Chapter 12 - Supplier Relationship

Supplier Relationship
Contents
• Introduction
• Supplier-Customer relationship
• Elements for Supplier Relationship
• Sourcing of Supplier
• Supplier Selection Criteria
• Supplier Certification
• Requirements for Supplier Partnership
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Introduction:
Deming’s one of 14 points:
Minimize total cost by working with only a single
supplier – end the practice of rewarding
business on the price tag alone.
The better the suppliers quality, the better the
manufacturers’ products are.
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One of the keys to obtaining high quality products
and services is for the customer to work with the
suppliers in an partnering atmosphere.
Partnering for mutual benefits is fundamental to total
quality.
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Partnering:
“Partnering is the creation of cooperative business

alliances between constituencies within an
organization and between an organization and its
suppliers and customers.
Business partnering occurs through a pooling of
resources in a trusting atmosphere focused on
continuous mutual improvement.”
--- Poirier and
Houser
Supplier-Customer relationship : Traditional Model
Customer
End
Supplier (Manuf-
Users
acturer)
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Supplier-Customer Relationship : TQM Model
Customer
(Manufacturer
)
Supplier User
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Key Elements for Supplier Relationship
(i) Long term commitment: Long-term commitment provides the
needed environment for both parties to work together.
(ii) Trust: Open and frequent communication avoids misdirection and
dispute while strengthening the relationship. Both parties become
mutually motivated when ‘win-win’ solutions are sought rather
than ‘win-lose’ solution.
(iii) Shared Vision: Employees of both parties should think and act for
common good.
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Sourcing of Supplier:
(i) Single source: For the customers, the advantages are:
complete accountability, supplier loyalty and a better end
product with less variability.
(ii) Multiple sources: The competition will result better
quality, lower costs and better service. However, in
practice, an adversarial relationship may result without
the claimed advantage.
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Supplier Selection:
Two questions to be answered to resolve “make or buy” decision
1. Does the organization have the technical knowledge to
produce the items internally? If not, should that
knowledge be developed?
2. Are there suppliers who specialize in providing the items?
If not, is the organization willing to develop such a
specialized supplier?
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Supplier Selection Criteria:
(i) The supplier understands and appreciates the management
philosophy of the organization.
(ii) The supplier has a stable management system.
(iii) The supplier can supply precisely those raw materials and
parts required by the purchaser, and those supplied meet the
quality specifications.
(iv) The supplier has the capability to produce the amount of
production needed or can attain that capability.
(v) The price is right and the delivery data can be met. Also the
supplier is easily accessible in terms of transportation and
communication.
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(vi) The supplier is sincere in implementing the contract
provisions.
(vii) The supplier has an effective quality system and
improvement program such as ISO 9000.
(viii) The supplier has a track record of customer satisfaction
and organization creditability.
Supplier Certification:
ASQ has developed the following criteria for certification
(i) The supplier shall have no product related lot rejection

for a significant period of time, say, one year.
(ii) The supplier shall have no non-product related
rejections within a stated period of time, say, 3 months.
(iii) The supplier shall have a fully documented quality
system, such as ISO 9000.
(iv) The supplier shall have successfully passed an on-site
system evaluation.
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(v) The supplier must conduct inspections and tests.
(vi) The supplier shall have the ability to provide timely
inspection and test data.
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Inspection of Supplier
(i) 100% inspection
(ii) Sampling
(iii) Audit
(iv) Identity check: Verify the item no. and the quantity for
accounting and inventory control.
Requirements for Supplier Partnership:
According to Poirier and Houser, the following are the
mandatory requirements:
(i) Supplier personnel should meet with buyer personnel beyond
those in purchasing office.
(ii) The price only approach to buyer-supply negotiation should be
eliminated.
(iii) Product features, quality, and delivery issues should also be part
of negotiation.
(iv)The quality of suppliers’ products should be guaranteed by the
suppliers’ quality process. The buyer should have no need to
inspect the suppliers products.
(v) The supplier should fully understand and be able to practice JIT.
The buyer should not need to maintain inventory.
(vi) Both parties should be capable of sharing information
electronically so that the relationship is not inhibited by
paperwork.
(vii) Top Management Commitment
(viii) Mutual Trust
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Supplier Relationship

“Partnering is the creation of cooperative business

(i) The supplier shall have no product related lot rejection

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