Suppliers are businesses interested in the same things as buyers. They both want business sustainability through growth, and to deliver quality products and services on time to customers. When suppliers and buyers become allies with common goals, both businesses benefit. Supplier Quality Development is a process for developing suppliers who become allies or an extension of the buyer’s business.-BY Gerald Donald

Staying competitive today has never been more challenging as uncertainty, turmoil and disruptions define the global business environment. The quality, competence, and capabilities of the supply chain are recognized as critical elements of successfully managing change. Emerging from this recognition is also an acknowledgment that investing in supplier development is a major determinant of the ability to build quality supplier relationships. These quality relationships then contribute to a reliable supply chain during times of turmoil and disruption, optimize value creation, and minimize risks. The need for supplier development has been strong in the past, but the approach has to change because the competitive landscape has changed. Suppliers can effectively become competitors because in many industries, suppliers can easily sell what they produce for buyers elsewhere. Suppliers can become burdens too, in situations where they are inefficiently producing goods and services that are not easily available elsewhere. Supplier Development 2.0 is Supplier Quality Development that is designed to develop strong, resilient and collaborative supplier allies that are committed to maintaining quality standards through a partnership of continuous improvement.

Moving Beyond the “Best Deal”

Supplier quality development is also called Supplier Quality Management (SQM). In the first stage of supplier development, the focus was on establishing a relationship in which suppliers built capacity, or were assisted with developing the skills and capabilities needed to meet corporate buying requirements. As supplier development matures, and in response to the major disruptions caused by the pandemic, there is more focus on optimizing collaboration and resilience through digital transformation. The challenge is ensuring suppliers maintain quality standards to meet customer needs.

In 2020, a Deloitte survey of Chief Procurement Officers found that 64% believed their focus would change from the immediate rapid response to supply chain disruptions to adapting supply chains so they thrive in the post-pandemic future, where a new normal requires high visibility into tier 1 suppliers, increased visibility into extended supply networks, digitization, and deepened supplier partnerships. Digitization supports all the requirements and is integral to supplier quality, but it also takes hands-on management and monitoring of critical suppliers on a routine basis.

The global membership organization ASQ helps members network, advance knowledge, and find solutions through training, certifications, and various tools. It defines supplier quality management as the “system in which supplier quality is managed by using a proactive and collaborative approach.” Supplier quality concerns performance and quality management that goes beyond getting the lowest price, or the best deal on quantity purchases. It includes supplier relationship concerns such as the supplier’s internal policies that impact performance, reliability, problem resolution, and communication. Partnership-oriented relationships enable buyers to work more closely with critical suppliers over the long-term and require relationship building, support from top leaders, mutual trust, and an understanding of each partner’s role.

ASQ points out that quality, cost, delivery, lean methodology, and connectedness are key indicators of supplier quality management. Connectedness concerns how well an organization is integrated with its supply chain. To develop an integrated supply chain, collaboration and a strong relationship must exist between the supplier and buyer.

Driving Quality in the Supplier Relationship

Supplier quality management is a higher-level supplier relationship in that the supplier and buyer become allies, supporting each other in achieving long-term success, future goals, and generating cost savings through joint performance. Technologies play an important role in that collaboration, data flows, analytics, and information sharing enable a strategically aligned supply chain. Another feature of supplier quality systems, per ASQ, is movement away from cost reductions as the means of offering high-performance products at the lowest cost possible. This is a short-term approach because cost reductions are limited by the need to stay viable as a business. Instead, buyers work with suppliers to develop strategies like waste reduction through joint initiatives in what is called a cost-out strategy.

Developing suppliers that are an extension of the buyer’s business is a proactive approach to integrating ongoing improvements that benefit the supplier and buyer organizations. Unlike supplier development in its basic sense of assisting suppliers with doing business with corporate clients, supplier quality development focuses on long-term systemic improvements for sustainable performance. The process focuses on things such as continuous improvement, reducing supply chain risks, driving cost-out, and improving materials management.

The supplier quality development process tracks performance against a pre-determined set of factors. These factors are different for each company, but they are also specific. SCMDOJO helps global supply chain professionals grow by supplying high-quality supply chain courses, tools, best practices, and mentoring by industry experts. Its Brief Guide to Supplier Quality & Supplier Development gives examples of performance tracking that include metrics such as 100% charge back for Quality Escapes caused by suppliers; 100% adherence to the Supplier Self Assessment& Supplier Qualification process, and less than 10% variance in on-time delivery year-over-year. Performance management includes activities such as monthly supplier quality meetings with each Supply Chain Management Leader and direct reports, quarterly business reviews with strategic partners, scheduled process audits of supplier processes, and completion of structured supplier sell assessments by buyer and supplier for comparison purposes.

Leadership Commitment Needed

The Supplier Quality Development process requires a leadership commitment at both the buyer and supplier organizations. The activity is not a one-off effort, like holding a supplier seminar or workshop. It involves developing the process for supplier selection based on organizational needs, and managing, measuring, and monitoring suppliers on a continuous basis to ensure their continued ability to meet the needs of the buyer’s organization and customers. There is also a need to respond when suppliers fail to meet quality standards. When successful, SQM creates measurable value for both organizations, but not all suppliers are eligible for this level of effort. They should be critical suppliers, but it is also important to recognize that continued development of smaller and more diverse organizations can position them to become strong critical partners in the future. SQM should not become an exclusionary process.