In this episode…
Renaud is joined by manufacturing industry experts Clive Greenwood and Max Phythian to discuss what it takes to drive your key suppliers to cut out defects. You’ll hear their opinions on the Cost Of Quality, the value of building a solid partnership with a supplier rather than having a purely transactional relationship, what buyers need to do in order to support this initiative with their suppliers, a number of really interesting real-world examples from their decades of working to improve quality and reduce defects in some the world’s largest companies, and more besides.
If you would benefit from improving the quality of components you get from suppliers, you’ll benefit from this episode.
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00:00 – Introduction. Introducing the topic and the two guests and their backgrounds.
02:03 – What does it take to get a key supplier to put in the work to go closer to zero defects? Max: What’s the feedback loop from the buyer to the supplier? Giving structured feedback that pushes for action and assuring the quality standard is clear is needed. Suppliers need to understand what a defect is and the impact on costs etc that defects cause. Clive: How does your supplier view your relationship? Partnership or simply supply? This dictates what actions can be taken. A partner wants to improve quality and pushes you to improve, too, as it increases your orders to them. Need to have synergy between the organizations with open and transparent dialogue. A supplier (not partner) will keep shipping parts etc as long as you keep paying them and if there is no feedback to tell them there is an issue then they can’t be blamed. The buyer needs to play their part and provide regular feedback on quality received.
09:39 – How to create the conditions required for better quality? Transactional relationships where suppliers are pushed to reduce prices is the opposite of the relationship needed. Clive: Suppliers often don’t know what the quality standard is (detailed AQL). They need to be told clearly otherwise they can’t be blamed for poor quality. He often sees that buyers haven’t provided this to their supplier when doing inspections. The more complex the component/assembly, the more interaction there needs to be between each party. In the past, Clive has even had an office in the supplier’s facility so he can work very closely with them.
Max: Engineering, production, and procurement need good internal communication between themselves and a solid understanding of the specification that they all buy into. For instance, procurement often misses how important components require good packaging and logistics, not the cheapest, and then they’re damaged during transit or need to be sorted on arrival as they weren’t beforehand. An example from his time at Toyota was if they received a defective part they would request the supplier send someone to them to sort through the parts and find the defectives and put them right in order that by experiencing this ‘pain’ the supplier would get a very clear understanding of the defect and could avoid it in future.
18:13 – How to speak with your supplier’s top management to spur the effort to go to zero defects? Clive: Inclusion is vital. Setting up an Obeya room (war room) is a critical first step as top management and the project staff can see all of the information laid out and can meet regularly to review progress, discuss issues, and celebrate successes. Corrective actions (open and closed) are a great thing to include on the wall. If it’s a component or a new project, key suppliers should be included in one of the meetings early on.
Max: 3-minute management. The room should have all of the project information on show so anyone can understand what is happening within three minutes without them needing to speak to anyone. Total transparency across production and quality should be there. Suppliers can be measured against each other and their KPI results can be compelling to push them to improve and be better than their peers.
Clive: If a business is not open and transparent he’d be worried about them. What are they trying to hide and why? Suppliers can’t be expected to read the buyer’s mind. They need to understand what’s required.
27:22 – About CoQ (cost of quality). How to change a supplier’s mindset that ‘better quality will require higher prices?’ Clive: Changing mindset about CTQ is key. Poor quality ultimately results in bankruptcy. Max: Worked in Automotive and Aerospace where quality failures can result in loss of life. The cost and impact of disruption can be a lot more than expected. A car gearbox that is defective is more than the cost of the component, it’s the cost of recalls, fixing each vehicle, etc. It’s huge for a business.
Clive: Falsifying documentation is also an issue (VW emissions scandal). Defects in documentation and test reports is endemic, but the EU MDR means that manufacturers or buyers can be prosecuted for failures of the product AND the documentation and this is likely to be used by more industries in the future.
33:13 – Since the 80s large organizations like Auto manufacturers improved quality a lot. What caused this (better communication, more awareness of CoQ, better incentives)? Clive: Compliance regulations that were customer-driven largely caused the improvement. Max: Results were a driver. Wearing a seatbelt was demonstrated to see lives, so manufacturers started to implement them as standard as well as there being legislation to include them.
35:38 – How should people in a less-regulated industry, such as general consumer goods, approach their suppliers about reducing defects quickly? Max: It comes down to where the buyer wants to pitch themselves. Do you have almost zero tolerance or accept a % of defects and is this clearly in your manufacturing agreement. Recognizing the cost of quality is important – is there a link between the manufacturer and service/warranty costs, for example? Clive: A planned cost reduction can be built-in throughout the product lifecycle and they can look at ways of reducing costs and not impacting quality. That’s the kind of transparency he is advocating.
42:38 – Let’s say you have a key supplier and their quality isn’t improving over the years even though they know your standard. What can be done to push them to improve? Stick or carrot? Clive: In some cases, some suppliers just won’t get there and you’ll need to find a better option. Max: Formulating a partnership is so important. If a supplier is simply a downstream supplier who provides a product for money and nothing more this sets you up for failure. They are running a business and you should consider setting up a supplier development program to help them become a partner and supplier who saves you money, be that with JIT, Kanbans, batch numbers, etc. Your supplier should be developed to align with your requirements and become a dependable part of your supply chain.
47:39 – Wrapping up
- Exploring How To Improve Supplier Performance [Podcast]
- Improving Supplier Performance is Buyers’ Biggest Hurdle
- A Good Way To Analyze Data to Drive Process Improvements
- How To Manage Chinese Suppliers based on Facts & Data
- 3 Key Process Improvement Tools You Need To Start Using: Flow Chart, FMEA, Control Plan
- Should You Avoid the Words “Defects” and “Defectives”?
- How many defects are still in a batch after an AQL inspection?
- What should factory operators do when defects are found?
- How To Switch To A Newer, Better Chinese Manufacturer? [eBook]
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