Supplier Approval And Assessment

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How to implement or improve a supplier approval and assessment program using a six sigma project management approach.

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Supplier Approval And Assessment

  1. 1. The Role of Supplier Approval and Assessment in the Creation of Competitive Supply Chains<br />David Warren, CPIM, CSCP May 26, 2010<br />
  2. 2. Competitive Supply Chains<br /><ul><li>Integrated Networks
  3. 3. Strategically leverage CRM and SRM</li></ul>CREATE<br /><ul><li>Demand enhancement
  4. 4. Reduced cost</li></li></ul><li>Steps for Creating a Customer-focused Business<br />Source: APICS,APICS Certified Supply Chain Professional™ Learning System, Chicago, Illinois: APICS, 2009<br />
  5. 5. Steps in Implementing SRM Strategy<br />Source: APICS,APICS Certified Supply Chain Professional™ Learning System, Chicago, Illinois: APICS, 2009<br />
  6. 6. Approval and Performance Assessment Tools &Criteria<br />
  7. 7. <ul><li>Approval
  8. 8. RFI/Questionnaire
  9. 9. Management and key contact information
  10. 10. Prerequisites
  11. 11. Operational standards and performance
  12. 12. Financial/Insurance/Legal
  13. 13. Ethical sourcing standards</li></li></ul><li>SUPPLIER SELF ASSESSMENT<br />(Page 1 of 2)<br />Self-assess-ment example(page 1 of 2)<br />or Stored There<br />Source: Amway, 2005<br />(copy included in handouts<br />
  14. 14. Self-assess-ment example(page 2 of 2)<br />Source: Amway, 2005<br />(copy included in handouts<br />
  15. 15. <ul><li>Approval – cont.
  16. 16. On-Site Evaluation/Qualification Checklist
  17. 17. Examine evidence for customer-focused strategy
  18. 18. Required Certification
  19. 19. Training
  20. 20. Control Plans
  21. 21. Lot Traceability
  22. 22. Corrective Actions</li></ul>Look at tab titled “Phase 3 Site Audit Verify” at http://www.wtg.ca/QS-9000%20Quality%20System%20Assessment.xls for a good example of a checklist<br />
  23. 23. <ul><li>Assessment
  24. 24. Periodic review of core information
  25. 25. Management and key contact information
  26. 26. Quality systems certification maintenance
  27. 27. Insurance
  28. 28. Legal
  29. 29. Financial Health</li></li></ul><li><ul><li>Altman’s Z-score
  30. 30. Uses five common business ratios
  31. 31. Greater than 70% accurate
  32. 32. Three models
  33. 33. Original – Public Manufacturer
  34. 34. Alternate 1 – Private Manufacturer
  35. 35. Alternate 2 – Private General Firm</li></li></ul><li><ul><li>Assessment – cont.
  36. 36. Performance measures
  37. 37. Perfect order
  38. 38. On time
  39. 39. Complete
  40. 40. Undamaged
  41. 41. Invoiced correctly
  42. 42. EDI-supported
  43. 43. Quality
  44. 44. Customer Service
  45. 45. Responsiveness</li></li></ul><li>Performance Metrics Examples<br />On-Time Shipping<br />Fill Rate<br />Source: Amway, 2010 (copy included in handouts)<br />
  46. 46. Performance Metrics Examples – (cont.)<br />Invoice Accuracy<br />Source: Amway, 2010 (copy included in handouts)<br />
  47. 47. <ul><li>Deficient performers
  48. 48. They know who they are
  49. 49. Your actions: based on risk
  50. 50. Containment – change supplier status
  51. 51. Contingency Plan
  52. 52. Improvement Plan</li></ul>Restore<br />Replace<br />Two-front War<br />
  53. 53. Implementing a Supplier Approval and Assessment Program(or revised program)<br />A Six Sigma approach to building continuous improvement into the process<br />
  54. 54. Why a Six Sigma Approach?<br />Comprehensive<br /><ul><li>Fits strategy for managing change
  55. 55. Stakeholder involvement</li></li></ul><li>A Six Sigma Project has Five Stages<br />D<br />M<br />A<br />I<br />C<br />nalyze<br />efine<br />easure<br />mprove<br />ontrol<br />
  56. 56. Define<br />Strategy alignment<br /><ul><li>Continuous Improvement (CI)
  57. 57. Quality Standard Certification
  58. 58. TQM
  59. 59. Lean
  60. 60. Six Sigma
  61. 61. HSE
  62. 62. “Musts”
  63. 63. “Wants”
  64. 64. Segregate requirements
  65. 65. SMART goals.</li></li></ul><li>Measure<br /><ul><li>Operations Performance Metrics
  66. 66. Enabling behaviors or cultural factors</li></li></ul><li>Measure<br /><ul><li>Operations Performance Metrics
  67. 67. On time delivery
  68. 68. Complete delivery
  69. 69. Quality of delivery
  70. 70. Responsiveness
  71. 71. Customer service call response time
  72. 72. Enabling behaviors or cultural factors
  73. 73. EDI/Automation
  74. 74. CI philosophy
  75. 75. 3rd party certification
  76. 76. Employee training
  77. 77. Financial health</li></li></ul><li>Measure<br />Challenges<br /><ul><li>Relevant to business
  78. 78. Best practices
  79. 79. Incorporate into routine
  80. 80. Subject matter experts</li></li></ul><li>Analyze<br /><ul><li>5 Whys
  81. 81. Brainstorming
  82. 82. Cause and Effect Diagram
  83. 83. Affinity Diagram
  84. 84. Flow Diagrams
  85. 85. Pareto Charts</li></li></ul><li>Improve<br /><ul><li>Failure Mode Effects Analysis (FMEA)
  86. 86. Change management
  87. 87. Pilot the new program
  88. 88. Key deliverables
  89. 89. Action plan with timeline
  90. 90. RACI responsibility matrix</li></li></ul><li>Control<br /><ul><li>Control Plan / SOP
  91. 91. Process Maps
  92. 92. Monitoring requirements
  93. 93. Defines business goals
  94. 94. Dashboards
  95. 95. Response / Contingency Plans
  96. 96. Defines the update process
  97. 97. Process owners take responsibility</li></li></ul><li>Six Sigma may not be the right approach for you if<br /><ul><li>Your company has not undertaken a type of CI initiative
  98. 98. No top-level support</li></ul>Little/no stakeholder participation or support<br />
  99. 99. Competitive supply chains are integrated networks<br /><ul><li>CRM and SRM leveraged
  100. 100. Enhance demand
  101. 101. Reduce cost</li></li></ul><li>Supplier approval and assessment is integral to SRM<br /><ul><li>Examples of criteria and tools
  102. 102. Approval
  103. 103. Assessment</li></li></ul><li>Six sigma project management<br /><ul><li>Thorough
  104. 104. Well-suited for Continuous Improvement environment
  105. 105. Stakeholders participate</li></li></ul><li>Resources<br />Vendor Audits Slideshow (by AnandSubramaniam)http://tinyurl.com/kodk8t<br />Vendor Management Slideshow (by AnandSubramaniam)http://tinyurl.com/l7z3r6<br />Here are a few examples of Supplier Rating Systems Flextronics - Powerpointhttp://www.flextronics.com/partners/supplierinfo/Files/SRS2_0SupplierInformation12-28-09.ppt#256,1,SRS Kohler http://kohler.com/corp/supplier/SQM_GPI_3009_Rev1_1_2008.pdfNorthrup Grumman https://oasis.northgrum.com/misc/SupplierScorecardGuidelines.pdf<br />Johnson & Johnson procurement policies<br />http://www.jnj.com/wps/wcm/connect/2078cc804f55640c9e6dbe1bb31559c7/procurement-policies-and-guidelines.pdf?MOD=AJPERES<br />Amway Supplier Scorecard Handout<br />http://supplier.amway.com/_layouts/files/north%20america/supply%20management/performance%20evaluation/2009%20Supplier%20Scorecard%20Handbook.pdf<br />

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