SUPPLIER

PARTNERSHIP
 TOPICS OF TODAYS DISCUSSION
 INTRODUCTION
 PARTNERING
 Long-term commitment
 Trust
 Shared Vision
 SOURCING
 SUPPLIER SELECTION
 PRINCIPLES OF CUSTOMER/SUPPLIER RELATIONS
 SUPPLIER CERTIFICATION
 SUPPLIER RATING
 RELATIONSHIP DEVELOPMENT
 Inspection
 Training
 Team Approach
 Recognition and Award
 INTRODUCTION
Organization and suppliers have the same goal – to satisfy
the end user.

 Working with supplier in a partnering atmosphere will yield high

quality product and services.
 In the 1980s 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 & 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.
 PARTNERING
Partnering is a long
- term commitment between two or more
organizations for the purpose of achieving specific business goals
& objectives.

 The relationship is based upon trust, dedication to common goals

and objectives.
 Benefits include:
o Improved Quality,
o Increased efficiency,
o Lower cost,
o Increased opportunity for innovation, &
o Continuous improvement of products and services
 The three key elements of partnering are:
o Long-term commitment.
o Trust.
o Shared vision.
 Long-term commitment
 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

term 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 parity.

 Trust enables the resources and knowledge of each

partner to be combined to eliminate an adversarial
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.

 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 must be formulated and implemented as a

team.
 SOURCING
There are three types of sourcing:
 Sole sourcing
o Organization is forced to use only one supplier.
o Technical specifications, patents, raw material location, etc.
cause this kind of sourcing.
o Partnering is a natural consequence, to benefit the end user.
 Multiple sourcing
o Two or more suppliers for an item are used.
o Competition will result in better quality, lower costs and
better service.
o It eliminates disruption of supply due to strikes etc.
 SOURCING cont’d...
 Single sourcing

o A planned decision by the organization to select one

supplier for an item when several sources are available.
o Advantages for the organizations include reduced cost,
complete accountability, supplier loyalty, partnering and a
better end product with less variability.
o Advantages for the supplier include new business from the
customer, reduced cost of the business and production
processes.
o It has allowed organization to reduce their supplier base.
 SUPPLIER SELECTION
Following are the conditions for the selection and evaluation of
suppliers:
1. Supplier knows management policy of the organization.

2. Stable management system of supplier , respected by others.

3. Supplier has the capability of dealing with technological

innovations.
4. Supplier can supply material meeting quality specifications.

5. Supplier has capability to meet the amount of production.

6. Supplier will not breach corporate secrets.

 SUPPLIER SELECTION cont’d….
7. The supplier is easily accessible in terms of
transporation and communication.

8. The supplier is sincere in implementing the contract

provisions.

9. The supplier has an effective quality system and

improvement program.

10. The supplier has a track record of customer

satisfaction and organization credibility.

These conditions go beyond evaluating a supplier on

the basis of quality, price and delivery.
 PRINCIPLES OF
CUSTOMER/SUPPLIER RELATIONS
Dr. Kaoru Ishikawa has suggested ten principles:

1. Customer and supplier are fully responsible for Quality

control.
2. Customer and supplier should respect each others
independence.
3. Supplier is entitled to complete information from the
customer.
4. Non-adversarial contract between customer and
supplier is needed for quality, quantity, price, delivery
method & payments.
5. Supplier should provide quality to meet customers
satisfaction.
 PRINCIPLES OF
CUSTOMER/SUPPLIER RELATIONS
6. Product quality evaluation methods should be
decided by the mutual consent of both the parties.
7. Amicable settlement of disputes between customer
and supplier should be established in the contract.
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 user should be considered
while doing business transactions.
 SUPPLIER CERTIFICATION
ASQC has developed the following certification
criteria:
1. Customer and supplier shall have agreed on specifications
which are mutually developed, justifiable, and not
ambiguous.
2. Supplier shall have no product-related lot rejection for a
significant period of time.
3. Supplier shall have no non-product related rejections for a
stated period of time.
4. Supplier shall have no negative non-product related
incidents for a stated period of time.
5. Supplier shall have a fully documented quality system.
(ISO 9000)
SUPPLIER CERTIFICATION
6. Supplier shall have successfully passed an on-site system
evaluation.
7. Supplier must make inspections and tests. (Laboratory
results & SPC are used)
8. Supplier shall have the ability to timely provide inspection
and test data.

Occasionally it may be necessary to decertify a supplier as

a result of a major problem.

Benefits of certification include customer/supplier

partnership, direct shipment to stock and reduction of
supplier numbers to a manageable level.
 SUPPLIER RATING
Supplier rating system is based on quality,
delivery and other added services.
The objectives of a rating system are:

o To obtain an overall rating of supplier performance.

o To ensure communication with suppliers in the areas of
quality, service, delivery and other desired measures.
o To provide supplier with a detailed and factual record of
problems for corrective action.
o To enhance the relationship between the customer and the
supplier.
RELATIONSHIP DEVELOPMENT
All the previously discussed issues contribute to
the development of the relationship. It includes:

1. Inspection
The goal is to eliminate or automate the inspection
process. It has four phases:
o 100% inspection,
o Sampling,
o Audit, and
o Identity check.
RELATIONSHIP DEVELOPMENT
2. Training
All personnel should receive quality awareness and
problem solving, technical and safety training.

 Team approach
Customer/supplier teams are established in areas such as
product design, process design and quality system.

4. Recognition and Award

Incentives/recognition in the form of newsletters, letter of
accommodation, ensures that suppliers remain committed
to a quality improvement strategy.
QUESTIONS