lecture quality management - wzl.rwth-aachen.de€¦ · the process of procurement of...

Quality Management – Prof. Schmitt Lecture 10

Quality Management in procurement L 10 © WZL/IPT

© WZL/Fraunhofer IPT

Lecture Quality Management10 Quality Management in Procurement

Prof. Dr.-Ing. Robert Schmitt



Page 2© WZL/Fraunhofer IPT

Contents

Introduction

Phases of the Procurement Process in the Process Chain

Phases of the Procurement Process– Guarantee, goodwill and liability– Derivation of procurement strategies– Dimensions of supplier selection– QM-agreements– Models of escalation– Continuous supplier assessment– First sample inspection– Feedback of field data

Perspective

Literature:Arnold, U.: Beschaffungsmanagement. Schäffer-Poeschel Verlag, Stuttgart; 1995Boutellier, R.: Basiswissen Beschaffung. Carl Hanser Verlag, München, 2000Eversheim, W.: Die Betriebshütte, Produktion und Management. Springer Verlag, Hamburg, 1997Eversheim, W.: Organisation in der Produktionstechnik, Band 1, Grundlagen. VDI Verlag, Düsseldorf; 1996Koppelmann, U.: Beschaffungsmarketing. Springer Verlag, 1995Locker, A. M.: Zusammenarbeit von F&E und Beschaffung: Konzept zur Gestaltung eines situativenund unternehmensspezifischen Kooperationsmanagements. Dissertation an der Universität St. Gallen, Hochschule für Rechts- und Sozialwissenschaften (HSG), 1997Lücker, M.: Qualitätsorientierte Beschaffung - Ein Beitrag zur Integration der Qualitätssicherung in den Beschaffungsprozess. Dissertation an der RWTH Aachen, Shaker Verlag, Aachen, 1992Masing, W.: Handbuch der Qualitätssicherung. Carl Hanser Verlag, München, 1988Malorny, C., u.a.: Brennpunkt TQM. Schäffer-Poeschel Verlag, 1994Pfeifer, T.: Qualitätsmanagement: Strategien, Methoden, Techniken. Hanser Verlag, München, Wien, 2001Rothery, B.: Der Leitfaden zur ISO 9000. Carl Hanser Verlag, München, Wien, 1994Seghezzi, H.D.: Integriertes Qualitätsmanagement - Das St. Gallener Konzept. Hanser Verlag, München; 1996Wittig, K.J.: Qualitätsmanagement in der Praxis. Teubner Verlag, Stuttgart; 1993

Pictures:MAN: http://www.man-mn.com/de/produkteundloesungen/Motoren_%26_Komponenten.jsp.Stand: 17.07.2006. VW: http://www.volkswagen.de/vwcms_publish/vwcms/master_public/virtualmaster/de3/modelle/golf/golf0/highlights/design.html. Stand: 17.07.2006.ZF: http://www.zf.com/defaultz.asp?id=2316&lang=2. Stand: 17.07.2006.




Callbacks – Caused by Defective Procured Parts

Year Producer Product Reason Callbacks

2007 Nokia Accumulator of mobile phones

Overheating and burning of

accumulators40 Mio.

2007 FordCars produced

between ´92 and 2003

Cruise controlunits catch fire 3.6 Mio

2005 DaimlerChrysler Voltage controllerfor generators

Voltage controllerfaulty 1.3 Mio.

2005 BoschBrake system, dynamo and

battery control

Accidents of DaimlerChrysler-automobiles due

to abrasion

1.3 Mio.

IntroductionThe fierce competition forces companies to concentrate more and more on what they are best in – their core business. This way, it is possible to offer competitive products on the global market further on. Due to the reduction of manufacturing depth, the quality of procured products and services has a rising influence on the overall product quality. Consequently, the companies’ success more and more depends on the quality (product- and process quality) of the supplier.This is illustrated in the figure with an example of the automobile industry. Up to 6.5 million wheels of the model Ford Explorer had to be called back, because they caused heavy accidents. Such callbacksnot only result in enormous costs, but also in a loss of image, which can only be compensated by an effort over a longer period of time.




Process chain

Phases of the Procurement Process in the Process Chain

Customerdriven

innovations

Technologydevelopment

Productdevelopment

Productmanufacuring

Orderprocessing

Product-utilisation

Suppliersearch

Supplierselection

Suppliercontraction

First sampleorder and inspection

Pilot seriesorder and inspection

Order of massproduction

Feedback of field data

Phases of the Procurement ProcessThe process of procurement of bought-in-parts is divided in supplier search, selection, contraction, firstsample order and inspection, pilot series order and inspection, order of mass production and feedbackof field data. By coorparatively developing a product with the supplier, he can already be integrated at an early stageof the product manufacturing process. This is possible already during the phase of technology development in order to support the companies´ own knowledge.For well-known technologies and new components the supplier is usually integrated during productdevelopment. The advantage is that the adaption between the supplier component and the owncomponent can already be done at an early stage.If new suppliers are needed for already developed products, they can also be added to the supplierpool during product manufacturing.As soon as the cooperation with the supplier is contractually ensured, this cooperation is assessedcontinuously to quantify the quality of the supplier.The difference between the first sample and the pilot series is that the pilot series should bemanufactured under condition of series-production, whereas this is not necessary for the first samples.




QM in the Procurement Process

Suppliersearch

Supplierselection

Suppliercontraction





Guarantee, goodwill and product liability1

Dimensions of supplierselection

3

First sample inspection 7

Procurement strategy

QM-agreements

2

4

Models of escalation5

Supplier assessment6

Influencing Factors of ProcurementTo manage the challenges of the increasing international procurement, companies have manypossibilities to ensure their procurement qualitatively. Depending on the needed bought-in-part and theexisting supplier there are different procurement strategies to reduce the procurement costs and to build up a high security against supply risks. Further tasks of Quality Management are continuous supplier assessment and checking stock receipt. They are suposed to ensure that the company is informed about defective bought-in-parts, so that an immediate reaction is possible (e.g. choosing a different supplier, if a supplier delivered too manydefective parts over a longer period of time).Within the civil law, there are aspects which back up the procurement to enable activities in conformitywith the law for both, supplier and receiver.




Guarantee, Goodwill and Product Liability

Liability foroffence

§ 823 BGB

Liabilityaccording to

PHG

EG-GuidelinesCE-SignLiability

forguarantee

Liabilityfrom

„default in performanceof contract“

ContractualNon-contractual

Liability by civil law

WarrantiesSupplier: He has to guarantee that the delivered goods fulfil the quality requirements [§§ 459; 633 BGB]. He is responsible for the accuracy in the sense of functionality, purpose suitability and the existence of guaranteed features.Customer: He is obliged to claim a defect immediately [§377 HGB]. Due to high level of loyalty to the customer, suppliers usually admit defects and lacks in quality within a legal period of 6 months, without being asked. Contract of guarantee: Is not regulated by the law and represents an optional service of the supplier. Due to strong customer orientation, the supplier makes an agreement with the customer about removing defects without being asked at the same time with the conclusion of the contract.Goodwill: Is far away from any contractual obligation. It is an effective tool in order to maintain and relieve customer relations.Product liability: Liability for damage, caused by the usage of defective products. The defectiveness refers to failures, which represent a lack of security. In case of disagreement the burden of proof for the accuracy is matter of the manufacturer.




The Elements of the Procurement Process

Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






Derivation of the Procurement Strategy - Portfolios

Procurement goods - portfolio(ABC-XYZ analysis)

Tech

nica

lcom

plex

ity(X

YZ-c

lass

ifica

tion)

High

Volume of procurement(ABC-classification)Low High

Leveragegoods

Standard goods

Strategic goodsBottleneck-goods

Procurement sources - portfolio

Supp

ly ri

sk

High

Influence on supplierLow High

Leverage sourcesStandard sources

Strategic sourcesBottleneck-sources

1. step:- Classification of procurement goods and sources

Derivation of Procurement StrategiesThe optimal procurement strategy depends on the complementary influencing factors technicalcomplexity & volume of procurement and supply risk & influence of the OEM on his supplier. The procurement-goods-portfolio is derived from the ABC-XYZ analysis of the merchandisemanagement. In merchandise management the goods are classified for their frequency or quality rating. The second classification (XYZ) refers to the fluctuations of the order of the products. The XYZ-analysis is carried out in respect of the technical complexity of the components.The technical complexity describes the inner (components) and outer (variants) diversity of productsand consequently affects the comlexity of the production process. The volume of procurement describes the total costs for the procurement of one brought-in part.The criterion supply risk considers the risk of delivery bottlenecks and supplier dependencies. Amongstothers it depends on the number of the available suppliers and the political situation of the procurementcountry. Finally the influence on the supplier describes degree of power the OEM possesses over his supplier.




Derivation of the Procurement Strategy

2. step:

Consolidation of theprocurement goods-and procurementsources-portfolios

Selection of suitableprocurement strategiesin dependence of theprocurement situation

Strategicgoods

Leveragegoods

Bottelneck-goods

Standardgoods

Standardsources

Bottleneck-sources

Leveragesources

Strategicsources

DisplacementProcuringefficiently

Securing theavailability

Using market potential,then cooperation in

partnership

Supplier management in partnership

Supplier development ordisplacement to strategic or

leverage sources

Depending on the values of the factors, suitable strategies can be derivated from a portfolio. Therefore the portfolios for the procurement sources and the procurement goods are combined withina matrix. Afterwards, a suitable supplier strategy for each area is determined.If strategic goods (high technical complexity and high purchase) are procured by bottleneck sources(high supply risk and little customer influence on supplier), a close cooperation is inevitalbe. That is, because many interfaces have to be synchronised within such a complex product developmentprocess. Furthermore, these goods are often an essential part of the end-product. Therefore, the riskfor a company to procure these parts from a bottleneck supplier is too high. In conclusion, it should beshifted to strategic or leverage suppliers instead. If simple and low cost parts are procured, a strategic partnership with suppliers would be to toocomplex. Because of the close cooperation a strategic supplier demands close communication und coordination. This form of cooperation does not offer many advantages to standard goods, but mainlycauses costs. Therefore, standard suppliers are preferred for such simple and low cost parts.




Procurement Strategy: Global SourcingProcurement on international markets fitsfor companies withalready existing global plants

Advantages in quality for customers

Disadvantages in quality for customers

Effectsfor suppliers

Procurement frominternational quality leaderspossible

Longer reaction time in caseof failures

More difficult communication

Different Q-comprehensionand training level

More damages in transit

Stronger cost competition

Loss of advantage of location

Source: VW

Depending on the company‘s objectives and markets, different procurement strategies are available.One of the strategies is global sourcing, where the procured parts are ordered from worldwidesuppliers. This strategy is primarily reasonable for major companies, which already have set up locations close to the suppliers. Thereby, an efficient supplier supprt is possible.




Procurement Strategy: Single & Local SourcingProcurement from fewsuppliers nearby thecompany is best ifflexibility is crucial




Reduction of transportationrisks (only Local Sourcing)

Marginal risk of communication problems

Creation of long-termbussiness connections

Dependence on suppliers

Low flexibility for changingsuppliers

Loss of technology know-how

Low bussiness competition

Close cooperation withcustomers

High purchase quantity

In contrast to Global Sourcing, Single and Local Sourcing only need to find a few suppliers nearby thecompany to procure from. The difference between Local and Single Sourcing is that Local Sourcingonly involves the suppliers that are close to the company, which is not necessary for Single Sourcing. On the other hand Single Sourcing means that only one single supplier is employed for one certain partor a part of a group. The balance of power between supplier and customer can enable a closecooperation between both partners.




Procurement Strategy: Forward SourcingIntegration of suppliersinto the product planningand product developmentis essential for complexproducts




Utilisation of supplier‘s know-how

Reduction of compatibleproblems with brought-in partsdue to early coordination

Higher innovation ability

Abandonment of corecompetence

Raising of possiblecompetition

High planning efforts

Very close cooperation withthe customer

Possibility for mutual productoptimisation

R & D

Source: MANSource: ZF

Forward Sourcing requires a strong commitment between supplier and customer. In this sourcing concept suppliers are integrated into the product development process at an early stage. Most of the time, already during product planning and development. This implicates that the supplier may introduce his know-how about the procured parts into the development. Possible failures can be prevented from the product planning.




Supply Strategy: Just-In-TimeJust-in-Time delivery of parts reduces stocks butrequires a high amount of coordination




Good basis for a continuousimprovement process

Reduction of stocks(especially important for high cost procured parts)

High dependence on suppliers

Production stops whendelivery chain fails

Long setup time

Little flexibilty due to high time pressure

JIT

Another sourcing concept does not relate to the number of supplies, but to the type of delivery.The Just-In-Time principle is a proven concept, which implies a delivery at an exact timing. Thisrequires a high degree of coordination and planning. This effort, however, pays off most of the time, since stocks can be reduced significantly by applying the JIT strategy. When parts are alwaysdelivered in time, they can be installed in the final product immediately, to that no storage in depots isneeded.The Just-in-Time supply is treated in detail in VDI standard 2512.




Supply Strategy: Just-In-Sequence

System partnersService partners

Delivery of procured partswithin the right sequenceat the right time permits a deep integration of suppliers




Very fast reaction time

Very slight chance of transportation damage

Highly reduced stocks

Very high depencene on suppliers

Production stops when supply chain fails

Very long setup time

Relocation of own factory to the OEM‘s site necessary

Higher reliability of turnover

Source: smart

Compared to the Just-In-Time strategy, Just-in-Sequence goes a bit further. In this model the procuredparts are not only delivered in time, they are also delivered in the correct order. Thus, the parts can beinset integrated into the final assembly line and synchronised with the production. This concept ismainly implemented by companies that feature products with a high variety of modifications, like carseats e.g.This requires, that the suppliers are located on the OEM‘s factory premises and that they are linked bya conveying system (railway, etc.). By this conveying system, the procured parts can be transferred to the OEM in correct sequence according to the production time-line.




The Elements of the Procurement Process

Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






Dimensions for Supplier SelectionQuality of the company

Quality assurance

Purchase Logistics

Development and production

• Willingness for cooperation• Situation of competition• Variety of products• Image• Ability to pay

• Ability for innovation• Manufacturing capacity

• Quality of products• Quality of process• Quality of deliveries(failure rate)

• Prices• Guarantee-services• Consulting and service

• Time to supply• Delivery reliability• Flexibility

6

Supplierselection

Supplier SelectionThe supplier evaluation always has the objective to select and/or promote the best suitable suppliers for the completion of the company’s aims and its quality policy. Thus, the evaluation of suppliers should happen on the basis of an integral individual company objective system.Due to the different criteria, that have to be judged and evaluated within the selection process, the supplier selection cannot be exclusively the task of the purchase department any longer. It should rather be done including the quality department.




Procedures to Select SupplierExample: Value benefit analysis

Criteria

K.O. criteria

QualityServicePriceDelivery reliabilityIntention forcooperationFlexibilityGuarantee

Supplier A

Know-HowTime of deliveryCredit standing

Supplier B Supplier C

v.benefit= Sg *x

Favoured criteria53

4

34

4

3

Weighting (gi)

i iKey xi :

3 – Poor fulfillment6 – Average fulfillment9 – High fulfillment

Key gi :2 – Low3 – Average4 – High5 – Very high

1 – Very low 0 – No fulfillment

iii Fulfilment (x)Fulfilment (x)Fulfilment (x)

78

9 90

3

00

3

3 333

003

84

Value benefit analysis

ABC analysis

Monetary value analysis

Checklist procedures

A systematic methodology is essential due to a large number of factors. The figure illustratesexemplarily the methodology of the value benefit analysis.Value benefit analysis- checklist method with weight of criteria and distinction of specificationsMonetary value method- specification of criteria including valuation standard and minimum parameter value- monetary evaluation of criteria for invited offers- selection of the supplier with the highest difference between price and accumulated monetary

valuesChecklist procedure- specification of criteria for the selection of suppliers- determination of the fulfilment of the citeria at possible suppliers- selection of the suppliers with the most fulfilmentsABC analysis- specification of criteria for the selection of suppliers- possible suppliers are sorted and assigned in classes- suppliers are classified according to their points of valuation for fulfilled criteria in A, B or C

categories




The elements of the procurement process

Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






QM Agreements

DefinitionAny agreements betweencustomer and supplierregarding:

Quality management

Quality level

QM-activities in advanceof production

Form of evidence forquality features

Quality assuranceduring the production

Certification and auditsof supplier

Identification of quality characteristics

Quality assurance duringthe phase of utilisation

Contents of QM agreements

Goals

Prevention on supplier‘sside

Reduction of mutipleinspections

Total cost reduction

Increase of trust

QM AgreementsQM agreements are intended as supplement for usual purchase and factory contracts, in order to make agreements for organisation procedures, QM agreements and legal positions together.The necessity for QM agreements is based on the desire of the companies to reduce the quality inspections of stock receipt as far as possible or even abandon all of them. Since the warranty claim according to §377 HGB is not valid in case of an ommitted complaint aboutdefects, backup and additional measures are necessary. These are supposed to guarantee the quality already in advance and during the manufacturing process. Among these backup and additional measures, the quality management arrangements, in particular, are obtained between supplier and customer. The aim is to harmonise the QM domains of both contracting parties as well as to organise QM arrangements preventively with the supplier.The relation of the trade partners and the mutual confidence are to be stabilised further on.





Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






Coverage of the Cooperation Through Models of Escalation

Normal range

Supplier visit

Problem elimination

Downgrading of the supplier

Relocation to other suppliers

Determination error cause

Definition of actions

Time-table

Realisation of actions

Failure

24h 5 days 9 days depending on action

Delay> 2 days

Delay> 5 days

Actionsinsufficient

Delay> 2 days

Delay> 7 days

Realisation insufficient

Delay> 3-5 days

Delay> 5-8 days

Steps of escalation

Delay> 2 days

Example for an escalation step model

Models of EscalationIn reality it is often recommended to use escalation step models in addition to contracts. In thesemodels consequences are defined (e.g. downgrading of the supplier assessment) for possible problemcases (e.g. delayed fault repair). This should encourage the supplier to handle aspects, which are not stated in the contract, as efficiently. To ensure this effect the escalation step models must be discussed and accepted at the beginning of the cooperation from both sides (supplier and customer). Right from the start, the supplier is aware of the consequences of possible failures (e.g. delays) and can prevent bad assessments by applyingsuitable prevention measures.





Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






Continuous supply

Continuous Supplier Assessment

of the valuationcriteria to suppliers

of the supplierfor data

collection

of the supplier(continuous)

to supplierabout evaluation required actions

Communication Qualification Evaluation Feedback Tracing

AimsSystematical improvement of

the product qualityPermanent inspection of the

ideal supplier line-up

Procedure

Informationen about compliance with actions

Amongstothers

delivery dateincominggoods/ quality control

76%

xInfo

rmat

ion

Continuous Supplier AssessmentWhen a company receives parts and materials from a supplier, it is important to audit the supplier‘squality of performance permanently and continuously. That is the only way to build up a solid basis forthe further development of the supplier, which finally should result in an improvement of the productquality. In addition, these supplies, who have an inadequate performance over a longer period of time, can be sorted out by constant measures.It is crucial to communicate evaluation criteria to the supplier in the very beginning of the mutualcooperation. In order to have an overview of the requirements at the early stage (mainly in QM-agreement) the supplier has to know the requirements and what he has to do to reach a good benchmark.Successful companies are setting up a feedback loop during the delivery of procured parts, where all evaluations are communicated directly to the respective supplier. Thereby the supplier receives a realtime transparency about his performance in order to optimise and work on the insufficiency by his own.




Continuous Supplier Assessment - Criteria

Procurement Quality Logistics Technology

Price Qualityperformance

Logisticsperformance

Actual technologyposition

Initiative for costreduction Quality system Logistics systems Compliance with

specific demands

Soft facts

Cooperation

Reclamationmanagement

LayersExample: Procurement

Price In comparison to target value

In comparison to other suppliers

Tendency

…

Price > 15% lowerthan target



…

30

25

10

Initiative for costreduction

…

100

80

65

…

85

15

Percent ofe.g.

Procurement

Percent ofe.g.

total costsPercent of

lowest layer

To measure the supplier performance the companies use different criteria. The most important criteriaare price, quality of goods (quality performance) and adherence to delivery dates (logistics performance). Different evaluation layers enable a weighting of the several parameters. Thus, the values of a suppliercan be correlated to those from the competitors for example. With this, not only the single state of theperformance can be seen, but also ist position within the environment. If e.g. some suppliers improvethe quality of one certain procured part, then the supplier, who cannot show the quality improvement, would get devaluated automatically. The aim is to find out the appropriate suppliers for the owncompany permanently.




Accepted

Continuous Supplier Assessment – Supplier Classification

Preferred Accepted Restricted Desource

Supplier is one of the best

Some minorproblems withpotential to be

solved

Major problems; activities should bedecreased with this

supplier

Repeated majorproblems; relocation

to other suppliersnecessary

100% - 95% 95% - 85% 85% - 75% < 75%

Calculation of Criteria

Overallpercentage

Supplier class

Supplier classes belong to the systematic assessment of the suppliers performance, where suppliersare classified in their measured performance. The best suppliers get a favoured treatment by a company, that means they are the first to receive an order as far as it fits their offered goods. If theseso called A-suppliers cannot supply because of lack of capacity, then the company has to proceed to the next level – the B-suppliers. C-suppliers are considered to be „limited“ because they show major problems within delivering(adherence to delivery dates, quality, etc.) for a longer period. Depending on the backup capacity of thecustomer the C-suppliers can be supported to realise improvements or they can be replaced by othersuppliers.Finally there are D-suppliers, which should be sorted out from the supplier pool. However there aresome cases in which a company still has to procure from such a D-supplier, for instance, if this supplieris in a monopoly position (unique technology or products).





Suppliersearch

Supplierselection

Suppliercontraction







3



QM-agreements

2

4






Inspection of the First Sample

DefinitionCheck for right size,Check for the right material,Check for the right function,

of the first samples regardingto each specification whichare defined in QM agreements.

Fundamentalrealisation:

New product

Reworked specifications

Reworked manufactoringconditions

First samplingby supplier

Generating a first sampling

report

First samplingby recipient

First sampling report

Pos. Feature Target value Actual value supplier Actual value cust. Release

1.) Outside-∅ 1,14 +/-0,01 1,14 mm 1,12 mm no2.) Inside-∅ 2,74 +/-0,03 2,75 mm 2,73 mm yes

Inspection and Release of the First SampleIn the context of first sampling, products which were produced for the first time on serial productionconditions undergo a full test.The objective is to identify and eliminate systematic failures before serial production starts. The procedure of the first sampling is to be determined with the suppliers in the QM-agreements.According to the customer the first sampling represents the first quality inspection, in which illegal deviations from agreed requirements can be detected before the first series supply.After release of the product both customer and supplier can refer to the determined quality standard of this sample.




Rating of the Inspection Strategy During Mass Production

Advantages Disadvantages

Defective products canbe detected with high probability

High test efforts

Supplier only feelsconditionally liable for thequality

Requirements

Large internal stock receipt departement:- Employees- Test equipment

In actual reality redundant inspections are conducted with the result of high inspection costsand unclear responsibilities

Incominginspection

Supplier Customer

Outgoinginspection

Incoming InspectionIn order to guarantee the quality of the final product, it is necessary to check the quality of the brought-in parts prior to assembly.For a long time, quality checks of incoming goods were usually done by the customer, because it just meets the requirements. This is absolutely suggestive for long distances of transportation which carry high risks of damaging goods.The significant disadvantage of this way of inspection for shipments with low damage risk due to transportation is, that, unnecessarily, multiple checks are performed: One check after the production of procured parts on the supplier‘s side and then again one check of incoming goods on the customer‘sside.




Rating of the Inspection Strategy During Mass Production

Advantges Conditions

Small inspection effortsreflect the philosphy of the Total Quality Management

Faster response time at supplier due to selftesting

Audits have to beconducted precisely

Clear assignment of theinspection responsibilityto the supplier

Requirements

Confidence in the quality abilty of the supplier

Incoming inspection has to be continued in a small scale

Inspection atsupplier‘s site

Supplier Customer

The shifting of responsibility for quality to the supplier reduces the total inspection costs and eliminates unclear responsibility relationships

Due to the facts of the stated problems, the dimension of incoming quality controls is currently underdiscussion and the necessity of inspections of incoming goods is even principally questioned.- The problem arises, for instance, from the manufacturing and assembly defined deliveries of the

system supplier. In order to avoid a standstill in the Just-in-Time production, it is necessary to havean in-time delivery with a stable quality.

- In result however, there is a conflict regarding §377 HGB (German Trade Law), which demands an immediate inspection of the shipment. Otherwise the customer may lose his right for liability claimsagainst the supplier.

- A way out is to shift the QC-activities right in the sphere of the supplier to avoid error.




Feedback of Field Data to Suppliers

Data interpretationService/

customer survey

Fragmentationto components

Develpoment

Production

Supplier

Procurement

QM

AimIncrease of the tranparency of failure-modes of the products in the

supply chainPool extension for optimisation of the suppliers

Optimisation

Feedback of Field DataThe feedback of the field data (data of the behaviour of products in the application to the suppliers) offer a further base for the product optimisation.All data pass through the customer‘s sections development, production, quality management and procurement. There, the data are to be filtered for components and single parts and broken down intothe particular suppliers. By the determination of reliability values for supplier components and their transmittal to the suppliers, they are informed about the weak points. The suitability of measures taken can be checked on thebasis of these data further on.




Step by Step Conception For Establishing a Customer-Supplier-Cooperation

Potential levels of cooperation

Reduction of redundant checks of incoming/outgoing goods bybuilding up confidence

Adjustment of informationexchange and reduction ofexaggerated claims for quality

Build up construction- and pro-cessing partnerships, abolish pro-cedures of changes

Optimisation of comprehensivebusiness processes

Integrated optimisation of thevalue adding chain from thecustomer to the subsupplier

X

Supplier Customer

Subsupplier System supplier OEM Customer

The tendency of the producing sector shifts to the effect that companies concentrate on their corecompetence and source out the remaining tasks to suppliers and service providers.The target is the optimisation of the success factors lead time, innovation, quality and costs.The procurement is involved in strategic decisions and brings in the aspects of the supplier. The aim of long-term relationships between supplier and customer is, to reduce costs and to improve performanceof the entire customer-supplier network.Especially the product development within the customer supplier network is important for theachievement of the aims mentioned above. Procurement works as a „Know-How-disc“, by purchasingboth materials and services and developing in association with the suppliers.The aim of such a cooperation is to increase the entire manufacture and development know-how. Theproduct development in the network is already characterised by a common development in the earlyphases. Employees from both companies operate in association and maintain a common projectmanagement.Prerequisite for a common product development is the agreement of both partners on strategic and on technological level.




Total Quality Management (TQM) of Procurement

Standards & guidelines

Aids & recommen-dations

for acting

Process orientation- Check of the quality of the business process- Reconciliation of processes between customer and supplier

Product orientation- Cooperation in the context of development of products

Cooperator / supplier orientation- Build up trustfulness by communication and frankness- Support of cooperation- Reconciliation of QM-system- Aspire to get win-win-situations

Continuous improvements- Support of suppliers instead of stock receipt checks- Organisation of benchmarking

TQM-philosophy

DM

t

PerspectiveThe new organisation principles of the strategic supply management support the procurementmanagement on the way to a Total Quality Management (TQM).TQM-philosophy in the procurement is the strategy of a purposeful, longterm based customer and supplier orientation.Thereby, supplier promotion represents the first step on the way to TQM in the procurement. The aimis to influence the quality capability of the supplier actively and to improve partnership cooperation. This is only possible by reduction of distrust at the interface between customer and supplier, resultedfrom one-sided profit-oriented thinking. Therefore, confidence is the base of the cooperation, whichmakes it possible for both the manufacturers and the suppliers to obtain positive synergies and usecompetition advantages.In the partnership cooperation performance and return should be in a balanced relation to each otherand chances and risks ought to be distributed between the partners equally. Both partners must profitequally from common improvements.

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