Quality Audit :By Aftab Malik & Ejaz Bhatti

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It is being presented on 22 May @ CASE ,Islamabad.
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Quality Audit :By Aftab Malik & Ejaz Bhatti

  1. 1. 1 QUALITY AUDIT PURCHASE PROCESS OF A PUBLIC DEPARTMENT
  2. 2. 2
  3. 3. 3 F-09-149 AFTAB SP-09-140 EJAZ OUR KOALITY TEAM
  4. 4. 4 Defining Quality Perfection Consistency Eliminating Waste Speed Of Delivery Compliance With Policies And Procedure Providing A Good, Usable Product Doing It Right The First Time Delighting Or Pleasing Costumers Total Customer Service And Satisfaction
  5. 5. 5  Large and Equipment Intensive Organization  Huge Variety of Non Standardized Equipment  High Stake Logistic Support Operations  Annual Budget Worth Billions Rs  Newly Implemented Procurement Management System (IESS)  Shortfalls Against Basic Quality Dimensions Introduction
  6. 6. 6 To carry out Quality Audit of the Purchasing Process of ABC Public Dept and suggest key improvements for quality purchase of spares at affordable prices reducing the administrative & logistic delays and focus on soft issues after analysis of various shortfalls Project Statement
  7. 7. 7 The scope of this case study will be limited to procurement of vehicle spares within country (local level) by a regional component of the National Level Organization Project Scope
  8. 8. 8  Process Flow  Sources of Procurement  Problems Being Faced  Methodology  Quality Audit and Analysis  Voice of the Stake Holders  Performance Statistics  Input by Various Professionals  Identification of Problem Areas  Core Issues  Recommendations & Conclusion How to Proceed
  9. 9. 9 Yes Start Demand on Store Ava l EndItems Issued NA Certificate Demand on Bulk Depot Purchase Process Delivery By Vendor & Inspection AvalItems Issued Yes No (Not Aval) No (Not Aval) Process Flow
  10. 10. 10 Sources Of Procurement  Govt Industries  Indigenous Manufacturers  OEM / OPM  Importers  Local Whole Sellers  Shopkeepers  Gen Order Suppliers (90 %) …….isn’t this alarming ????.isn’t this alarming ????
  11. 11. 11 Grey Areas  Diversified Equipment Type  Different Suppliers  Variation - Fatal for Quality
  12. 12. 12  Comprehensiveness of Documentation System  Good Ethical Practices  Flexible System  Fair Play & Justice  Ability to Reach Out Source  Simplicity in System  Effective Vendor Evaluation System  Vendor Pre Qualification  Supplier Relationship  Supplier Satisfaction  Speed of Delivery System  JIT  Price for Money Quality Indicators
  13. 13. 13  Quality Consciousness of Vendors  Maintainability of Logistic Stock  Storage Life  Inspection Methods  Training of HR  Assessment of Life Cycle  Guarantee / Warrantee  Supply Chain Mgmt  Payment Schedule  SOPs Availability  Empowerment  Ease of Demand Process  Vendor Data Base  Performance Based Vendor Assessment  Vendor Appraisals Quality Indicators
  14. 14. 14 Methodology, Quality Audit And Voice Of Stake Holders
  15. 15. 15 Methodology  Benchmarking (Organization following Best Practices)  Questionnaire  Interviews  Quality Audit  Average of 3 x Comparable Outfits  Comparison With KSB  Identification of Vital Issues  Analysis of Vital Issues; Input of Stakeholders, Professionals  Key Suggestions for Optimum Performance
  16. 16. 16 Quality Audit
  17. 17. 17 Quality Audit & Comparison Ser Category PUBLIC SECTOR KSB PUMPS Marks obtained Quality % Marks obtained Quality % 1 Documentation and Transparency 17 68% 20 80% 2 Practicality, Speed, Effectiveness 9 23% 34 85% 3 Supply Chain Mgmt 7 28% 22 88% 4 Vendor Mgmt 7 16% 29 64% 5 Quality 8 32% 21 84% 6 Cost Effectiveness 4 27% 13 87% 7 Training 5 33% 13 87% 8 Customer Focus 6 30% 17 85% 9 Soft Issues 4 10% 31 78%     67 27% 200 80%
  18. 18. 18 Comparison 0 10 20 30 40 50 60 70 80 90 Document Speed Supply Vendor Quality Cost Trg Customer Soft Public Private
  19. 19. 19 Voice Of The Stakeholders • SUPPLIERS • CUSTOMERS • EMPLOYEES
  20. 20. 20 Voice Of The Suppliers  Environment not conducive (Soft Issues) Uneven allotment of business Lack of respect in dealings, sitting place, refreshments Wastage of time, summon for meager issues Bureaucratic Culture Lack of info / specs on Tenders No proprietary / long term relation Delayed & unclean payments
  21. 21. 21 Voice Of Customer Reactive, Rather Than Proactive Waiting Room Delays Quality Of Spares / Qos
  22. 22. 22 Need Adequate Training Processing Delays Motivation Voice Of Employees
  23. 23. 23 Performance Statistics And Input By Professionals
  24. 24. 24 Rejection Rate Month Rejection % of Sample 1 Rejection % of Sample 2 Rejection % of Sample 3 Average % Sep-07 33 23 19 25 Oct-07 23 33 24 27 Nov-07 19 32 27 26 Dec-07 25 28 29 27 Jan-08 25 29 30 28 Feb-08 23 28 36 29 Mar-08 32 22 31 28 Apr-08 26 36 26 29 May-08 15 37 29 27 Jun-08 33 37 22 31 Total 254 305 273 277 Average 25 31 27 28
  25. 25. 25 Rejection Rates 0 5 10 15 20 25 30 35 Sep- 07 Oct- 07 Nov- 07 Dec- 07 Jan- 08 Feb- 08 Mar- 08 Apr- 08 May- 08 Jun- 08 Average % Average %
  26. 26. 26 Process Delays Demand Serial Prep Time (Days) Time Taken to get NA (Days) Purchase Process Delivery / Inspection Total Process Time 1 6 47 12 12 77 2 7 51 13 9 80 3 5 49 19 13 86 4 6 41 12 14 73 5 3 43 11 18 75 6 8 5 2 2 17 7 6 6 3 2 17 8 9 49 12 18 88 9 5 32 19 13 69 10 7 47 15 16 85 11 3 49 14 12 78 12 4 41 17 19 81 13 5 43 13 28 89 14 6 44 19 12 81 15 8 25 21 15 69 Total Days 1065 Average Days 71 Average Months 2.4
  27. 27. 27 Total Process Time 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total Process Time
  28. 28. 28 Performance Statistics • Rejection Rate - 28% (< 15%) • Timely Delivery - 50% (>85%) • Accuracy Of Order - 80% (>99%) • Delays In Processing - 2-3 Months (1 Wk) • Availability In Depots - 10% (>70%) • Customer Satisfaction - 50% (>80%) • Supplier Satisfaction - 50% (>70%) • Cost Effectiveness - 40% > Than Mkt Price • Durability/ Quality - 40% (90%) • Waste/ Dead Inventory - 40% (<15%)
  29. 29. 29 Input By Professionals • Various Interactive Sessions During QITC Course • Mr Kamran Moosa, CEO PIQC • Mr Shafqat Iqbal, Former Dir PNAC • Brig Iftikhar • Gen (R) Mian Salimuddin, CASE Faculty • HoDs Proc & QM KSB • Dir QM, NESCOM • Dir QA, AWC
  30. 30. 30 Identification Of Problem Areas And Core Issues
  31. 31. 31 Identified Problem Areas  Process Inefficiency  Soft & Ethical Aspects  Bad Vendor Management  Technical & Training Issues
  32. 32. 32 Process Inefficiency  Dependence On Non Availability Voucher From Depot  Lack Of IT Culture  Untrained Employees  Denial Of Repeat Orders / Proprietary  System Overload (Bulk Depot Non Functional)  Bulk Purchase Of Un Required Items At The End Of Fin Yr (Bar Chart)
  33. 33. 33 Utilization Trend Of Annual Budget 0 5 10 15 20 25 30 35 M onth Jul07 A ug 07 S ep 07 O ct07 N ov 07 D ec 07 Jan 08 Feb 08 M ar08 A pr08 M ay 08 Jun 08
  34. 34. 34 Soft / Ethical Aspects  Less Accountability (Bad Inventory Management/JIT)  Process Violation; Compromised Price/Quality  No Respect For Suppliers  Non Conducive Environment, Intricate Documentation & Payment Procedures  Diminishing Mutually Beneficial Relationship
  35. 35. 35 Bad Vendor Management  Variance In Price & Quality  Inefficient Tendering Process Without Mention Of Specs  Suppliers Pre-qualification  Old Suppliers Base; General Order Suppliers  No Effort To Reach Out Close To Actual Source
  36. 36. 36 Technical / Training  Old Vintage, Non Commercial Equipment  Less quality awareness of all stakeholders  Priority to economics only / lowest price
  37. 37. 37 Key Recommendations
  38. 38. 38 Recommendations  Selection Of Quality Vendors: OEM/OPM/Sole Distributors  Process Simplification & Speed: Remove False Customers, Inventory Mgmt Through IT  Training: Employees And Vendors  Quality Of Supplier: Less Inspection, Quality Contracts  Purchase Criteria: Quality Instead Of Lowest Price  Reduction Of Waste/ Dead Inventory  Forecasting  No Mandatory Consumption Of Budget  Accountability For Surplus/Dead Inventory  Reward System For On Performance  Customer Focus
  39. 39. 39 Vendor Management  Factors  Selection Of Quality Conscious Vendors  Concept Of Partnership And Trust  Performance Rating And Rewards  Respect For Vendors  Mutually Beneficial Relation Vendor Relationship Model (Vrm)
  40. 40. 40 VRMVRM SPEEDY CLEANSPEEDY CLEAN PAYMENTSPAYMENTS SUPPLIER FOCUS BUSINESS SECURITY CoQ TRAINING INFO & TEAM WORK RECOGNITION WIN WIN RELATIO N Vendor Relationship ModelVendor Relationship Model
  41. 41. 41 CONCLUSION A reduced variation, simplified processes and creation of an environment of trust and respect between all stakeholders can lead to a long-term and mutually beneficial relation; thereby exponentially improving the quality & speed .
  42. 42. 42
  43. 43. 43 43 If You Have Your Sight, You Are Blessed. If You Have Insight, You Are A Thousand Times Blessed
  44. 44. 44

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