Quality Progress - August 2016 - (Page 8)

EXPERTANSWE Negotiating supplier quality Q: How do I convince our supplier to accept and produce material with a tighter speciļ¬cation requirement from a quality standpoint? My organization strives to make our product with the materials sent to us. Our speciļ¬cations help meet our customers' high expectations. My sourcing team is unlikely to replace this supplier. Considering that I'm just the receiving inspector, how should I handle this issue? Perry Ward Ogen, UT A: Never understate your role in the organization. A receiving inspector plays a pivotal role in an organization's supply chain. Take a 30,000-foot view of your position, and look at your organization's value stream and key activities that create customer value. Figure 1 illustrates a value stream for an order-to-cash process. From this perspective, you see how key parts are interconnected. Decisions made anywhere along the value stream can affect activities upstream or downstream, including supplier quality. Supply chain thinking requires a strategic view of sourcing that focuses on the longterm success of all partners along the chain. Pricing, delivery timing and quality can be established cooperatively, taking into account the needs of a supplier and buyer. You can address the specifics of supplierquality specifications using a framework called the golden circle.1 The golden circle offers a nontraditional mindset for solving problems by focusing on the "why," "how" and "what" (see Figure 2). As a representative of the organization that owns the product brand and image, you're responsible for the activities of its supply chain. You must consider the total cost of owning a supplier's products and how they affect your organization's reputation. Poor supplier quality results in costs in the form of customer complaints, product returns, rework, scrap, expediting, overtime, reshipping and credits. It also results in delivery reliability slips and delays. The rule of thumb is that a customer who had a bad experience will tell eight to 10 others about it. Today, thanks to the internet, they tell everyone. The cost of poor quality can be as much as 30 to 40% of an organization's revenue.2 Many of these costs are not seen, and poorly understood and quantified. You can use this to frame the discussion with your sourcing team and supplier. This will show the "why," which explains why quality is so important. I generally frame this in terms of the cost of doing nothing. At this point, you can shift to the "how" and discuss how you are going to address supplier quality. You can try using some traditional negotiating tactics. Hard negotiators take a position because they view other parties as adversaries to be beaten down. They demand concessions and give none in return, and they threaten, mislead or pressure the other party. This can endanger your long-term success. Soft negotiators value agreement to the point that they disclose their bottom line, alter their position or accept one-sided agreements that involve only concessions. Contracts could be won, but these negotiators are left feeling exploited. These positions can be described as win-lose or lose-win. But there is a third option-a win-win negotiating technique based on principled negotiations. Principled negotiations start by insisting on several objective criteria for long-term gains that are beneficial to both parties. For example, total cost of ownership is an objective criterion. Supplier quality value stream Order 8 Schedule Produce QP * www.qualityprogress.com Inspect Fulfill Ship / FIGURE 1 Support Invoice Cost impact through supply chain / FIGURE 2 Why? Why this issue is so important. The context. How? How we're going to approach it. The process. What? What we're going to do to solve it. Principled negotiations separate the people from the problem, and they take emotional issues out of the equation and focus on interests, not positions. Positiontaking tactics lead to defensiveness. In principled negotiations, negotiators relate what they are interested in achieving and seek to understand the other party's interests. After you reach this point, the next logical step is to focus on the "what," which explains what we are going to do to raise supplier-quality specifications. Only you, the supplier, and your internal team can answer this. But now you have a solid framework to help you successfully begin the journey. Peter J. Sherman Managing partner Riverwood Associates Atlanta REFERENCES 1. Simon Sinek, "The Golden Circle," Gumroad.com, http:// tinyurl.com/golden-circle-sinek. 2. Juran Institute, "Cost of Poor Quality," Juran.com, http:// tinyurl.com/juran-cost-of-poor-quality. CAPA effectiveness Q: How can an organization evaluate the effectiveness of a corrective and preventive action (CAPA) before it's implemented? The U.S. Food and Drug Administration expects pharmaceutical and medical device manufacturers to include an effectiveness check in the report, but do organizations have enough guidance to make these checks meaningful? A: Effectiveness checks are improved if they http://www.Gumroad.com http://www.tinyurl.com/golden-circle-sinek http://www.Juran.com http://www.tinyurl.com/juran-cost-of-poor-quality http://www.qualityprogress.com

Table of Contents for the Digital Edition of Quality Progress - August 2016

Up Front
LogOn
Expert Answers
Keeping Current
Mr. Pareto Head
Chain Challenges
Sample Simplification
Recognize, Rate and Resolve
Exploiting Bottlenecks
Station to Station
Quality in the First Person
Career Corner
Statistics Roundtable
Standards Outlook
QP Toolbox
QP Reviews
One Good Idea
Back to Basics

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