F E AT U R E

QUALITY 4.0

12 QP October 2019 ❘ qualityprogress.com

 Just the
Westend61 via Getty Images

Facts
Quality control
is integral to
optimizing supply
chain efficiencies.
Quality 4.0 takes
quality control
to another level,
aligning quality
management
practices with
Industry 4.0
technologies
to optimize the
bottom line of
the entire supply
chain.

The author offers

a practical six-
step framework
to integrate
purchasing
and quality in
Industry 4.0.

Integrating
software
systems—such
as enterprise
quality manage-
ment systems
and enterprise
resource planning
systems—can
assist in an
organization’s
communication
and collaboration
efforts, enhance
purchasing
controls and
minimize risk.

Integrate procurement strategies

to advance quality control in
Industry 4.0 | by Varun Gupta

qualityprogress.com ❘ October 2019 QP 13

 F E AT U R E
QUALITY 4.0

Quality is the ability of a product to meet cus- Evolution of procurement

tomer requirements and expectations. Thus,
maintaining quality control plays a critical role
in supply chains (SC) as a product evolves from
raw materials to finished goods.
It is well-known that the most important quality
control occurs at the source of manufacturing—that
is, the inputs to manufacturing. In the case of SCs,
this begins at the procurement of raw materials.
Traditionally, purchasing departments working
in procurement use a list of information1 about raw
materials for quality control that includes the:
++ Physical description.
++ Dimensional measurements.
++ Chemical composition.
++ Performance specifications.
Procurement managers use this list for supplier
selection and sourcing to ensure quality standards
are met. With the arrival of the Quality 4.0 revolu-
tion, however, these quality practices have become
dated and can, in fact, lead to a loss in quality and
lack of process optimization.
strategies in Industry 4.0
“Digital procurement (or digital supply chains) automates
repeatable tasks to boost efficiency and reduce costs;
it equips stakeholders across the business with real-time
insights and analytics through artificial intelligence (AI) and
easy-to-use online tools,” according to a recent report from
Accenture, a technology and consulting firm. “It deploys new
and smarter ways to infuse data models to enrich day-to-day
operations and decision making. Furthermore, it transforms
buyer interactions with suppliers and other third parties by
serving as a platform for new levels of collaboration.”4
Industry 4.0 has helped organizations by reducing costs
as well as creating a difference in values based on the digital

What is Industry 4.0?

Quality 4.0 is an offshoot of Industry 4.0, also
referred to as the fourth industrial revolution.2
Industry 4.0 is the trend of using additional
automation and data exchange in technologies
for manufacturing. This revolution includes capa-
bilities such as the internet of things (IoT), cloud
computing, machine learning (ML), artificial intelli-
gence (AI), blockchain technology and 3D printing.3
In a broader SC context, Industry 4.0 is indicative
of digitalization in which SC partners are connected
digitally and using tools such as IoT and cloud com-
puting to improve and optimize SC processes, such
as procurement, production and scheduling. Thus,
Quality 4.0 aligns quality management practices
with Industry 4.0 technologies to enhance and
optimize the bottom line of the entire SC.
It is important to note that Quality 4.0 does
not replace the traditional approaches to quality
management. Instead, it enhances and optimizes
these methods, including procurement strategies
for quality management.
This article provides enterprises that are looking
to adopt Industry 4.0 standards with vital infor-
mation on leveraging quality management using
procurement strategies.

14 QP October 2019 ❘ qualityprogress.com

 transformation products used for procurement. The first
instance of a digital technology developed for procurement
was IBM’s replenishment management system and method
(RMSS) in 2000. IBM used technology to solve the complex
procurement process for its laptop production plant in Mex-
ico.5 Three years after its implementation, production at the
plant grew from $1.6 billion to $3.6 billion annually.
Arguably, this is one of the first success stories of digitali-
zation of the procurement process. In traditional procurement
processes, however, there were inefficiencies due to repeated
processes, the manual verification of processes, and a lack of
transparency and collaboration among different SC partners.
Using modern digital technology that includes data mining,
AI, blockchain technology and 3D printers has changed the
traditional landscape of procurement and taken it to another
level. Procurement is an essential function of any organization
and can represent up to 80% of an organization’s costs.6
Integrating procurement strategies
The key success factor for quality managers to
effectively use digital technologies for procurement
is to incorporate market trends, process trends
and the product life cycle together. Specifically,
these include market trends that identify the
current customer needs that drive product design,
development and production. Finally, you need
the SC to produce and deliver the finished product
to customers.
Traditionally, businesses earned a competitive
advantage by performing well in one or several

Quality managers must adopt

software systems that can
integrate with other functions,
such as procurement.
Westend61 via Getty Images

qualityprogress.com ❘ October 2019 QP 15

 F E AT U R E
QUALITY 4.0
of these areas. With automation and the adoption of advanced
digital technologies, however, organizations must strategically
integrate all of these capabilities. It is important to note that
because of these strategic implications, we observe the impact
of supply-side procurement processes affecting the SCs (part-
nerships, information sharing and collaborations), as well as how
quickly finished products are being delivered to customers and
affecting a product’s life cycle.
In the context of quality, quality managers must adopt soft-
ware systems that can integrate with other functions, such as
procurement. This strategic enhancement can be realized by
adopting enterprise quality management systems (EQMS) that
can integrate with purchasing software and databases, such as ​
enterprise resource planning (ERP) systems. An EQMS ensures
that business best practices for business are enabled to produce
the highest quality products. Furthermore, using an EQMS
improves confidence in product quality and has a positive effect
on an organization’s reputation.
Bridging procurement and quality
EQMSs are enterprise software systems that manage content and
business processes for quality and compliance throughout the SC.
An EQMS solution allows users to collaborate effectively with suppliers
and improve communication. The system facilitates cross-functional
communication and collaboration, including interoperability with
procurement software systems, such as ERP systems.7, 8
Most ERP systems have procurement functions—including tools
for supplier management, purchase orders and invoicing—and
businesses use them as part of their procurement processes.
As modern purchasing processes get connected to Industry 4.0
technologies, it is critical for businesses to ensure that the EQMS
and ERP system are well integrated. Although there is progress
on EQMS adoption by businesses, most of the market still hasn’t
adopted EQMSs. Additionally, only 21% of the market has adopted
an EQMS, and less than half of these organizations have integrated
their EQMSs with their ERP systems.9
Figure 1 shows how integrating EQMSs and ERP systems can help
organizations by enhancing the purchasing controls over supplier
quality management, as well as help the business minimize its
risks associated with lack of quality control (at the source). This
is achieved through improved cross-functional communication of
quality and procurement managers, as well as direct visibility of
purchasing decisions to the organization’s quality control personnel.
It must be noted that integrating purchasing strategies with
quality management strategies, as shown in Figure 1, is not
a simple technology adoption process but rather a long-term
continuous improvement project. The next section provides
a practical six-step framework for integrating purchasing and
quality in Industry 4.0.10
16 QP October 2019 ❘ qualityprogress.com
STEP ONE
Define corporate goals
for digitalization
The first step in integrating purchasing and
quality in the backdrop of Industry 4.0 is to
develop and define the vision, objectives or
goal of the business. It also includes brain-
storming and developing business plans to
use the digitalization in the short, medium
and long-term.
For example, a steel manufacturing com-
pany formulates the goal of producing $100
million in steel in four years and growing at a
rate of 5% annually. The steel company wants
to implement software systems for all of its SC
operations, such as purchasing, supply man-
agement and customer interactions.
The company’s short-term goal is to grow at
a steady rate of 5%, and the medium-term goal
is to be among the top-10 leading steel suppli-
ers in the United States. In the long term, the
company wants to sell $1 billion worth of steel
annually across the globe.
The business must find a balance between
short and long-term goals to see when and
how it would want to use efficiencies and
information realized by implementing digi-
talization in procurement processes, as well
as other parts in their supply chains.
After clearly laying out the goals, it is
important to have all stakeholders and the
top-level management across all functional
areas of the business in agreement. It is less
costly to resolve any issues or conflicts across
stakeholders and functional units before
investing in digitalization, compared to waiting
until post-digitalization to get buy-in.
 FIGURE 1

EQMS and ERP system integration under Quality 4.0

Igor Korchak via Getty Images

EQMS

> Supplier quality management

> Risk management

Quality 4.0
> Purchasing strategies for:
> Supplier quality management
> Risk management

ERP
EQMS = e
 nterprise quality
> Purchasing control management systems
ERP = enterprise resource planning

STEP TWO

Digitalize purchasing, quality processes

“Emerging digital and advanced analytics tools promise new
levels of procurement performance,” according to authors of
a recent McKinsey report. “To deliver that promise, chief pro-
curement officers must discover which of them are best suited
to the needs of their company.”11
In this step, the business must develop a plan to digitalize
the purchasing and quality processes. To do this, managers
must classify their products as direct or indirect goods.12
Direct goods and services contribute to the organization’s
sales, either through production or resale, whereas indirect
goods support the primary operations of a business and are
viewed as enablers.
Using the steel manufacturing company again as an exam-
ple, direct goods are the raw materials for producing steel,
such as iron and coal, as well as the finished goods, including
different forms of steel the company procures from its suppli-
ers. On the other hand, indirect goods for the steel company
are the machinery and capital assets, including
office supplies.
Although businesses often want to digitalize the
processes for direct and indirect products and ser-
vices, prioritizing indirect goods over direct goods is
a more commonly used strategy, especially when the
resources for digitalization are scarce. This is because
the investments required for digitalizing indirect
products are usually lower as compared to the invest-
ments for digitalizing the direct products because of
their size and strategic importance to a business.
This strategy enables the business to reap
the benefits much more easily and with less risk.
Therefore, managers first should digitalize purchas-
ing and quality processes for indirect products.
Finally, the digitalization process should align
with the organization’s goals from the first step.

qualityprogress.com ❘ October 2019 QP 17

 F E AT U R E
QUALITY 4.0

FIGURE 2

Continuous improvement cycle to integrate

purchasing and quality processes for Industry 4.0
Corporate goals
for digitalization

wir0man via Getty Images

Measure quality
improvements and
redefine goals

Digitalize
purchasing and
quality processes

Visibility and
transparency

Integrate

Implement

Quality 4.0 does not replace the

traditional approaches to quality
management. Instead, it enhances
and optimizes these methods.

18 QP October 2019 ❘ qualityprogress.com

STEP THREE
Integrate digitalized purchasing
and quality processes
Integrating digitalized purchasing and quality processes
is critical to realizing their full potential. Traditionally, pur-
chasing and quality processes are fragmented. As a result,
organizations delay adopting quality technology because
it can be challenging to adopt technology to automate
fragmented processes.
Therefore, it is important that organizations harmonize
and integrate processes, and connect automated processes
for purchasing and quality. As part of process integration,
it is beneficial to leverage collective analytics and learnings
to continuously improve system integration.
To accomplish this, quality managers must shift the focus
of high-value staff away from the mechanics of execution and
toward innovation and improvement of the quality processes.
According to LNS Research’s Quality 4.0 Impact and Strategy
Handbook, only 7% of manufacturers plan to connect their
quality management software with other Industry 4.0 technol-
ogies.13 This is a missed opportunity for most businesses.
STEP FOUR
Implement the digitalized ecosystem
Implementation of the digitalized ecosystem that integrates
purchasing and quality processes is becoming increasingly
dynamic and has evolved from using simple electronic data
interchange systems to smart and complex networks using AI,
ML, robotics and big data analytics.
These technologies will help alleviate quality concerns and
issues. According to a recent PricewaterhouseCoopers report,
“Industry 4.0: How Digitization Makes the Supply Chain More
Efficient, Agile and Customer-Focused,” professionals expect
digitalization to affect the bottom and top lines of businesses—
that is, it can help a business gain efficiency by about 4.1%
annually, as well as increase revenues by about 2.9% a year.14
STEP FIVE
Visibility and transparency
Digitalization increases visibility and transparency
across the SC and helps to accurately track and
trace the movement of goods and all information
across the SC. This makes it much easier for busi-
nesses to identify the root cause of product defects
and can lead to better quality control in end-prod-
ucts. Track-and-trace systems based on blockchain
technology are the answer to quality problems and
the answer to the general problem of maintaining
SC visibility.15
The Chipotle chain restaurant was the center of
a high-profile quality issue in late 2015.16 Multiple
people in Simi Valley, CA, were suffering from
norovirus, and more people later were sickened
by Salmonella-tainted tomatoes. In addition, more
than 100 students in Boston picked up E. coli late
in the year. These incidents were traced back to
Chipotle restaurants, which resulted in a revenue
decrease of 6.8% for Chipotle. Subsequently, same-
store sales declined by 14%, net income decreased
44% and the stock price plummeted 39%.
These problems were due to supplier issues,
which were difficult to trace back to the actual
suppliers in the absence of any track-and-trace sys-
tems. In 2017, Arturo Tanus, Chipotle’s food safety
manager, explained how Chipotle now tracks all of
its produce from the farm to the restaurants using
FoodLogiQ software to provide more visibility.17 
Overall, the degree of cross-collaboration
depends on previous steps, especially corporate
goals (short and long term), the level of digitaliza-
tion and the degree of integration.
qualityprogress.com ❘ October 2019 QP 19
 F E AT U R E
QUALITY 4.0
STEP SIX
Measure quality improvements
and redefine goals
After the roadmap for digitalization is prepared
and implemented, the next step is to measure
the impact of digitalization on the quality of the
products. After the impact is measured, it must
be compared with the corporate goals established
in step one.
If there is any gap between the realized impacts
of digitalization vis-à-vis the projections in step one,
the goals must be refined and redefined to enhance
the benefits of digitalization. This is needed to
ensure a continuous improvement culture.
At this stage, it may be necessary to collaborate
with other SC members, including suppliers, and
obtain customer feedback to improve the digital
technologies in the business, realigning them with
the redesigned corporate goals for Industry 4.0.
Driving quality control
in Industry 4.0
By cross-collaborating with the purchasing depart-
ment, quality managers can reliably drive quality
control processes with the digitalization of most
business processes. Particularly, a key takeaway
for organizations looking to adopt EQMS software
is to ensure its interoperability with existing or new
ERP systems.
Through a clear roadmap of technology adop-
tion guided by corporate goals, organizations can
reliably improve product quality and minimize the
risks of abrupt technological changes in procure-
ment and quality processes.
20 QP October 2019 ❘ qualityprogress.com
REFERENCES AND NOTE
1. Martin Murray, “Quality in Purchasing and Supply Chain
Impact,” The Balance Small Business, Nov. 29, 2018,
www.thebalancesmb.com/quality-in-the-purchasing-process-2221199.
2. Bernard Maar, “What Is Industry 4.0? Here’s a Super
Easy Explanation for Anyone,” Forbes, Sept. 2, 2018,
https://tinyurl.com/forbes-industry-4-0.
3. Mario Hermann, Tobias Pentek and Boris Otto, “Design Principles
for Industrie 4.0 Scenarios,” 2016 49th Hawaii International
Conference on System Sciences, Institute of Electrical
and Electronics Engineers, pp. 3,928-3,937, January 2016.
4. Accenture, “Next Generation Digital Procurement,”
www.accenture.com/us-en/insight-digital-procurement-process.
5. T.R. Guadalupe, “Compras Inteligentes,” Expansion Magazine,
Sept. 20, 2011, https://expansion.mx/expansion/2011/09/14/
compras-inteligentes.
6. Varun Gupta, “Procurement Strategies for Digital Supply Chains:
Concepts and Best Practices,” Technology Optimization and Change
Management for Successful Digital Supply Chains, IGI Global, 2019,
pp. 17-38.
7. Matthew Littlefield, “What Is EQMS? (Enterprise Quality Management
Software),” Dec. 6, 2012, LNS Research—Industrial Transformation
Blog, https://tinyurl.com/lns-eqms-blog.
8. TIP Technologies Inc., “What Is Enterprise Quality Management
Software (EQMS)?” https://tinyurl.com/tiptech-eqms.
9. LNS Research, Quality 4.0 Impact and Strategy Handbook,
https://blog.lnsresearch.com/quality40ebook.
10. Gupta, “Procurement Strategies for Digital Supply Chains:
Concepts and Best Practices,” see reference 6.
11. Pierre de la Boulaye, Pieter Riedstra and Peter Spiller, “Driving
Superior Value Through Digital Procurement," McKinsey & Co.,
April 2017, https://tinyurl.com/mckinsey-digit-procure.
12. Dale Neef, E-Procurement: From Strategy to Implementation,
FT Press, 2001.
13. LNS Research, Quality 4.0 Impact and Strategy Handbook,
see reference 9.
14. PricewaterhouseCoopers, “Industry 4.0: How Digitization Makes
the Supply Chain More Efficient, Agile and Customer-Focused,”
Strategy&, Sept. 7, 2016, https://tinyurl.com/price-water-industry4.
15. For an example of track-and-trace systems based on blockchain
technology, see Michael Casey and Pindar Wong, “Global Supply
Chains Are About to Get Better, Thanks to Blockchain,” Harvard
Business Review, March 13, 2017, https://tinyurl.com/hbr-blockchain.
16. Kevin O’Marah, “Chipotle Lessons: Supply Chain Visibility and Higher
Prices,” Forbes, Dec. 16, 2015, https://tinyurl.com/forbes-chip-lessons.
17. Arturo Tanis, “The Future of Food Safety: Food Brand Perspective—
Chipotle’s Approach,” presentation, Future Food Tech, San Francisco,
March 20, 2017, https://tinyurl.com/future-food-tech-chip.
Varun Gupta is an assistant professor
at the Black School of Business, Penn
State Erie. He holds a doctorate
in operations management from
the University of Texas at Dallas in
Richardson. Gupta is a member of the
Production and Operations Management
Society, the Institute for Operations
Research and the Management Sciences, and the Council on
Undergraduate Research.