It is always relatively easy to control quality within one’s own organization, for obvious reasons. But manufacturing has become very complex, and most large manufacturers have to depend on vendors to provide raw materials or components. If satisfying the customer is the ultimate goal, then vendor development becomes critical. This is because quality is that standard of excellence which is mutually acceptable to the purchaser and the supplier. Hitherto, a buyer’s relationship with vendors was mostly adversarial and at best contractual. What is required today is teamwork based on mutual confidence and joint planning.
The Japanese have developed an excellent and innovative approach for dealing with vendors, which is in contrast to the traditional western approach. Vendor surveys as conducted in the West have not proved to be useful in predicting the future quality performance of vendors. The western emphasis has been on organization and documentation, whereas the Japanese approach has been on the capability of the process, the adequacy of process controls and training plus qualifications of the work force. The Japanese, in certain cases where technology upgradation is inevitable, have even arranged for finance from financial institutions for the vendors.
Areas of concentration
As a consequence, the western approach has tended to concentrate on conformance to procedural specifications rather than on product fitness for use. The emphasis is on the vendor’s general plan of approach, not on specific products or processes.
The Japanese team approach dovetails the vendors’ processes into those of the buyers. There is joint planning, assessment of quality standards, training of staff, to the extent that the vendor becomes a de facto partner in the business. The supplier helps to develop the product in tandem with the designer, offering his expertise and knowledge to solve the most difficult of problems. This helps him to become aware of the controls that will be necessary both within his own process and during assembly of the product. A situation develops where both the purchaser and the supplier are helping each other towards the supply of a product that will meet performance requirements.
If we acknowledge that the quality of products can be better controlled at the point of manufacture, it is essential that the purchasing staff grade and assess all their potential suppliers on a continuous basis. And then, whenever possible, measure their performance in compliance with the requirements of specifications and evaluate their quality control procedures.
Other countries like South Korea have adopted the Japanese approach very successfully. Modi Rubber, a leading tyre company, went through a detailed vendor survey by the South Koreans. The message that Modi Rubber got was that the Koreans were looking for something more than organization and documentation. They were looking for process capability and the extent of training of the work force, among other things.
Take the case of Otis Elevators (India), which exports elevators to countries like Thailand, Sri Lanka and the Philippines among others. To become a world-class exporter, the company made a serious effort through eight senior executives drawn from various Otis companies internationally. After a thorough analysis they came up with 200 recommendations which had to be implemented by Otis India if they were to become a world-class vendor/exporter. The comparison was made with other companies within the Otis group using similar technologies.
A fine skill
An Indian company that has successfully developed vendor upgradation into a fine art is Maruti Udyog Limited (MUL). MUL is associated with over 400 vendors who supply a variety of components. Of course, the fact that Maruti had to indigenise under its phased manufacturing programme, must have been the motivating factor. Their internal rating system keeps track of vendor performance with respect to the quality, quantity and delivery schedules. This has enabled them to classify the vendors into different categories ranging from good to poor.
A review of the various categories of vendors indicated tooling quality, proper raw material supply, process control, quality management system and a total productive management system as the focal areas that needed attention. However, in carrying out the specific upgradation exercises, it was found that a case-by-case approach was practical as each vendor had problems that required specific solutions based on the capability of the manufacturing processes.
The problems ranged from inadequate training of personnel and poor technology, to lack of process capability. MUL has gone to the extent of requesting financial institutions to come forward with innovative schemes to help vendors upgrade themselves.
From a supplier’s viewpoint, an ‘A’ category customer receives the vital attention of the upper management. Therefore, a small but thoroughly vetted list of approved suppliers is of greater importance to a purchaser than a much longer list of unknown suppliers. The latter can only hike the cost of inspection. This very important function is usually performed by the purchase manager, who has to constantly identify cheaper and alternative sources of new items. To establish confidence in the supplier, it would sometimes be necessary to work in conjunction with the quality assurance people.
However, this joint planning is not oblivious of the economics of the supplier. And the product supplied is, more often than not, cheaper than what could be purchased from another vendor. This is because the gains from higher quality are usually shared between buyer and vendor. Also, it is entirely feasible for the vendor to be an adversary on prices and a member of the team on quality.
The initial investment incurred by the buyer is usually recovered very soon through higher quality and lower costs. Clearly, the benefits accruing from vendor development are so great that manufacturers can only ignore this issue at their peril.
CREDITS: Suresh Lulla, Founder & Mentor, Qimpro Consultants Pvt. Ltd.