index
 Taguchi’s loss function
 Quality Costs
 Malcolm Baldridge National Quality Award

17. QUALITY COSTS
Quality cost is the cost of poor quality.
Quality costs are used by management for quality
improvement, customer satisfaction, market share, and
profit enhancement
High quality cost  ineffective management
A quality cost program,
Warns dangerous financial situations.
Quantifies the magnitude of the quality problem
Identifies opportunities for quality improvement and
establish funding priorities
Adds credence to management’s commitment to quality
Identifies hidden and buried costs in all functional areas

18. QUALITY COST CATEGORIES
 Preventive cost category: Prevention costs include the cost
of all activities to prevent recurrence same errors or
failures in other products or services
 Appraisal cost category: Appraisal costs include all costs
incurred in the planned conduct of product or service
appraisal and determine compliance to requirements.
 Internal failure cost category: Internal failure costs include
all costs required to evaluate, dispose of, and either correct
or replace nonconforming product or services prior to
delivery to the customer.
 External failure cost category: External failure costs
include all costs incurred due to actual or suspected
nonconforming product or service after delivery to the
customer.

19. COLLECTION AND REPORTING
Quality costs should be collected by product
line, projects, departments, operators,
nonconformity classification, and work
centers.
Quality costs are reported by comparing
current costs with historical costs. Also by
comparing actual quality costs with budgeted
costs, favorable and unfavorable variances
can be determined.

20. ANALYSIS
Trend Analysis includes comparing present
cost levels to past levels.
Trend analysis provides
 Information for long-range planning
 Information for instigation and assessment
of quality improvement program
Pareto analysis is made using pareto
diagram. It is used to determine the most
important problem (or highest quality cost)

21. OPTIMIZING COSTS
 To make comparisons with other
organizations.
 To optimize the individual categories.
 To analyze the relationship between cost
categories.

22. QUALITY IMPROVEMENT STRATEGY
 Reduce failure costs by problem solving
 Invest in the right prevention activities
 Reduce appraisal costs where suitable
 Continuously evaluate and redirect the
prevention effort to gain further quality
improvement.

23. MALCOLM BALDRIGE NATIONAL
QUALITYAWARD
MBNQA is an annual award to recognize U.S. organizations
for performance excellence. Criteria for performance
excellence are leadership, strategic planning, customer and
market focus, information and analysis, and human resource
focus.
The award promotes:
Understanding of the requirements for performance
excellence and competitiveness improvement
Sharing of information on successful performance strategies
Benefits derived from using these strategies
Three awards may be given in each year in each category
(manufacturing, service, small business, health care, and
education)
Many organizations, who ignored awards, uses these categories
as a technique to measure their TQM effort.