Managing Supplier Risks with Supplier Management Solutions

Reputable brands strive to deliver the highest quality to their customers while adhering to their ethical values and company visions. Are their suppliers also meeting the required quality, safety, ethical and environmental standards?

Pro QC has developed the following 10-stage Product Development Life Cycle (PDL) framework, that applies to almost every product or component being produced today. It breaks down a typical product launch, from design to shipment, into 10 stages. The goal of Pro QC’s supplier management services is to help our clients understand and manage their supplier risks during the various stages of their sourcing effort, whether they work in the sourcing, quality, or compliance department.

Using the E-Bike as an example, 80 - 100 parts and components from 15 – 30 different suppliers are used in the assembly of an E-bike. Below, Pro QC have summarized each stage in the Product Development Lifecycle along with the common risks and challenges that our clients face in their supplier management effort.

(Click on your current stage of the PDL to learn more)

Development & Planning
1. Design
2. Product Development
3. Supplier Selection
4. Supplier Qualification
5. Pre-Production Validation
6. Production Planning
7. Incoming QC
8. Production and Assembly
9. Packaging
10. Shipping
Production & Delivery
Development & Planning
Production & Delivery

1. Design Stage

The product development life cycle begins with idea generation, concept development, and market testing. For example, the E-Bike handlebar is designed with the form, fit, and function in mind that best serve the market/user’s requirements and the overall aesthetics of the final bike.

Although Pro QC do not actively get involved in this stage, a postmortem investigation with many of our client often reveals the following challenges.

Supplier Risks & Challenges:

Misalignment between the buyer, supplier sales department, and factory production department on critical design requirements
Advance product quality planning was not factored in early enough
Difficulties in transitioning from a prototype supplier to a mass manufacturing supplier

2. Product Development

In this stage, the engineers will refine the design and define the engineering specifications of the handle such as material properties, dimensions, weight, and other requirements while satisfying different product and safety compliances. This is also the stage where engineering prototypes (engineering build) are made to rigorously test the form, fit, and function of the product.

Supplier Risks & Challenges:

Poor communication of the technical details between buyer and factories
Misalignment on the new product’s specifications
Misalignment on design/engineering revisions
Supplier’s production capability is unable to meet the design requirement

Pro QC’s Supplier Management Solutions:

First Article Inspection (FAI)
Supplier Development Services
Resident Supplier Quality Resourcing

3. Identify Potential Suppliers

Once the component specifications are defined, the procurement department will begin to identify a list of suitable suppliers that can potentially meet their requirements in terms of capabilities, cost, capacity, and quality.

Supplier Risks & Challenges:

Lack of experience and due diligence in new supplier region
Communication challenges
Concern about supplier scams
Low confidence supplier’s trustworthiness
Concerns over supplier’s financial viability

Pro QC’s Supplier Management Solutions:

Onsite Supplier Verification
Financial Credit Check

4. Supplier Qualification

Once a list of trustworthy suppliers has been identified, an evaluation of supplier reliability is recommended to ensure they can produce at a consistent level of quality. A world-class organization usually has a comprehensive supplier qualification program to identify and mitigate the risks associated with quality, safety, on-time delivery, cost, and compliance.

Supplier Risks & Challenges:

Suppliers are not as capable as they initially claimed
Supplier lacks effective and systematic quality assurance practice
Supplier is ISO 9001 certified, but the underlying principles are not implemented in practice
Mass production quality does not match prototype quality
Buyers want to sell to big retailers, but their suppliers do not yet comply with the retailer’s supplier code of conduct
Supplier violation on labor law, ethical and environmental compliances
Goods held in customs due to supply chain security malpractice

Pro QC’s Supplier Management Solutions:

Global Supplier Audit Programs
Supplier Quality Audit for Potential Suppliers
Quality Management System Audit
Social & Ethical Audits
Supply Chain Security Audit
Environmental Audit

5. Pre-Production Validation

Before commencing volume production, it is crucial to validate the factory’s equipment, staffing, production methods, capacity, and quality control plan for each product line. This is an important stage to prevent critical failures, costly mistakes, and loss of time due to changes and rework.

Supplier Risks & Challenges:

Factory not ready for mass production
Shipment delays due to critical failure, poor quality, and resource constraints
An exponential increase in defective products
Product recall
High Cost of Poor Quality
An exponential increase in the cost of change after mass production commences

Pro QC’s Supplier Management Solutions:

Engineering Build (EB) and Quality Build (QB) Audit
First Article Inspection (FAI)
APQP/PPAP Audit
Manufacturing Process Audit or VDA 6.3 Process Audit

6. Production Planning

Production planning is an administrative process that involves ensuring that sufficient raw materials, components, staff, and other outsourced processes such as secondary processing are procured to create finished products according to the specified schedule.

Supplier Risks & Challenges:

Production delay due to poor material procurement planning
Production delay due to inadequate production staffing
Poor sub-supplier management

Pro QC’s Supplier Management Solutions:

Order Expediting

7. Incoming Quality Control

Incoming quality control is required when all the procured material and components arrive at the factory. This is the first step in controlling the production process and resulting product quality. Understanding how a factory manages its incoming material and its supply chain is a very good indication of its commitment to quality. (The saying goes: Garbage in, garbage out.)

Supplier Risks & Challenges:

The factory does not manage the quality of its supply chain or is poor at supplier management
Suppliers turn a blind eye to defective components during incoming and still use them for production and assembly
Using sub-standard material or components (e.g., lower-quality fabric than required)
Substituting lower-cost alternatives for product components (e.g., cheaper electronic components in a mobile phone)
“Quality fade” where suppliers make small, gradual substitutions in materials and components over time
Bulk material ordered by the supplier degrades over time due to poor storage conditions

Pro QC’s Supplier Management Solutions:

Incoming Inspection
In-Process Inspection
Manufacturing Process Audit or VDA 6.3 Process Audit

8. Production & Assembly

Upon approval for volume production, raw materials and components are processed, extruded, forged, cast, injected, machined, and assembled. It is important to note that a factory may not have all the production capabilities and may outsource certain processes to other suppliers.

Supplier Risks & Challenges:

Operators are not producing according to the production control plan
Supplier is under pressure to ship goods, turning a blind eye to defective components
Lack of quality staff to enforce quality control
Poor control of re-worked material/product
Mistakes made by temporary, untrained staff/operators
Communication breakdown when the supplier is under pressure

Pro QC’s Supplier Management Solutions:

First Article Inspection (FAI)
In-Process Inspection
Manufacturing Process Improvement
Quality/Root Cause Investigation (8D)
CAPA Verification
Order Expediting & Production Monitoring
End-Of-Line Testing & inspection

9. Packaging

Packaging and labeling of the goods are the last steps before shipping. The smallest aesthetic defect on the packaging or missing components often leads to customer returns, and a misplaced label often leads to compliance issues.

Supplier Risks & Challenges:

Products are poorly packaged
Human mistakes and missing components lead to customer returns
Wrong labeling leads to compliance issues and significant re-work

Pro QC’s Supplier Management Solutions:

Manufacturing Process Audit
Poka-Yoke Implementation
Pre-Shipment Inspection
End-Of-Line Testing & inspection

10. Shipping

Packaged products are being loaded by suppliers at the factory or warehouse into containers and shipped to their final destination.

Supplier Risks & Challenges:

Rough handling of goods during container loading by the factory or outsourced warehouse, leading to damaged product
Poor container loading leads to product damage during transit

Pro QC’s Supplier Management Solutions:

Container Loading Supervision
C-TPAT Audit

"Pro QC’s supplier management services help our clients manage their supplier risks in the various stages of their sourcing effort."

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Managing Cost Of Poor Quality (COPQ)

Cost of Poor Quality (COPQ) is defined as the costs associated with providing poor-quality products or services. There are internal and external COPQ elements as below:

  • Internal COPQ such as waste, scrap, labor, rework time, and administrative costs
  • External COPQ, which are typically extremely costly such as product recall, repair and servicing, warranty claims, product return, lawsuits, and marketing disasters

These quality risks and COPQ can be found in every stage of your supplier management journey, and the COPQ increases exponentially as it moves downstream. The earlier these risks are identified and proactively prevented, the less it will cost the company in the long run.

A few pre-emptive supplier quality audits and proactive supplier development initiatives will always outweigh the potential cost of product recalls, safety compliance lawsuits, and marketing PR disasters.

COPQ

Supplier quality audits and supplier development initiatives always outweigh the potential cost of product recalls, safety compliance lawsuits, and marketing PR disasters

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Supplier Development & Factory Improvement Services

Supplier audits, compliance assessments, process audits, and product inspections are all detection methods for Pro QC to identify risks and issues at the factory. The ultimate value Pro QC delivers is assisting our clients to resolve their problems and improve supplier competency. This effort will ultimately result in cost reductions and sustainable improvement.


Compliance improvement
PPAP follow up
CAPA Facilitation & Validation


Process improvement
Quality KPI improvement
CAPA Facilitation & Validation

11. Potential Supplier Development
Risks and issues are often identified when onboarding a new supplier or working with an existing one on a New Product Development (NPD) process. Changes, corrective and preventive actions (CAPA), and training are often required to proactively minimize the potential failure or to re-qualify the production line. This often requires intensive communications and QA follow-up between the buyer’s engineering team and the factory’s production team to ensure all risks are considered.

Supplier Risks & Challenges:

Suppliers made changes without notifying their clients
Suppliers lack the motivation or quality personnel to improve and implement system improvements
Suppliers claim to have implemented improvement actions but are not validated for effectiveness
Supplier actions only treat the symptoms of the problem rather than the root cause of the issues
Clients do not have enough resources to follow up and validate the implemented actions

Pro QC’s Supplier Management Solutions:

Quality, Social, and Ethical Compliance Improvement
PPAP Follow Up
Supplier CAPA Facilitation
Resident Supplier Quality Resourcing

12. Factory Continuous Improvement
On the one hand, many of the suppliers our clients work with are small to medium size factories without the world-class quality management system or practices in place. On the other hand, some of our clients with a more established factory are always looking to improve their performance so they can sell their products into a more stringent sector. Whether the continuous improvement is triggered through a complaint or a proactive initiative, it calls for objective input and unbiased monitoring to facilitate the transformation.

Supplier Risks & Challenges:

Suppliers lack the qualified quality personnel to drive changes or implement actions
There is a lack of internal audits and quality assessments at the factory
Factory assessments are biased
There is a lack of systematic continuous improvement at the factory
Lack of prioritization and objective monitoring of supplier’s improvement initiatives

Pro QC’s Supplier Management Solutions:

Quality System Improvement and Quality Tool Deployment
Targeted Quality KPI Improvement
Targeted Manufacturing Process Improvement
Establishing Effective Production Control Plan
Poka-Yoke Implementation
Implementing Continuous Improvement

Sustainable Supplier Improvement with Pro QC’s Supplier Development Team

Pro QC understands improvement projects are fluid and every situation and scenario requires a bespoke approach. Our Supplier Development team consists of a diversified mix of Six Sigma Black Belt quality experts, certified auditors, and supplier quality engineers who are product domain experts.

Pro QC is ready to deploy a suitable project team to support your effort in:

Defining an approach to your challenges or improvement initiatives
Defining actionable milestones
Following up with suppliers
Resolving issues and validating CAPA
Annual audits and monitoring improvement progress

All supplier management projects aim to achieve long-term and sustainable improvement.

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Ready to Improve Supplier Performance?

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Pro QC’s Core Value Proposition

The Supplier Development consulting services provided by Pro QC aim to help our client manage their supplier risk and reduce their Cost of Poor Quality. This ultimately translates into an improved profit margin and enhanced brand reputation.

To discuss how we can help you manage your suppliers and ensure that they meet all performance requirements, contact us today.

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