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* In any business or job situation, your prime goals to satisfy your customer with quality
goods and services. But in order to effectively satisfy your customer, it is essential that your
suppliers also provide you with quality parts and services.
*The philosophy of TQM extends to concept of quality suppliers and ensures that they engage
in the same quality practices. If suppliers meet quality standards, materials do not need to be
inspected upon arrival
Organization and suppliers have the same goal – to satisfy the end user.
*Customers and suppliers have the same goal—to satisfy end user. The better the supplier
quality, the better the supplier’s long-term position, because the customer will have better
quality. Because both the customer and suppliers have limited resources, they must work
together as partners to maximize their return on investment.
Working with supplier in a partnering atmosphere will yield high quality product and
services.
In the 1980’s procurement decisions were based on price, awarding contracts to the
lowest bidder, sacrificing the quality and timely delivery
Deming suggested that long term relationship of loyalty and trust should be developed
with the supplier to ensure improved products and services.
Just-in-time (JIT) concept calls for raw materials and components to be delivered in
small quantities only when they are required and not before stores ran out of stock.
*There have been number of forces that have changed supplier relations. Prior to the
1980s, procurement decisions were typically based on price, thereby awarding contracts
to lowest bidder. As a result, quality and timely delivery were sacrificed. One force,
Deming’s fourth point, addressed this problem. He stated that customers must stop
awarding business based on the low bidder because price has no basis without quality. In
addition, he advocated single suppliers for each items to help develop a long-term
relationship of loyalty and trust. These actions will lead to improved products and
services.
Another force changing supplier relations was the introduction of the just-in-time (JIT)
concept. It calls for raw materials and components to reach the production operations in
small quantities when they are needed and not before. The benefits of JIT is that
inventory-related costs are kept to minimum. Procurement lots are small and delivery is
frequent. As a result, the supplier have many more process setups, thus becoming a JIT
organization itself. The supplier must drastically reduce setup time or its cost will
increase. Before there is little or no inventory, the quality incoming material must be very
good or the production line will be shut down. To be successful, JIT requires exceptional
quality and reduced setup time.
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The practice of continuous process improvement has also caused many suppliers develop
partnership with their customers. A final force is ISO 9000, which is mandated by the
major automotive assembly firms. Specifically, first tier and tiers subsequent to the OEMs
must maintain supply chain development through three key factors: zero defects, 100%
on-time delivery, and a process for continuous improvement.
Partnering is a long-term commitment between two or more organizations for the purpose of
achieving specific business goals and objectives.
The relationship is based upon trust, dedication to common goals and objectives
Benefits include:
Improved quality,
Increased efficiency,
Lower cost,
Increased opportunity for innovation and
Continuous improvement of products and services
The three key elements of partnering are:
Long term commitment
- Provides the needed environment for both parties to work toward
continuous improvement
- Total organization involvement is necessary, CEO to the workers.
- Each party contributes its unique strengths to the process.
- A supplier may only take risks in a long-term commitment
- Dependency appears as a national consequence in a long commitment,
it is not a sign of weakness, but a sign of strength of the relationship
and is necessary for competitive advantage.
Trust
- The strength of partnering is based on fairness and equality.
- Enables the resources and knowledge of the each partner to be
combined to eliminate an argumentative relationship
- Mutual trust forms the basis for a strong working relationship
- Open and frequent communication avoids misdirection, disputes and
strengthens the relationship
- The parties may share or integrate resources such as training activities,
administrative systems and equipment
Shared vision
- Each of the partnering organizations must understand the need to
satisfy the final customer.
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- There should be an open and candid exchange of needs and
expectations.
- Shared objectives and goals ensure a common direction aligned with
each parties’ mission
- Partners must understand each other’s business so that equitable
decisions are made.
- These decisions should be formulated and implemented as a team
*You normally have a strong motivation to receive quality goods and services. You want to
get your money's worth and obtain those quality items that are necessary for you to be able to
deliver quality goods to your customers. On the other hand, your supplier may not be as
motivated to provide you with the quality products and services you want to use or need to
pass on to your customers. His first motivation is usually to make money, and that money is
already established in your contract. If you want something done correctly, you must make
sure the supplier completely understands what it is you want. The way to assure your supplier
will provide you with quality goods and services is to form a customer-supplier partnership
with him. You do that by working together, sharing motivation for quality goods, and helping
each other to do a good job.
Sourcing refers to the value added process selecting suppliers and the respective cooperation
scheme and it must be supported by advanced analytics and market intelligence, supplier
performance information and a concrete and well-developed strategy
Sole sourcing
- Organization is forced to use only one supplier
- Technical specifications, patents, raw material location, etc. cause this
kind of sourcing
- Partnering is a natural consequence, to benefit the end user.
Multiple sourcing
- Two or more suppliers for an item are used.
- Competition will result in better quality, lower costs and better service
- It eliminates disruption of supply due to strikes etc.
Single sourcing
- A planned decision by the organization to select one supplier for an
item when several sources are available.
- Advantages for the organizations include reduced cost, complete
accountability, supplier loyalty partnering and better end product with
less variability.
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- Advantages for the supplier include new business from the customer,
reduced cost of the business and production processes.
- It has allowed organization to reduced supplier base.
Choosing a specific company and bypassing the competition refers to single sourcing.
Different suppliers and distributors typically produce and sell similar merchandise. This is
advantageous to companies that purchase supplies because they can choose among various
companies. However, after a thorough analysis of possible suppliers, company heads,
managers or owners may choose to sign with a single company and pass up the opportunity
to work with other suppliers. This decision could be based on price or the quality of products.
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More flexibility to react to
unexpected events that
could endanger supplier’s
capacity
The following are the conditions for the selection and evaluation of suppliers:
These conditions go beyond evaluating a supplier on the basis of quality, price and
delivery.
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8. Continuous information exchange will improve the product or service quality.
9. To maintain an amicable relationship, both the parties should do procurement,
production and inventory planning.
10. Best interest of the end users should be considered while doing business transactions.
* It supports the concept of quality at the source by doing it right the first time thereby
substantially reducing or eliminating the need for final quality inspections by the supplier or
the customer. The primary objective of the certification process is to assure consistent high
quality as demonstrated by predictable conformance to our requirements. The basic premise
is that we want to identify suppliers that have adequate process controls in place and they
provide legitimate proof that their products are consistently fit for use, authentic, meet label
Supplier Rating system is based on quality, delivery and other added services.
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