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Integrated Approach to Supplier Quality Engineering
Firms can maximize efficiency and reduce waste associated with outsourced processes.
Saleem Ganiy, Medtronic
Most companies outsource products and services as a routine part of doing business efficiently and economically, and as a means of shedding non-core competencies. Additionally, with changing economic realities and competitive pressures, companies periodically re-balance their competencies to achieve a better allocation of resources, often through more outsourcing and occasionally by insourcing. While the resulting net demand for outsourcing is better understood and driven from a business point of view, the underlying technical elements—traditionally falling on functions such as supplier quality engineering—generally are executed poorly.
Supplier quality engineers play a critical role in supplier management and often are pivotal in executing tasks that support their counterparts in product development and operations to deliver the results baked into operating plans and budgets. With the focus on manufacturing outsourcing as a strategy for success since the early 1990s, supplier quality engineers increasingly are called on to deliver results that enhance the success of others dependant on outside sources of products and services.
However, for the most part, supplier quality engineers are overlooked in organizational planning activities or simply buried under other functions within a firm’s quality assurance or operations departments. To make matters worse, some firms fill positions in supplier quality engineering for tactical reasons, such as to support immediate needs in operations, or to plug deficiencies in their quality system identified through internal or external audits. This is not a result of deep convictions or strategic planning. The result is that supplier quality engineering is not implemented very effectively and, lacking a strategic compass, relegated to non-value-added and reactive work, increasing the very risks they are expected to mitigate.
This article presents a model for supplier management that shows how companies that rely on manufacturing outsourcing can be more successful by strategically and fully integrating supplier quality engineers into their organizations alongside research and development and operations.
Supplier Quality Roles
Supplier quality engineers are used in a variety of roles to support the outsourcing of manufactured goods and technical services. For example, they are instrumental in ensuring supply integrity through prime and alternate source qualifications or mitigating risks in existing ones. Sometimes, they play a key, albeit indirect, role in assuring just-in-time deliveries through Lean manufacturing and defect reduction activities, relying on their technical and problem-solving skills to reduce waste. Further, they are deployed to assist in the qualification of lower-cost suppliers, often located in distant places, using their skills at bridging cultural and relationship sensitivities. Despite decreasing costs, the focus on quality relies on engineers’ skills at improving supplier performance through statistical analysis and continuous improvement activities. In general, these roles fall into four main areas, forming the basis of subsequent discussions:
• Product development
• Manufacturing
• Supply base rationalization
• Supplier integration
Product Development
The role of supplier quality engineers in product development is the most strategic part of their function and the most neglected. Supplier quality engineers traditionally are left out of the product development process except in the later phases, when they are tasked with procedural requirements—ranging from first article inspections, resolving measurement issues, issuing supplier corrective actions, and filling out lengthy qualification checklists to other tactical tasks routinely assigned to them. However, due to their knowledge and exposure to a broad range of manufacturing technologies and supplier capabilities in production environments, the role of supplier quality engineers in product development must begin when design concepts are being negotiated. These traditional roles they are asked to play don’t add real value since they are generally after-the-fact activities, after the most critical decisions on the designs are completed and the errors baked in. These activities simply ensure that poor design choices are now mass producible.
On the other hand, most product development engineers spend their working lives in front of highly sophisticated CAD systems, analyzing choices through finite element and simulation exercises, and carry out tests in labs or controlled production runs in their own factories. Such exercises allow them to determine how well their designs may work within constraints. Supplier quality engineers, for their part, spend most of their time interacting with the manufacturing world of internal factories and suppliers, often solving problems. This exposure makes them ideal team members who can provide valuable input on the manufacture of designs and means to avoid those problems.
As an example, supplier quality engineers involved early in the product development phase can be instrumental in the selection of the best suppliers for the technologies under consideration, provide accurate assessments of the capabilities and limitations of new candidate suppliers or technologies, give valuable input on design tolerances and manufacturing limits, as well as initiate activities related to process development and qualification of the external processes. The earlier supplier quality engineers are involved in these activities, the more likely they will be an integral part of the decisions made and the less likely that choices of suppliers or design parameters devoid of this valuable input would be made. Supplier quality engineers have a vested interest in these outcomes since they have to live with the results long after design engineers have moved on to newer projects.
In short, while product development engineers are focused on making customers happy with the functionality and utility of their designs, supplier quality engineers and manufacturing engineers are better suited to driving effective solutions to manufacture those designs with the least cost of ownership burden.
Understanding the Manufacturing Process
Manufacturing engineers develop and own the internal processes that make the products designed by their counterparts in product development. In the current environment, many of the constituent parts of these products are made by external suppliers, whose manufacturing processes and limitations are understood by engineers only at a cursory level given the varied locations of most suppliers and internal demands for their skills.
This provides another strategic opportunity for supplier quality engineers to support the development of robust and efficient processes at the suppliers. Unfortunately, most companies, being tactically inclined with regard to supplier management, focus their attention on capability indices so that they can close out qualification reports, paying scant attention to the robustness and efficiencies of the processes implemented. Non-robust processes, due to the lack of proper modeling and optimization1 of the process parameters, eventually settle into their true longer-term patterns of creating waste. This can be compounded by inefficient processes, not Lean by design, also contributing to waste. This causes internal process development teams to unwittingly adapt to components that come from poorly designed processes, making waste an integral part of the finished products.
In the long run, these poor strategies lead to excessive demand on supplier quality engineers to reactively support production lines, resolving the numerous day-to-day issues related to supplied materials, and later attempts to improve non-robust designs and processes by a retrograde application of Lean and Six Sigma principles. However, one benefit of this wasteful use of engineering resources is the maturing of supplier quality engineers in their problem-solving skills and process knowledge, useful for their potential strategic roles in product and process development. A good supplier quality engineer has to be foremost a good technical problem solver well versed in manufacturing technologies.
Supply Base Rationalization
In most companies, product development and manufacturing are generally separate functions under separate leadership. The quality group is expected to be independent of both these functions. Bridging this divide is made difficult as each function develops its own, often competitive, silo. To overcome this gap effectively would require a fundamental change in philosophy akin to the “Toyota Way,” which resulted in the famous Toyota Production System (TPS). While U.S. automotive giants have tried to emulate TPS, their successes have been limited as they brought in the tools of TPS but left the philosophy and heart, or the “humanity,” behind.2
While such a fundamental change may become more viable in the future, mistakes currently perpetuated as a result have to be dealt with more effectively than they are today. For example, if product development engineers engage with incapable suppliers or bring on new suppliers without due diligence performed on supplier selection, these choices become part of the issues that have to be dealt with in the future. On the manufacturing side,
if supplier quality engineers don’t engage early with the suppliers to develop robust and efficient processes, poor quality components may fill the production pipelines requiring their constant attention, absorbing useful resources in wasteful activities.
Supply base rationalization is the process of cleaning up the mistakes made in the past resulting in too many wrong suppliers and too little supplier accountability. It is a rationalizing process, carried out through a cross-functional effort between the technical and business functions, which bridges the gap between doing things right in the first place and the mistakes created by not having a sensible supplier management strategy in place. It also becomes a necessary ongoing bridge between product development and the day-to-day demands of operations. The activities within this function, which initially is to clean up past errors and set future strategies, subsequently mature to one of managing supplier behaviors and relationships in a closed-loop process, and integrating the suppliers in the product development process.
Supplier Integration
At Toyota, external suppliers are fully integrated into the product development process, and this partnership has progressed to a level of maturity where it is now essential for a supplier to agree to provide “resident engineers” to Toyota and their affiliated companies.3 These resident engineers work concurrently with their respective development teams on the design and manufacturing technologies required to bring the intended product to the marketplace.
For many firms, however, suppliers are given a set of sketches, drawings or CAD files, depending on the stage of internal development, and simply asked to provide a quote to manufacture the part or assembly. They are not asked often to provide input on the designs, and even less frequently told of the intended functions. Such exchanges are held back out of fear that the supplier may pass on information related to top-secret projects to competitors. This is characteristic of customer-supplier relationships that are underdeveloped.
In such relationships, suppliers assume the customer already has determined what is best for the intended function and performance and simply want the product exactly as defined, regardless of cost variances, to meet timelines. In such an approach, suppliers eventually go into their own silos with the provided information to create the molds, dies, tools and fixtures to manufacture the intended part or assembly. The output often is not optimal as a wasteful iteration of trials, errors and rework efforts attempt to make up for the lost opportunity to design robustly with practical input from the supplier and other affected functions.
Therefore, a critical function of supplier quality engineers and supply chain personnel is to select and nurture relationships with key suppliers to a degree of mutual trust, so that their input is sought and incorporated at an early stage while the product design is still fluid.
An Integrated Approach to Supplier Management
While we have discussed four key roles that supplier quality engineers can play in product development, manufacturing, relationship management and supplier integration, the critical skills needed are related to their ability to cohesively bridge all these activities and bring value to the entire organization.
In the integrated approach to supplier management, supplier quality engineers have to be well versed and play a key role in all of these four areas. In this approach, R&D selects suppliers that are objectively “rationalized,” and manufacturing efforts extend into the supplier’s own processes through supplier quality engineering to ensure they are designed robustly and not just validated on paper. This connectivity is shown in a simplified graph in Figure 1.
At the global level, supplier strategies should be connected and consistent with companywide supplier initiates (such as a drive toward applying Lean manufacturing and Six Sigma practices at external suppliers) or customer focused requirements.
Division-level supplier initiatives should, in turn, be in the spirit of those developed at a higher strategic level, similar to a company’s mission statement, but tailored to apply to the particular needs of that division.
These dependencies are well known, understood and written about, and, therefore, not the subject of this discussion.
In the integrated approach to supplier management, the focus is on creating a structure at the
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fundamental levels of product development and operational units dependent upon external suppliers, where all the current mistakes in supplier management take place. In this approach, it is necessary that supplier initiatives at the divisional and plant levels make business sense and are not simply sounding boards for the initiatives that originate from above.
At the core of this integrated structure is what we have already termed supply base rationalization, a cross-functional effort involving business and technical personnel to deal with the realities presented by an existing supply base and jointly forging divisional strategies that are driven by accurate assessments of current and future needs.
The engine of this core is real-time supplier performance data that is available within each function during the normal course of doing business. This objective data has to be evaluated, rationalized, accurately reduced to meaningful metrics and used to drive divisional initiatives affecting both product development and manufacturing. In this approach, data not only links the functions together (see Figure 1), but also crosses the cultural divide or functional silos with greater ease, facilitating the integration and value added by supplier quality engineering.
Metrics of Supplier Performance
Within operations, we collect data on the quality of products supplied as well as the level of service that is being currently provided. For example, data is collected when parts arrive (accuracy of paperwork, count, packaging integrity, promised vs. actual delivery dates), during incoming inspection (dimensional, visual, functional data), and during manufacturing (form, fit and functionality of parts).
This data can be used to generate a measure of performance of the existing supply base and compared against interim goals if no long-term strategies have been established yet. Such scorecards
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Similarly, within product development, supplier metrics are available through their project performance against mutually agreed timelines, availability of robust industrial and engineering support, depth of technical skills, robustness of tool and fixture designs, prototyping capabilities and pricing.
However, unlike data available in manufacturing, which come from relatively stable processes and are directly measurable, many of the characteristics of supplier behavior in R&D projects are not easy to measure given the complex and dynamic natureof product development activities. Recognizing this complexity, it also is important to differentiate and select the correct parameters; some describing journeys (e.g., processes), while others defining end results (e.g., prototype quality).
As an example, while poorly designed tooling may generate failures and cause delays that are measurable, the contributions of weaknesses in the complex tool design process (defining the journey) that led to this situation is the critical factor affecting the project, and which may continue to plague every project with that supplier until corrected.
In this instant, it is important to rate the supplier on its tool design and fabrication capabilities, rather than the failures themselves. Similarly, timeline misses could be related to the supplier not having the right resources available to the project, perhaps reflective of a flawed hiring or training process, rather than not having enough resources.
The primary task of supply base rationalization is to assimilate all available performance measures of supplier behavior and formulate and execute strategies that steer new products under development while meeting operational needs.
This continuous analysis of real-time data will lead to the conclusion that some suppliers need to be targeted for continuous improvement and training activities, some recognized and promoted within the organization for increased business, and some others set up for disengagement or risk mitigation actions.
Divisional strategies that prefer operational priorities (e.g., lower costs) to product development needs are bound to fail.
In the integrated approach, both needs must be simultaneously optimized by setting reasonable goals for supplier performance within each function that are honestly debated and agreed upon.
The ultimate goal of supplier quality engineers in the integrated approach is to progressively shift their efforts from a “tactical” one, where they currently spend enormous time dealing with day-to-day manufacturing issues, to a more strategic one, where they focus most of their efforts on product development support to prevent those problems in the first place. They provide the human link to the data that connects the functions together and they must play a critical role in the rationalization function.
Some examples of the supplier quality engineer activities within each function are noted in Figure 2, and each company and division should choose those that make the most sense to the business. By applying such an objective and rational approach to managing suppliers, companies can reduce their dependence on poor suppliers, reduce waste associated with a myopic approach to product and process development, and use an integrated approach to supplier quality engineering that relies on a closed loop, data driven and value-added partnership with suppliers.
References:
1. Through statistical techniques, such as the Taguchi method.
2. The Toyota Way, by Jeffrey Liker, McGraw-Hill, 2004, pages 10-13.
3. The Toyota Product Development Process, by Jeffrey Liker and James Morgan, McGraw-Hill, 2006, pages 193-194.
