Quality Progress - August 2016 - (Page 8)
Negotiating supplier quality
Q: How do I convince our supplier to accept
and produce material with a tighter speciﬁcation requirement from a quality standpoint?
My organization strives to make our product
with the materials sent to us. Our speciﬁcations 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
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
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
QP * www.qualityprogress.com
/ FIGURE 1
Cost impact through
supply chain / FIGURE 2
Why? Why this issue
is so important.
How? How we're
going to approach it.
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
1. Simon Sinek, "The Golden Circle," Gumroad.com, http://
2. Juran Institute, "Cost of Poor Quality," Juran.com, http://
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
Table of Contents for the Digital Edition of Quality Progress - August 2016
Mr. Pareto Head
Recognize, Rate and Resolve
Station to Station
Quality in the First Person
One Good Idea
Back to Basics
Quality Progress - August 2016