You already know that cost of quality is one of the most holistic -- but difficult to benchmark -- metrics. One school of thought distills cost of quality into two broad components: cost of good quality and cost of poor quality. With respect to the cost of poor quality, costs due to poor supplier quality in particular are garnering more attention from manufacturers interested in managing this complex supplier performance metric.
Calculating Costs Due to Poor Supplier Quality
In general, the cost of poor quality consists of internal failure costs (i.e. rework and scrap) and external failure costs (i.e. warranties, returned products and recall costs). When you measure costs due to poor supplier quality, a similar framework is helpful. There are many ways to calculate the cost of poor supplier quality, and manufacturers closely protect their specific methods of benchmarking supplier costs. To shed some light on the subject, here are a few basic guidelines to more accurately measure costs due to poor supplier quality:
- Leverage emerging technologies like an enterprise quality management software solution to streamline cost of quality data;
- Harmonize your nonconformance and corrective action processes with real-time upstream visibility;
- Measure and monitor the cost of poor quality with supplier scorecards. These three broad facets of managing supplier quality warrant a lot of attention when considering the cost of poor quality.
Three Basic Strategies for Reducing Poor Supplier Quality
You should always remember the critical importance of gaining executive buy-in to supplier quality management. Success can only occur when your business goals and quality management goals align, so to lower costs due to poor supplier quality, leadership must step forward. Harmonizing your nonconformance and corrective action processes is one means to shedding light on poor supplier quality. Cross-functional collaboration within the enterprise and among suppliers is also key. Technology such as enterprise-quality management software can be very helpful when optimizing nonconformance and corrective action processes. Lastly, scorecards are an effective means of benchmarking supplier performance. At this point, you should call to attention the challenge of accurately generating supplier quality metrics. You may foresee technology as a key enabler of improving costs due to poor supplier quality, and Enterprise Quality Management Software (EQMS) solutions are effective tools for lowering cost of poor quality.