Tuesday, November 16, 2010
Supplier Relationships - Today’s systems almost always involve suppliers for items varying from commodity parts to critical subsystems. Managing suppliers, particularly those supplying critical components or subsystems, is a major project activity and usually involves engineers as well as project management and sometimes enterprise management. It is sometimes ok to leave the management of non-critical commodity items to procurement personnel but critical items must involve engineers and project managers.
There are several ways to involve suppliers including strategic alliances, partnering relationships or simply contact by project or procurement personnel. Strategic alliances are for a longer term than one project; partnering relationships may be for one project or for a longer term as well. It is not the intent of this work to describe the business reasons for selecting an approach to involving suppliers but to describe why and how supplier relations should be part of project planning.
The success of modern methods like concurrent product and process development depends on involving suppliers early in the project so that the team has benefit of the supplier’s capabilities in making design decisions. The objective should be to develop qualified suppliers, not just suppliers whose product data sheets offer desirable features. This means it is necessary to evaluate a supplier’s technology, product quality and reliability, manufacturing and quality assurance processes and cost competitiveness. It is not unusual to find that a supplier has the desired product with the best technologies, but is lacking in key manufacturing or quality assurance processes. This can be an opportunity for a strategic alliance or partnering relationship in which process development help is offered to the supplier in return for exclusive or preferential access to the supplier’s product or technology. Thus finding and qualifying key suppliers must be an ongoing process because there just isn’t sufficient time once a development program is underway. Postponing or ignoring the need to qualify suppliers ahead of time usually results in having to send engineers to the supplier to resolve a crisis caused by failure to deliver on time or with the required quality. It’s much more expensive to fix supplier problems when the problems are holding up an entire project than it is to qualify the supplier before the project starts or at least before the supplier begins manufacturing the required items or implementing planned services.
Having prequalified suppliers helps reduce the number and the size of the documents related to suppliers that are commonly called source control documents (SCD’s). An example explains this best. One manager on a schedule critical project with a dozen suppliers found that by accepting the supplier’s quality assurance processes the size of the SCD’s were reduced from typically 50 pages to typically 10 pages; a fivefold reduction in effort for this documentation task. This manager also found that requiring the engineering team to design to their supplier’s standard part specifications eliminated the need for special SCD’s for these parts and resulted in a factor of six reduction in SCD’s needed for this example project. Thus the combination of accepting the supplier’s quality assurance processes and designing to standard part specifications reduced the number of pages of SCD’s by a factor of 30 for this example. It may not be advisable to completely eliminate SCD’s for all standard parts but engineers should consider limited SCD’s for standard parts, e.g. a specification sheet plus selected critical requirements necessary to protect against changes by suppliers that could cause problems.
Assuming some type of partnering relationships are arranged with key suppliers it is necessary to recognize that these relationships require formal management. There should be documented agreements, specified points of contact and periodic reviews of the relationships. Engineers and engineering managers should regularly visit suppliers of critical components that are involved in such relationships.
It is always desirable to have multiple sources available for procured items, however, when the cost of properly qualifying a supplier and the costs of not qualifying suppliers are taken into consideration experience shows that one or at most two suppliers are all that can be afforded. Project managers must recognize that there is no shortcut. The cost of qualifying key suppliers is necessary and will be absorbed, either as preplanned at affordable cost or unplanned at a much higher cost.
Finally, if possible, buy and test new critical parts before and/or during concept selection. This provides designers critical information that isn’t available in a supplier’s data and specification sheets. Having this data available during the design work avoids the redesign necessary when it is discovered during subsystem testing or in systems integration that the parts don’t really perform exactly as the data sheets implied. This means that critical part decisions are made before design work begins or even before systems engineering is complete. The reason that this is possible is the reality that products and systems are typically designed around the use of critical parts that represent new technological capabilities or are state-of-the-art leaders. In a modern process like Integrated Product Development (IPD) the design engineers are involved from day one and can identify such critical parts at the initiation of projects.