The late Philip Crosby argued that the performance standard that defines total quality is zero defects, which he defined as conformance to requirements. Taguchi further argues that any deviation from a target value carries with it some level of opportunity loss due to scrap, rework, and dissatisfied customers. We can operationalize the pursuit of zero defects, however defined, in several important ways. Each recognizes the importance of eliminating product and process variability.
A supplier audit evaluates quality systems and locations rather than individual products. Furthermore, audits involve suppliers directly in the quality improvement process. The process also helps suppliers make meaningful improvements with the buying company providing support as required, measures supplier quality improvement progress, and formally recognizes supplier quality achievement.
An effective supplier audit system has four elements:
- The process applies to internal and external suppliers, including internal divisions of the company. An internal supplier is an internal facility that supplies another facility with a product. Including internal suppliers demonstrates that the company practices and follows its own quality prescriptions.
- A trial audit of the supplier’s facility occurs before the official quality audit. The trial audit minimizes the possibility of surprise and gives the supplier a fair opportunity to prepare for the official audit.
- Audit processes rely on a cross-functional team to perform supplier audits. These teams provide a level of expertise that a single individual cannot provide.
- Suppliers receive a quantified numerical rating after the official audit. This provides immediate visibility about how the team rates a supplier’s quality systems.
- Step 1: Meet and Plan – Once a buying company identifies the suppliers that it plans to evaluate for certification, the company conducts a one-day overview meeting with the suppliers’ managers. A representative then meets with each targeted supplier to plan a schedule of initial contact.
- Step 2: The Supplier Self-Survey – Each supplier has an opportunity to perform a self-survey. The self-survey covers the same four sections as the formal audit (Step 5)—management, quality measurement, safety and training, and facilities. The supplier rates itself on each survey item on a scale of 0 to 10. During the self-survey, suppliers become aware of the buyer’s specific quality requirements.
- Step 3: Strategy Planning – The buyer and the supplier use the results of the self-survey to identify supplier strengths and weaknesses. Where necessary, the buyer will assign an employee to work directly with a supplier to assist in developing an improvement strategy. This individual lends personal support and guidance where required. The supplier must commit to improvement and not rely on buying personnel to achieve any necessary changes. The supplier initiates the necessary improvements to correct deficiencies during this phase of the process.
- Step 4: The Trial Audit – The support person assigned by the buyer conducts a trial audit once it appears that the supplier has improved in each deficiency area. The trial audit serves two purposes. First, it reveals the status of the supplier’s improvement effort. Second, it prepares the supplier for the formal audit conducted later by a cross-functional audit team.
- Step 5: The Formal Audit – The formal review process includes information from two separate sources. First, each buying company location that has direct contact with a supplier completes an evaluation on a 10-point scale. Internal users evaluate the supplier for material quality, delivery, paperwork, nonconformance resolution (i.e., how the supplier resolves problems), and sales and marketing service. The user evaluation applies to a specific supplier location. Every buying location that receives material from multiple supplier locations evaluates each of the supplier’s locations individually. The most comprehensive part of the certification process is the formal supplier audit. If the results of the trial audit indicate that a supplier is likely to achieve the minimum required for certification, the buying company schedules a formal audit. The company tries to conduct the formal audit within 90 days of the trial audit.To make the audit as objective as possible, the audit team uses a corporate supplier scorecard that includes items on quality management, quality measurement, safety and training, and facilities. The audit document defines, as precisely and concisely as possible, the meaning of each value so the audit team can accurately and fairly evaluate a supplier. The audit team records its score for each audit statement, adds all the item scores together, notes if the supplier meets all minimum scoring requirements, and makes a recommendation for either (a) certification, (b) certification after corrective action, or (c) no certification.
- Step 6: Recommendation Review An audit review committee evaluates the certification recommendation of the audit team before reaching a final decision. The committee also reviews the user evaluations completed during the review process. The review committee weighs the audit team’s score as 80% of the total rating and the user evaluation as 20% of the total. Supplier certification occurs at three levels. The initial level is a “Certified Supplier,” the middle level is a “Preferred Supplier,” and the top level is a “Supplier of Excellence.” Each level receives different forms of recognition and rewards.Information from all audits and user evaluations should be entered into an online system such as CAPSTONE Performance Visibility Suite, which offers a dashboard with convenient visibility of supply chain metrics.