LNS Research provides executives a platform for accessing unbiased research and benchmark data to improve business performance
The LNS Research Blog provides an informal environment for analysts to share thoughts and insights directly with our community on a range of technology and business topics
Because research has shown that the earlier a defect or nonconformance is caught the less expensive it will be in the long-run, it’s critical that end-to-end quality capabilities extend from suppliers all the way through service and everything in between. This is especially true in discrete manufacturing industries such as electronics or high-tech, where the ability to balance quality and product complexity is often the source of a competitive advantage.
To achieve this balance, one area market-leaders are investing in is supplier quality management (SQM). SQM capabilities that enable communication and collaboration with design and manufacturing are central to reducing the instance of a defective part or component from making its way into the supply chain in the first place. We’ve seen that companies with effective SQM capabilities tend to perform better in key quality metrics, which are often indicative of financial performance.
With the use of benchmark data from LNS’s 2012-2013 Quality Management Survey, this post aims to highlight several trends in and key functionalities for managing the quality of suppliers.
Ensuring that your supplier relationship reaches its full potential requires not only a high level of visibility, but also the ability to interact and understand the risk of engaging in business with upstream partners. There are three important functionalities to note, each of which are increasingly being offered as part of the larger enterprise quality management software (EQMS) portfolio.
With the rise of EQMS, the global adoption of scorecards and portals is gaining momentum. A great example of this is Intel’s web-based Supplier Quality Portal. Front and center, a quote from the company’s Director of Materials Quality and Reliability supports this notion: “Our mission is 100% of materials and services used by Intel and its customers will function as expected at the lowest total cost. Clear and high quality communication between suppliers and Intel is one of the key items to achieve this mission.”
Although there are a number of metrics (cost of quality, OEE, first pass yield) that experience improvements when supplier quality technologies are used, we will hone in on one specific to discrete manufacturing industries: new product introductions (NPI). In the fast-paced world of, for instance, consumer electronics, quick and effective NPI cycles are often required for survival. With reliance on global suppliers to battle ever-tightening operating margins, supplier portals are making a significant difference.
The data point below was taken from LNS’s Quality Management Survey, cross-analyzing the adoption of a web-based portal that streamlines supplier quality data with NPI performance. As shown, companies that currently had these automated data collection capabilities outperformed others in successful NPIs with a median performance of 94%, as compared to 70% performance for those without the capability. For discrete manufacturing companies, this data point alone is enough to warrant an investment.
Because supplier portals automate and enhance many of the traditionally manual processes that impact NPI, the data point shown in the box plot above makes sense. Rather than having to rely on email communications and Excel spreadsheets, companies using these portals have more visibility into delivery times, production status, and inventory control.
Strengthening the argument, the automation aspects of supplier portals are only part of the equation. Although the data point above depicts the automation capabilities of portals, it’s important to remember that it is a two-way street. There is also the capability to communicate with suppliers to share changes to best practices, standards, quality specifications, and so on.
For a more complete discussion of the positive impacts that supplier quality management can have on quality metrics and operational performance, join LNS’s President and Principal Analyst, Matthew Littlefield, in a webcast this Thursday, June 6, at 2p.m. EST. He will highlight which are the right quality metrics to measure and provide a roadmap for making dramatic improvements in performance.
You might also be interested in:
Top 6 Challenges in Electronics Manufacturing
Reducing the Cost of Quality in Electronics Manufacturing
Overall Equipment Effectiveness: Benchmark Data by Industry
Allowed tags: <a> link, <b> bold, <i> italics
© 2014 matthewlittlefield.com