CLASS 2 – Relationships, Requirements Process, Specifications, and Quality
RELATIONSHIPS
Supply Management has transformed from “Reactive/Mechanical” purchasing to a “Proactive and Strategically Focused process.
Old school thinking, basically one of an “Adversarial” nature, has largely given way to the concept of “Partnership”
Three fundamental levels of Buyer-Seller Relationships include (Table 4-1):
Transactional – Collaborative – Alliance
Transactional: Characterized by an arm’s length approach, focused on individual purchases with no regard for continuation of proven relationships. Price is the major consideration. These relationships are the purchasing equivalent of a one night stand.
Collaborative: More cooperative in nature, recognizing value in the mutual success of both parties. Buyers are more likely to maintain proven relationships. Sellers more likely to invest in R&D, Training, Process Improvements to increase the value of their product/service to their loyal buyers (Value Engineering/Value Analysis process is enhanced). The relationship also benefits from enhancements to the learning curve as experiences are developed over time.
Alliance: Takes the collaborative process to a higher level by incorporating even greater levels of “institutional trust”, which results from substantial and proven experiences working together at the enterprise and individual levels over time.
As these alliances develop, price competition tends to give way and traditional short-term competitive-based approaches to source selection are often offset by cost-based arguments for longer-term relationships, such as:
ROLE IN NEW PRODUCT DEVELOPMENT
Review: Purchasing process consists of three phases:
• Pre-award: Requirements Determination
• Solicitation and Award: Purchasing/RFP, Source Selection (technical and price), Award
• Post-award: Contract Administration and Management
Early purchasing involvement (EPI) and use of cross-functional teams:
• Reduce time to procure
• Increase quality of products (both purchased materials and end-products)
• Produce more favorable cost returns on purchased materials
Purchasing involvement in the Design Process:
• Facilitates identification of new components
• Supports location of potential vendor-partners (considering product suitability, quality, certainty of delivery, cost, service)
Purchasing's role is expanded by:
• Use of Design or Project Teams
• Employ materials engineers as buyers
• Co-locate buyers with design/engineering staff (permanent or matrix)
SPECIFICATIONS
If Quality is conformance to specifications then specifications are the foundation of Quality of Performance.
Quality is related to suitability and cost (not price), rather than intrinsic excellence (i.e. a diamond)
Cost (life cycle cost = price + related future expenditures, i.e. maintenance, repair, modification, etc.
Quality is determined by the TECHNICAL consideration of suitability and the ECONOMIC consideration of cost and availability.
Responsibilities:
Technical considerations are the responsibility of the designers, jointly with the marketers
Economic considerations are the responsibility of the purchasing department, jointly with the marketers
Purchasing Dept. has a responsibility to support the development of the requirement but not to unilaterally develop it
How does a PO describe a requirement?
• By market grade (natural products i.e. lumber, food products)
• Brand name (or equal)
• Commercial standards (Grade 8 bolts, Commercial Standard A-A-3097 Type II Class 1 for Adhesives). Commercial standards, developed by industry used to establish grades and qualities of specific commodities.
• Design specification
• Performance specification - Functional specification (Outcome based)
• Review of submitted samples
• Qualified products list
Most common methods include:
• Brand name
• Commercial Standard
• Specifications (Design or Performance)
Conventionally, a purchase description calls for the minimum product needed to perform its intended function should be stated
Specifications must consider-
Function (design)
Consumer acceptance (marketing)
Economy to produce (manufacturing)
Materials availability, cost (procurement)
Views within the organization may be in conflict:
• Marketing wants product to be unique
• Engineering wants product excellence
• Production wants ease of construction
• Purchasing wants materials availability, low cost
Because of these considerations, Balanced Specifications, i.e. specifications that address and satisfy the total requirements of the organization, must be developed by:
• Early Purchasing Involvement - EPI (and Early Supplier Involvement – ESI)
• Formal Committees to review specifications
• Informal involvement (i.e. "challenges to designs/requirements)
• Purchasing Coordinator to perform liaison between Purchasing, Design, and Production.
• Standardization of Purchase Descriptions whenever possible.
Specifications must consider:
1. Marketability and product appeal
2. "Make ability"
3. "Inspect ability" (ability to test and comply)
4. "Storability" (receipt, storage, shelf-life)
5. Scheduling of production
6. Availability (to purchase competitively, timely, reliably)
7. "Substitutability" (when necessary due to unavailability)
8. Cost
9. Standardization
STANDARDIZATION
TWO TYPES OF STANDARDIZATION:
1. Of things (size, shape, color, physical properties, chemical properties, performance characteristics, etc.)
2. Of Practices and procedures (managerial standardization)
As production process moves from Job Shop through Line Flow to Continuous Process Flow methods, opportunities to standardize FINISHED PRODUCTS increase. As this occurs, materials, parts and subassemblies used in each process can be increasingly standardized.
Standardization reduces costs in a manufacturing industry (or any industry) by permitting the purchase of fewer items, in larger quantities, at lower prices, thus, acquisition, handling, quality costs are minimized.
Standards Organizations Include:
SIMPLIFICATION
Simplification means reducing the number of standard items a firm uses in its produce design and carries in inventory.
Simplification encourages broad application of the same standard materials throughout a range of product lines.
QUALITY
QUALITY is often defined as “conformance to specifications”
"Fitness for Use" must also be considered -
A quality product may not be fit for use in that the latter deals with specification adequacy, not product conformance to that specification. It may be said that Total Quality, from a Manufacturing perspective, is attained when a product is fit for its intended use.
Traditional role of inspection was as the first line of a quality program; however, while still a component of the quality process, it has been de-emphasized as a primary tool in favor of:
Five general factors affect the quality of purchased material:
Suppliers are generally responsible for quality control; the Buyer is responsible for quality assurance.
Quality has costs associated with its attainment (or lack thereof)
Quality Schools of Thought
Phillip Crosby and the Quality College:
The "Cost of Quality" (Crosby) is the cost of doing things wrong, hence -effective quality programs result in cost avoidance to the firm
Deming and the Deming Prize - Japan (relate to Malcom Baldridge Prize in U.S.)
Deming's view: Management is responsible for 85% of Quality Problems (such as design, manufacturing process, engineering, training, purchasing, customer relations)
ISO 9000 - 9001 Quality Standards (See Attachment at the end of these notes)
Undesirable quality costs include: Scrap, Rework, Repair, Loss of Customer Goodwill
Most quality advocates espouse quality as a "top down, bottom up effort"
Two Views of Quality:
OLD SCHOOL |
CURRENT POSTURE |
Productivity and quality are conflicting goals |
Productivity gains are achieved through quality improvements |
Quality defined as conformance to specifications or standards |
Quality is correctly defined requirements which satisfy user needs |
Quality measured by degree of non-conformance |
Quality measured by continuous process/product improvement and user satisfaction |
Quality is achieved through intensive product inspection |
Quality determined by product design and is achieved by effective process controls |
Some defects allowed if product meets minimum quality standards |
Defects are prevented through process control |
Quality is a separate function focused on evaluation of production |
Quality is part of every function in all phases of the product life cycle |
Workers are blamed for poor quality |
Management is responsible for quality |
Supplier relationships are short termed, competitive based, and oriented towards acquisition costs |
Supplier relationships are long term/quality oriented |
Quality and the JIT Manufacturing Perspective
JIT Elements Relating to Purchasing include:
Quality and Conformance (more important than price)
Emphasis shifting from lowest price to lowest cost characteristics of -
Quality – Performance - Delivery
Long-term supplier/relationships are encouraged (Although average in U.S. has historically be approximately 1-2 years
Advantages? (Willingness to invest in process, R&D, training; conduct value analysis, improved learning curve
Some "Sole or Single Source" Contracts may be necessary, however, at least two vendors supplying materials may be wise to keep competition viable (primary and alternate supplier)
Formal vendor evaluation/certification programs imperative in JIT
JIT is characterized by frequent deliveries of small quantities directly to point of consumption on factory floor
Once vendors are certified, little or no incoming inspection is needed
Vendors are involved in production decisions, i.e. scheduling, needs and materials determination
JIT Purchasing can become an excuse to take advantage of vendors when firms MM and other management practices are at fault (i.e. faulty planning, design, marketing forecasting, etc.)
True Just In Time Production Lowers Everyone's Inventory (buyer and supplier alike)
Evaluation of a Quality Program:
Organization for Quality:
• Defined responsibility, authority of personnel assigned QC responsibilities
• Management involvement, review, and commitment
• Training
• Sufficient resources allocated (personnel, equipment, facilities, funding, etc.)
Effectiveness of Planning:
• Review of requirements (specification review)
• Identify special controls, processes, equipment, skills required
• Determine required documentation, reporting, staff involvement
Review Work Instructions for -
• Clarity
• Do-ability
• Contribution to desired level of quality
Develop and Maintain Responsive Corrective Action Programs (Post Detection Actions) -
• Correction of work instructions
• Vendor analysis and corrective action (jointly with vendors)
• Improved technical data packages to vendors
• Analysis of elements of cost of quality (scrap, rework, repair data, both internally and externally caused) to determine causes of defects, costs of quality trend analysis)
• Introduce improvements and corrections
• Maintain effective follow-up
Maintenance of Standards and Drawings
• Current
• Adequate
• Configuration and change control
Adequacy/Availability of Test Equipment
Control Over Purchased Items
• Source selection and vendor qualification
• Vendor quality level is your quality level
• Ongoing vendor evaluation programs
• Feedback, correction of identified non-conformance(s )
In-process Inspection at Critical Points During Manufacture (or Service)
(Critical points are established based upon their ability to impact product quality)
Completed Item Testing and Evaluation
• Sampling
• End item inspection/tear down
• Performance validation/verification
Handling of Materials (Storage, Delivery) to Preserve Quality, Minimize Damage and Loss
Disposition of Non-conforming Vendor Supplied Materials
Information System to Provide Feedback
• Internal - to identify faulty processes, causes on non-conforming products
• External - to identify defective items getting to customers
CASES: RANDALL, PLACIDO
The Quality Management System (QMS) is the collection of processes, documents, resources, and monitoring systems that direct the work of an organization regarding product and service quality. The organization needs to establish, document, carry out, and maintain this system to meet the requirements of ISO 9001:2000.
The organization needs to document – either electronically or on paper – the quality policy, quality objectives, and quality manual. Written procedure, plans, and operations need to describe how product and service quality is attained. Certain records, providing evidence of activities that were carried out (i.e. purchase orders, sales contracts, inspection records, design review notes, etc.), have to be retained
The quantity, detail, and form of the documentation can differ from one organization to another depending on size, type of activities, or complexity of processes.
The quality manual describes the extent of the QMS and may exclude certain sections of the Standard that don't pertain to the organization. All of the quality procedures are either included in the quality manual or are referenced by it. The interaction between processes making up the QMS is also described.
All of the documents in your QMS must be legible, identified, reviewed, authorized, up-to-date, issued, distributed, and periodically updated. Obsolete documents have to be identified and protected from unintended use. Documents that come from outside the organization also have to be identified and controlled.
Certain records need to be kept to demonstrate how the QMS is operating. These records must be legible, and easy to identify and retrieve. A written procedure must describe how they are identified, stored, protected, retrievable, and define their retention and disposal times.
5 Management responsibility
The Standard recognizes that an effective quality program requires the involvement and commitment of the organization’s top management. Therefore, the Standard assigns top management the following responsibilities:
Top management must ensure that customer requirements are understood and met with the goal of improving customer satisfaction.
The quality policy identifies the main goals of the QMS. The quality policy must be:
5.4 Planning
Establish measurable quality objectives that support the quality policy and communicate them throughout the organization.
5.4.2 QMS planning
Plan the QMS so that the quality objectives are met and so the system continues to work as it is changed to incorporate improvements.
5.5 Responsibility, authority and communication
5.5.1 Responsibility and authority
Effective work depends on a clear understanding of each person’s responsibility and authority. Therefore responsibility and authority must be defined and communicated.
5.5.2 Management representative
Top management must appoint a manager to have ongoing operational responsibility for the QMS. This person is referred to as the Management Representative. The duties of the Management Representative include:
Top management needs to set up an effective system of communication to ensure effective operation of the QMS.
5.6.1 General
Top management is required to regularly review certain aspects of the QMS to make sure that the goals are being achieved and to look for ways to improve the QMS. The review must cover suitability, adequacy, and effectiveness of the QMS. The review also includes assessing opportunities for improvement and needed changes to the QMS, quality policy, and quality objectives. Records of these reviews must be kept.
5.6.2 Review input
These meetings must address the following areas:
5.6.3 Review output
These reviews result in decisions and actions related to:
6 Resource management
6.1 Provision of resources
Provide the people, equipment, tools, and materials need to:
6.2 Human resources
6.2.1 General
People performing work affecting product and service quality must be competent to carry out that work. This competency is attained through a combination of education, training, skills, and experience.
6.2.2 Competence, awareness and training
The organization must:
6.3 Infrastructure
The infrastructure for a QMS includes the building, workspace, equipment, and the supporting services involved in creating the organization’s products or services. The organization will need to determine, provide and maintain the infrastructure needed to achieve the planned results.
6.4 Work environment
The work environment of the organization must not interfere with the ability of employees to perform effectively in order to meet quality requirements.
Product Realization Requirements
7.1 Planning of product realization
Product realization is the term used to describe the work that the organization goes through to develop, manufacture, and deliver the finished goods or services. An effective Quality Management System (QMS) includes a comprehensive approach to getting from the product concept to the finished product. This approach, sometimes called a quality plan, includes the following:
7.2 Customer-related processes
7.2.1 Determination of requirements related to the product
The Standard requires the organization to determine product requirements. These requirements can come from the customer, may be mandated by laws or regulations, and include generally accepted standards within your industry or market. Requirements are established by standard contracts or oral agreements that the sales department uses in discussions with customers, and other sources.
7.2.2 Review of requirements related to the product
After gathering preliminary product requirements, these requirements need to be reviewed to be sure that the customer understands them and that the organization is meeting these requirements. This review must ensure:
Routine orders for items described in a catalog of products are considered reviewed when the relevant product information is reviewed.
Put in place effective customer communications channels, to allow dialogue regarding:
7.3.1 Design and development planning
To effectively plan the design and development process, the organization must:
7.3.2 Design and development inputs
Determine the product requirements, including:
7.3.3 Design and development outputs
The output of design and development must include sufficient information to verify that design output meets design input requirements. In addition, it must:
7.3.4 Design and development review
Review the design and development work products to:
Include representatives from each function concerned with the design and development stage being reviewed. Keep records of the reviews.
7.3.5 Design and development verification
Verify, according to your plan, that the design output meets design input requirements. Record the results of these verification activities.
7.3.6 Design and development validation
Validate the operation of the resulting product under actual operating conditions. If the product has multiple uses, validate operation for each intended use. The methods for validation defined in the design output should be followed. Whenever possible, the validation of a product or service should be performed prior to delivery to the customer. Record the results of these validation activities.
7.3.7 Control of design and development changes
Identify, document, review, and approve all design changes before carrying them out. Evaluate the impact of the changes on the present design of the product. Keep records of the review.
7.4.1 Purchasing process
The organization needs to ensure that purchased products and services meet purchasing requirements. The purchasing group must establish criteria for how they evaluate and choose suppliers. These criteria must be based on the suppliers’ ability to provide products and services that meet order specifications, especially product and service quality requirements. The extent of the controls depends on the importance of the purchased goods in the finished product. Finally, records must be kept showing how purchased products and services were evaluated.
7.4.2 Purchasing information
Clearly describe on purchase orders the product or service being ordered. Consider including the following specifications:
Review and approve purchasing requirements before sending them out.
7.4.3 Verification of purchased product
Carry out a plan for verifying that purchased services and materials are adequate, i.e. meet purchase specifications.
7.5 Production and service provision
7.5.1 Control of production and service provision
Plan production, installation, and service processes and provide an environment where work can proceed in an orderly fashion. These controlled conditions may include:
7.5.2 Validation of processes for production and service provision
Process validation demonstrates that operation of the processes achieves the planned results. When it is not possible to verify the finished good or service through monitoring or measurement the QMS must require validation. Validation is particularly important where deficiencies are not identified until the product is in use, or the service is delivered. When validation is required, the QMS must define the criteria for the following:
7.5.3 Identification and traceability
Where appropriate, establish procedures to identify a product and determine what specifications pertain to it as it moves through manufacturing, delivery, and installation. Record the inspection and measurement status of the product. Individual products or batches of products must have unique serial identification recorded if assuring product quality requires this.
7.5.4 Customer property
Special care must be taken when a customer provides their property for use or incorporation into the product. Identify, verify, and protect customer property provided and maintain records of lost, damaged or unsuitable customer property. This may include intellectual property.
The standard requires the organization to preserve the product, including identification, handling, storage, packaging, protection, and delivery of parts and products throughout all processes.
7.6 Control of monitoring and measuring devices
Any measurement worth taking is worth taking correctly. The standard requires the organization to identify the inspection, test and measurements taken, their required accuracy, and the equipment used to make the measurements. Procedures must describe how measurements are carried out.
Measuring equipment must be carefully cared for, including:
Measurements taken with equipment later found to be inaccurate must be assessed and corrected.
8 Measurement, analysis and improvement requirements
8.1 General
Plan and carry out the inspection, test, measurement, analysis, and improvement activities needed to:
Monitor the end customers' opinion of your product and service. Determine how to gather and use this information.
Internal audits are verification activities performed by trained auditors within the organization. Their purpose is to determine how well the plans making up the QMS are being followed. The Standard requires internal audits be carried out regularly in each area covered by the QMS. Audits address conformity with the QMS, the requirements of ISO 9001:2000, and the effectiveness of the implementation.
Audit plans address:
Auditors are trained, objective, and never audit their own work.
Identified problems are quickly resolved by the manager responsible for area being audited.
Audit results are reported and recorded, follow up actions are verified.
8.2.3 Monitoring and measurement of processes
Monitor and measure the performance of the processes that make up the QMS. Compare these actual results to the planned results. Take corrective action to make sure the product or service meets requirements.
8.2.4 Monitoring and measurement of product
During the production process, monitor and measure the product to assess if requirements are met. Keep records showing:
8.3 Control of nonconforming product
Nonconforming product is any product or service that does not meet requirements. Have documented procedures to identify nonconforming products and to make sure they are not used by accident. Define who is responsible for deciding what to do with a bad product. One of the following three actions must be taken:
Keep records of nonconformities.
Re-inspect any corrected products according to the procedures for new products.
Mitigate potential losses, perhaps by recall, from any product that has been found to be defective after its release to the customer.
The standard requires the organization to collect information on the functioning of the QMS. This information is then analyzed to evaluate the effectiveness and efficiency of your system and to identify opportunities for continual improvement of the QMS. Information collected and analyzed relates to:
8.5 Improvement
8.5.1 Continual improvement
Make use of the quality policy, quality objectives, audit results, data analysis, corrective and preventive actions and management review to improve the QMS.
When problems occur, fix the underlying process responsible for the defect. The thoroughness of each solution depends on how costly or unsafe the actual or possible problems are.
Create written procedures for:
The same actions described above for corrective actions must be considered for problems that have yet to occur. This is called preventive action. Effective preventive action involves identifying the potential problem, examining the root cause, putting a plan in place to prevent occurrence of the problem, evaluating the effectiveness of the plan, recording actions taken, and reviewing the preventive actions taken. A written procedure is required to describe the preventive action process.