Benefits of Supplier Quality Management

Estimated reading time: 4 minutes

• Supplier quality management is the proactive and often collaborative approach to ensure that a supplier delivers goods and services of the highest quality.

• Quality is evaluated using predetermined specifications about the product and service itself, but it also encompasses other variables. These include the timeliness of delivery, quantities, and price.

The Process

The benefits of the supplier quality management process begin immediately after the organization recognizes the need to procure an item or service. Typically, there will be a cross-functional team that will be involved in the vendor selection process. They come up with the criteria to be used. Here is how a typical process would go:

The team sends requests for a formal quote to several potential suppliers with specifications on what they need. Once they evaluate the quotes and identify one potential supplier, the selection team plans a visit to the supplier’s premises. They conduct an on-site assessment of the supplier’s capacity. This could be in terms of volume or some other quality standard. In some industries, the supplier may need to have a certificate of system registration.

Besides a site visit, a client may also visit and consult with other clients that have been served with the same vendor to ask questions on the reliability and working methodologies of the vendor. Some industries also tend to have databases on company profiles in order to make vendor selection easy. Companies can look at those databases or engage consultants to help with selection as part of the quality control process.

Another important aspect of the supplier selection process is the evaluation of samples. Where samples do not already exist, the supplier may need to build a prototype.

The Benefits

The quality management process does not stop at the selection of vendors. It’s an ongoing process until a contract’s life comes to an end. Successful supplier quality management requires an unwavering dedication by both sides to discuss future plans. For instance, if the client organization, for instance, requires a bigger volume in the next financial year, they should communicate the same to the vendor in time. The vendor can assess whether they will have such capacity. The vendor may even decide to inject more capital into their business to maintain the long-term client-vendor relationship.

Here are some key benefits of supplier quality management.

Minimizing Risk

Supplier risk is a major concern in any procurement undertaking. When a business relies on a vendor for mission-critical inputs, vendor non-performance puts many things at risk. It represents a financial risk because you could end up losing clients. There is also reputational risk and legal risk too. Therefore, conducting prior and ongoing checks on the vendor’s internal processes is a major risk mitigation measure. A great example would be an organic food processing company conducting training for contracted farmers to ensure that they do not use unauthorized inputs and that the product is handled with the highest cleanliness standards during harvesting and delivery.

Improving Contract Management and Supplier Relationships

Such things as prior checks on the supplier’s capacity, past relationships with clients, industry certifications, and financial capacity make contract management much easier, even financially. Even when working with overseas companies, prior checks can be successfully conducted through third-party consultants. It would be very expensive to keep canceling contracts and going to litigation each time a vendor fails to deliver as per the contract specifications. It is much more beneficial when both parties establish long-term working goals and pursue them together during the contract’s life cycle.

Providing Data for Procurement Decisions

The supplier management process involves a collection of data on the profile and ongoing performance of vendors. This visibility leads to more informed and less risky future procurement decisions. For instance, if a vendor has been determined to be reliable and their quality is consistent, it’s possible to get into long-term contracts with them at predetermined item prices. Locking prices is essential for planning. Working only with reliable suppliers and using historical delivery data, a company can make more optimal inventory decisions.

It Fosters Sustainable Business

Conducting prequalification checks allows businesses to install conditions that can foster a more sustainable approach to business. A business may use its buying power to influence change in a certain sector. For instance, it may require a vendor to ensure safe working conditions and minimum wage for workers in places where such requirements do not exist in law or are not enforced.

It can also influence governance by requiring proper documentation of all correspondence and payments during the life of the contract. This might force a vendor who previously did not have proper licenses or conducted business on a cash basis to reorganize and start doing business properly.

Compliance Enforcement

In some countries, companies are duty bound in law to work only with vendors who maintain certain quality standards. This is the case mainly in the food and drug sectors where inputs are closely monitored. Working with numerous suppliers poses a challenge and increases the non-conformance risk. Checks protect the company from potential liability when regulators come knocking.

If your company needs to streamline the supplier quality management processes, you need the right software to do so. The right software allows for more streamlined communication with suppliers as well as the ability to compare different suppliers’ performances objectively. Reach out to ProcurePort for a consultation on how our e-procurement solutions can ease your quality management performance.