Supplier Agreements: The Good, The Bad, and The Quality

We dive deep into the intricate relationship between supplier agreements and product quality, highlighting the essential aspects to consider when partnering with suppliers. Quality in design is not just a checkbox; it requires clear communication and collaboration.

• Exploring the challenges of designing custom components 
• Discussing the different types of supplier agreements 
• The importance of defining and measuring quality expectations 
• Navigating multiple vendors in the supply chain 
• Developing a quality plan for effective collaboration 

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You might like this episode, too: Supply Chain Management during Design, with Kevin Bailey (A Chat with Cross-Functional Experts) - Quality During Design

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ABOUT DIANNA
Dianna Deeney is a quality advocate for product development with over 25 years of experience in manufacturing. She is president of Deeney Enterprises, LLC, which helps organizations and people improve engineering design.

Transcript

Introduction to the Custom Component Challenge

Speaker 1 0:00

You've been working on this new product development project for a long time and you ended up having to design something that's custom and a little bit finicky. We don't like to do that if we don't have to, but sometimes it's necessary. So, designing something like that, we need to also find somebody to make it for us. We don't have the capability in-house, so whoever we partner with to make this finicky part or component for us, they need to be also able to make it. So it's affecting our design decisions. But huzzah, we found somebody. We found somebody willing to work with us to make this finicky component for this very important design, and we're all set to go. And then we try to put it through the system and we get a call from our supplier management friends saying we're sorry, you can't use them. They're not within our approved supplier list. So now what do you do? Let's talk more about supplier agreements, where they're good and where we may need to be a little extra careful.

Speaker 1 1:03

After this brief introduction, hello and welcome to Quality During Design, the place to use quality thinking to create products. Others love for less. I'm your host, diana Deeney. I'm a senior level quality professional and engineer with over 20 years of experience in manufacturing and design. I consult with businesses and coach individuals and how to apply quality during design to their processes. Listen in and then join us. Visit qualityduringdesigncom. So your company has an approved supplier list, but I've known from experience that it's not always a relationship for quality. I talked about having to design a custom component with some specific quality characteristics in it, and it is true that sometimes just finding somebody that says, yes, I can make that for you is a real challenge. Sometimes we can't get away with it. This episode is just assuming that we can't get away with doing anything else. We just need this component for our design. When we choose a supplier from the company's approved supplier list, that does mean that the company has some sort of relationship with them, but it might not be the kind of relationship that is right or appropriate for whatever you're doing with the supplier now right or appropriate for whatever you're doing with the supplier.

Speaker 1 2:28

Now. Let's talk about some of the common supplier agreements that we might be seeing when we're working in new product development. If we are thinking about our new product launches, we may have agreements in place with our suppliers that involve things like product availability making sure that we can order the product when we need it pricing or service obligations. If it's a service, here we're looking at the supplier, the distributor and even customer agreements to help us with our new product launch. If we're partnering with a supplier for our research and development projects, then the supplier agreement is going to have some different things in it. We're going to look at intellectual property rights, how the project is going to be funded and how we're going to collaborate with each other.

Speaker 1 3:14

Collaborative terms If we are making high volume products, then we may want to improve the efficiency and the visibility of where these products and components are and just improve our collaboration overall with our suppliers. So those supplier agreements may have more to do with pricing and delivery terms. And finally, if we are concerned about value, we may have procurement agreements so that we can achieve the maximum cost savings. Where we're negotiating pricing, we have volume discounts and we make sure that the products are within a certain compliance to a standard. All of these are common supplier agreements that we may see, and any one of them could be the type of agreement that your company has with that supplier. Usually, companies have an approved supplier for this particular kind of service or for this particular kind of product. However, these approved supplier lists are not always a relationship for the quality of our product, are not always a relationship for the quality of our product when it comes to checking on the service to see how it's performing, or doing incoming inspection, or evaluating field performance of the component as part of your system.

Speaker 1 4:31

It could all fall apart because of quality. Because we didn't work with our supplier to develop a common definition of quality. What is most important for this component to have high quality. How is the supplier going to measure it? How are you going to measure it? Or how are you going to check on the quality of the product that you're getting? So we not only need a common definition of what quality is, we also need to include how it's measured. And especially if we're engineers working on a new custom part and we finally found a supplier to supply it to us, this might be the kind of thing that's missing in our existing supplier agreements, or this is the kind of thing that we really want to make sure that we include in any new supplier agreements. I've seen it lots of times in different industries Quality just seems to get missed, maybe because when we're thinking about how things get done and when we need to communicate what information and how things are going to cost. Those are all things that we're thinking about up front and how things are going to cost. Those are all things that we're thinking about up front. But what we're defining as quality and how we're going to measure it sometimes is an afterthought, and that includes when we're working with suppliers and coming up with agreements.

Speaker 1 5:49

I was working with a team in new product development as a quality engineer and the team needed to develop a custom component and it was very particular about how it was plated. It was difficult to find a supplier to say, yes, we'll make this in the quantities that you need, because the quantities were kind of low and we were lucky to find out that the supplier that we picked was actually part of our approved supplier list. They were actually a catalog company that could also do some custom parts for us. So all of this is looking good. We found somebody that could make it. They said yes to our detailed specification. They were already in our system. We already had a supplier agreement with them. But then we were really concerned about how this thing was plated, because that really was most important. So we started going back and forth and talking with the supplier You're going to provide this part to us that's plated. How are you confirming the quality of the plating itself? And they said what do you mean? So that was a key indication right there that maybe we need to look at this a little bit more. So we did.

Speaker 1 7:03

What we found out is that our supplier or our vendor, the person we were going to be buying this custom part from really wasn't doing any of the manufacturing of it. They were like the middleman who knew people who knew other people who could do it. So if vendor A is the person that we're buying it from, they were actually buying it from vendor B and vendorB was doing some processing with it, but they were really purchasing it from vendor C and vendor D, and vendor D is the one who is actually providing the plating. So now we have a supply chain where the vendor who is controlling the most critical piece of our component is four vendors removed from whoever we're buying it from. We had a relationship with vendor A, but we did not have a relationship with vendor B. Or did we have a relationship with vendor C or D, with vendor B, or do we have a relationship with vendor C or D and when you don't have a relationship, you don't have any leverage or you're not working with people to be able to produce the part that you need.

Speaker 1 8:07

We were able to get in touch with and contact vendor D, who was doing the plating, and just talked with him about the quality standards that he uses. Can he play to the standard? And it was an unusual request. There was a lot more work to be done, but what did we end up doing? We ended up getting very specific on our part specification as far as what is critical, how it's to be processed, what we were doing to measure the quality of the critical parts and what we expected them to be able to provide a certificate about to maintain that they were doing the process the way they said they would be doing it. We used the specification, which is the thing that everybody was using to be able to make the product, to be able to really nail down what it is we needed and what was important.

Speaker 1 9:01

But then to actually put it in place and get people to talk and work out a system for how we're going to monitor the quality of this product, we used a quality plan. This quality plan helped us in a couple of ways. For one, it helped us to really think about how we were going to control the quality of this special component, considering that we had vendors A through D. Did we need to update or change our supplier agreement with our vendor A? Did we need to develop a closer relationship with vendor D or could we manage that through vendor A? Was it important that some of the vendors followed a quality management system? Was it important that they were ISO certified or was it enough that they could provide some evidence that they were following a standard? How were we going to evaluate the parts when they came in the door?

Speaker 1 9:55

I found that communicating with our vendors and our suppliers, with what it is we were going to be checking and how we're going to be checking it, was really important for the relationship With these sort of things. We don't want to be wishy-washy and we don't want to treat it like a gotcha experiment. We say we have these specifications and we think you should be able to meet them, but then we're going to be measuring you on other things to make sure that you're really good. We want to avoid those kind of situations. They're our partners in creating a good product, a product that's going to function well in the field and help people. So we want to treat them as a partner and share information and develop that relationship, and a quality plan was something that helped us to think through that relationship and how we're going to manage the quality of this product. Not only did the quality plan help us think through what we were going to do, it also helped communicate with other people down the line. It helped communicate with the supplier agreement people. It helped communicate things to the quality assurance people who were going to be taking it on when it reached production, and it also remained part of the design control documents as a history of what we did to develop this product.

Common Types of Supplier Agreements Explored

Speaker 1 11:15

So what's today's insight to action? We need to look beyond the availability of a supplier to be able to provide us with a component. Sometimes our supplier agreements are set up just for things like product availability and pricing and funding and delivery terms and they miss the quality aspects, or the quality aspects that are included in the existing agreements may be too generic for the part that you're designing, especially if you're designing a custom product with a critical to quality characteristic on it. It's important to manage the relationship with our suppliers not only with the upfront project planning and pricing, which are also very important, but we have to remember the quality characteristics and how we're going to manage those also, because it is a partnership. They need to know how to make the product or provide the service in a way that is going to meet our expectations and they need to know how we make the product or provide the service in a way that is going to meet our expectations and they need to know how we're going to be evaluating that product or service against those expectations. Then they'll be able to be great partners with us in quality during design.

Speaker 1 12:32

If you like these topics, please visit qualityduringdesigncom and sign up for the newsletter. Behind the scenes here I'm working on some big changes to the website which will affect the kind of information that is available for you. It'll be better organized and there'll be more of it. I look forward to sharing that with you in the upcoming months, but until then, please visit the site. There is still a lot to see. You can search through the podcast blog for other topics and there are some curated series of podcasts that focus in on one particular topic. This has been a production of Dini Enterprises. Thanks for listening.