5 Steps to Improve Supply Base Building & Supplier Quality Management

Procurement Oct 4, 2018

Suppliers play a vital role in new product commercialization, from the product planning stage
through to the launch of your product. There are hundreds of thousands of suppliers in the
market, but to choose the right one(s) makes all the difference. Many organizations are now
becoming more and more strained in supply base building and managing and overseeing the
quality, cost, and delivery of raw materials, so we suggest the following five steps to help your
organization better identify the right suppliers and build supply bases for your next program.

5 Steps to Improve Supply Base Building & Supplier Quality Management

1. Determine Selection Criteria

Supplier selection is a crucial step, and if not executed properly could have a tremendous impact
on your company; selecting a supplier should be the top priority for any Supplier Quality
Management activity. Organizations should be able to categorize their supply bases according to
their capabilities and needs. Supplier selection criteria must also meet your customer’s quality
standard needs, program objectives, and policies. Always check to see if suppliers possess
certifications related to the desired product, process, or service they would provide. In a perfect
world, your suppliers will deliver quality products and services, in the timeframe requested, and
with minimal supervision.

2. Perform Supplier Audits

For most Quality Management Systems (QMS), auditing suppliers is mandatory, but regardless,
it’s surefire way to collect accurate information about a supplier and/or its facilities. There are
two common methods for conducting supplier audits: onsite and offsite.

When you conduct an onsite audit, the below topics and areas of concern should be addressed:

 The structure of the company’s QMS

 Performance data
 Product and process management
 Results of supplier internal audits and certification audits
 A feeling of how the company operates and the atmosphere within the organization
 Personal interaction with key members of the supplier’s staff and points of contact

Though not as effective as onsite audits for most situations, offsite audits may be conducted by
phone, where you’d ask a specific set of questions related to the criteria the supplier needs to
meet. On rare occasions you may even get lucky and find the supplier’s website or business
directory listing has some or all of the information you require.

With either method of conducting supplier audits, always keep records of each one, specifically
noting the date the audit was performed and the team member who performed it. This practice
makes it simple for your team to find the information they need on a given supplier, in addition
to having multiple audits from a single supplier, over time, from which to compare for tracking
quality and improvement.

3. Track & Rate Suppliers

Each company has its own supply bases, which typically expand as new projects begin. It’d be in
your organizations best interest to score the performance of every supplier sourced with regard to
cost and quality of its final deliverable because this enables your team to track and rate suppliers
for the purpose of using them for future projects. Examples of categories to track could be, but
aren’t limited to:

 Cost: High, Medium, or Low

 Quality: High, Medium, or Low
 On-Time Delivery: Yes or No (and percentage of on-time deliveries)

Based on the above categories above, you can then filter this information in various ways to see
which of your tracked suppliers, for example, are:

 Top-5 highest spend

 Top-10 critical suppliers
 Top-5 low-quality suppliers
 Top-10 excellent performing suppliers

4. Track Supplier Performance

Supplier performance is easily measured if your company has a system that supports making the
data readily available, and Key Performance Indicators (KPIs) will prove to be a very helpful
tool if used correctly. The following supplier KPIs are good for measuring overall supplier
performance:

 Right First Time

 Delivery on Time
 Response Time, Quotes, and Inquiries

5. Supplier Management

Once you’ve identified suppliers and built your supply base, while keeping in mind the previous
four steps, engaging and managing your supplier should be much more efficient. You may even
get some suppliers to review their internal processes and strategies by mentioning to them that
you could source them more business if they improved function X or received certification Y, for
instance. Getting to know as much as you can about, and maintaining continuous contact with,
your suppliers will drastically improve your relationships with them, and subsequently their
transparency, boosting your supply base building and supplier quality management, and the final
program product as a result.