2-H-1 Develop/administer a supplier certification program

Supplier certification is an organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections (ISM Glossary, 2006).

1) Supplier quality practices

Supply management departments sometimes categorize suppliers (according to certain criteria) as "preferred' "partnered," "certified" and "pre-qualified." These categorizations generally indicate that the organization has evaluated the suppliers as possessing the quality and operating systems that meet customer needs. In the evaluation process, supply management professionals may evaluate not only their primary suppliers• but also second- or third-tier suppliers that support their primary suppliers. This type of evaluation gives the supply management organization a higher level of confidence in its primary suppliers' capabilities.

Supply management professionals with established lists of recommended suppliers will also have a process to recognize supplier performance over a period of time. ~en a supplier's performance remains high over a period of time, it achieves a higher level of recognition by the supply management organization. As the supplier achieves each level of performance, a higher level of trust, improved integration into the supply management organization, and an increased use of quality systems or statistical process control (SPC) to n1onitor perforn1ance results are achieved. Supply management organizations May categorize suppliers to meet specific needs as follows:

• Approved suppliers- Suppliers that meet an organization's selection criteria and have been added to the approved list (ISM Glossary, 2006). The approval process may include submission of samples for testing or• other steps to approve the item or service to be purchased. It may also include inspection of the supplier's quality systems.

• Preferred suppliers -A group of suppliers that an organization has determined meet its expectations for quality, delivery and/ or price and that are able to respond to unexpected changes. Often the organization establishes master price agreements with preferred suppliers. For items where preferred suppliers have been identified, the entire organization is required to buy from these suppliers (ISM Glossary, 2006).

• Partnered suppliers -The term "partnership" or "partnered supplier" refers to a close relationship with a supplier. Such relationships are usually built around long term arrangements, large volume commitments, and joint product or service process development. Electronic links between the organizations may automate ordering and delivery scheduling. Such arrangements generally work best when there is a mutual benefit in forming a relationship (e.g., to compete with another set of organizations for the same customers). Many organizations are moving away from use of the word "partner" because of its specific legal meaning. In many organizations, terms such as "strategic alliance" and "special relationship" are used to indicate a supplier association that is based on more than the traditional price based, arm's length model.

• Certified suppliers -A certified supplier is one whose enterprise wide quality control system is integrated with the supply management professional's enterprise wide quality control system, and through which a larger quality assurance system is established. In this way, total costs associated with quality are reduced through the elimination of duplicate efforts and use of SPC and other quality control processes and information sources. The supply management organization• typically defines the standards that suppliers must meet to become certified. In some industries, there are also standards agreed upon by the entire industry.

• Prequalified suppliers - Prequalified suppliers are added to an organization's "approved supplier" list when they have passed a supply management organization's preliminary screening. This consists of closely examining the suppliers to determine such factors as financial strength, facilities, location, size, technology, labor status, management, costs, terms, references and other factors. Such suppliers are thereby prequalified to do business with the organization.

• Certifiable suppliers -A certifiable supplier is one that is not currently certified by the supply management organization but is in the process of becoming certified, J.?:lay already be certified by another division of the same organization, or may be certified by another organization.

• Disqualified suppliers - Individuals, companies or other organizations that fail to meet the standards established by a supply management organization and are barred from competing for that organization's business (ISM Glossary, 2006). Typically, a supplier would not be disqualified until several steps had been taken to attempt to correct the underlying performance problems. Disqulifying a supplier is ~ last resort.

• Acceptance testing -Test procedures that lead to formal acceptance of a new or changed product, process or system. For example, the overall condition of a given lot may be determined by inspecting only a portion or sample of the lot. For a software system, a user acceptance test plan is agreed to by the buyer and seller, carried out and then results are compared to pre-established severity thresholds to determine corrective action (ISM Glossary, 2006).

• Certification requirements - Organizations n1ay create quality standards that, when achieved, become the basis for the supplier to be certified, thereby qualifying for reduction or elimination of incoming inspections. These standards usually include definitions of how the measurements are made and the minimum level of quality that will no longer require inspection. To become certified; suppliers review their measurement system with the supply management organization to ensure that the measurements are correlated and to provide documentation that the minimum certifiable quality levels have been achieved.

Under the Uniform Commercial Code (UCC), after a reasonable opportunity to inspect the goods, supply managemen.t professionals become responsible for all defects that incoming • inspections should have uncovered, even if no inspection took . place. Documenting the certification arrangements with suppliers (and defining the liability for quality problems discovered later) can avert potential issues. Supply management professionals should make sure that both parties sign the documented agreement.

Inspections may occur at many places and may have many levels of thoroughness. The locations of inspections may include:

• The supplier's plant, in process, as goods are made or as a service is performed

• The supplier's plant, at inspection stations

• The supplier's plant, at final inspection before shipment or at the end of a service

• The supply management professional's organization, at incoming inspection

• The supply management professional's organization, in process, as the supplier's materials are used

• The supply management professional's organization, at final inspection before shipment

The earlier inspections occur, the more likely the problems and service issues will be corrected. Suppliers that use process controls and inspect as materials are made (and that correct problems immediately) are least likely to ship a defective product.

The levels of thoroughness of inspections include:

• No inspections at all

• Occasional .audits or random inspections (for example, for certified suppliers)

• Routine sample inspections

• One hundred percent inspections (such as automated testing)

Thoroughness early in the process can eliminate or drastically reduce service problems or the need for inspections later in the process.

The results of inspections (anywhere in the process) should be documented in a format that is easily understandable by both the supply management professional and the seller. If inspections take place at the supply management professional's facility, then the data will become the basis of the supplier's quality measurement and should be provided to the supplier on a regular basis. If inspections take. place at the supplier's facility, then the supplier can provide that data to the supply management professional as proof of quality.

2) Supplier certifications/registrations (for example, ISO, GMP or good manufacturing practices)

Customers may require that their suppliers seek and maintain ISO 9000:2000 registration or other types of registrations or certifications. ISO 9000:2000 and ISO/TS 16949 are discussed below. ISO 9000:2000 is perhaps the most common supplier registration standard used worldwide. ISO/TS 16949 is a standard created for a specific industry (automotive) and is simply provided as an example that is well known.

ISO 9000:2000 basics - ISO 9000 is not a prescription for running a business or an organization. However, its requirements provide a recognized international quality standard that businesses can follow. To effectively use the ISO standard, processes need to be planned and followed. The organization must correct deficiencies in current processes and strive to continually improve.

The original version of ISO 9000 was implemented internationally in 1994 by the International Organization for Standardization (ISO) Technical Committee. ISO 9000:2000 is a much simplified document with six requirements and three standards.

The three standards are:

1) ISO 9000:2000 - Quality management systems - Fundamentals and vocabulary.

2) ISO 9001:2000- Quality management systems- Requirements. This specifies the requirements of a quality management system. These are used for internal implementation, contractual purposes or third-party registrations.

3) ISO 9004:2000- Quality management- Guidelines for performance improvement. This broader document provides guidelines for objectives that are not included in ISO 9001:2000. These include continual improvement and enhancing- overall performance.

ISO 9001:2000 consists of five clauses:

• Clause 4: Quality Management System

• Clause 5: Managen1ent System .

• Clause 6: Resource Management

• Clause 7: Product Realization

• Clause 8: Measurement, Analysis and Improvement

For more information about ISO 9000:2000, contact the International Organization for Standardization in Geneva, Switzerland, at www.iso.org.

The following eight principles provide the foundation for ISO 9000:2000. These are mentioned in ISO 9000 and 9004, but not in ISO 9001. They are:

1) Customer focus

2) Leadership

3) Involvement of people

4) The process approach

5) A systems approach to management

6) Continual improvement

7) Factual approach to decision-making

8) Mutually beneficial supplier relationship

The ISO registration process typically takes several months from initial meeting to final registration audit. This timeframe differs from client to client, but each process usually follows the steps below.

Step 1 - Inquiry where the organization contacts registrars to investigate the terms for registration. The prospective organization then makes a final selection of a registrar with whom the organization is comfortable.

Step 2 - The organization contracts with the registrar. In this process, registration steps are determined and a price is negotiated. A signed quotation or purchase order leads to the first stage of the certification process. Some organizations may wish to have a pre-assessment or gap analysis audit.

Step 3 - Often involves a phase 1 audit. At this stage, the registrar performs an on-site audit of the documented quality system against the applicable standard.

Step 4 -The certification audit. Every element of the ISO 9000 standard is audited several times during the registration process. Representative samples of an organization's business processes are chosen for any audit. During each three-year period, 100 percent of the organization is audited. The audit program is a valuable tool that provides a dearly and mutually defined process and snapshot of auditing - past, present and future.

Step 5 - May involve process audits (optional). The organization may choose business processes for auditing to the applicable standard, allowing the client to learn and experience the registrar's auditing methods and style.

Step 6 - Involves the final certification audit. Once the organization's documented quality system has met the applicable standard, the registrar will conduct an audit to determine the system's effective implementation. This may involve interviewing the process owners and responsible personnel as designated in the documented quality system for processes chosen from the audit program.

Step 7 - After certification, involves rolling certification audits. These are sometimes referred to as surveillance audits where the registrar returns on either six-month or annual cycles.

ISO/TS 16949 basics -Along with ISO 9000:2000, there is the TS 16949 standard that applies only to automotive organizations. TS 16949 is an ISO Technical Specification that aligns existing automotive quality system requirements within the global automotive industry. In conjunction with QS 9000, TS 16949 specifies the quality system requirements for the design/ development, production, and, where relevant, installation and servicing of automotive related products.

The International Automotive Task Force (IATF) wrote ISO/ TS 16949.The IATF consists of an international group of vehicle manufacturers including Ford Motor Company, General Motors and Volksvagen, as well as the following automotive trade associations: AIAG (America),VDA/QMC (Germany), SMMT (UK), ANFIA (Italy), CCFA and FIEV (France). Representatives and subcommittees of TC 176 also helped to prepare TS 16949.

Both the QS 9000 standards and TS 16949 are being updated for consistency with ISO 9000:2000. These are just examples of standards. Other industries or services may develop other standards.

BMPs are best management practices and GMPs are good manufacturing practices; These are generally practices that are encouraged or required by regulatory agencies. For example, the U.S. Food and Drug Administration (FDA) publishes BMPs for food• manufacturers. Medical instrument manufacturers follow FDA BMPs. Some of these require the use of lean manufacturing or SPC.

3) Congruence of test methodologies and results between buying and selling organizations

Many times an organization will want to work with its suppliers to achieve consistency in quality practices. This will include the following areas:

• Acceptance/rejection history -What do the records indicate about the supplier's performance? Acceptance or rejection history should be readily available and reviewed, along with traceable records. A check should be made to ensure that measuring device calibration dates have not expired.

• Testing capability -what abilities does the organization have to detect correct and incorrect work by both the workers and equipment? A batch sampling technique or some form of statistical sampling procedure will most likely be used instead of 100 percent inspection of the incoming components. Final examination of the finished product will probably take place in a secured area awaiting final release. Quality control personnel should do the examination, and the inspection procedures should be in writing. Test methods, procedures and instruments should be the same as those used by the supply management professional's incoming quality control procedures to ensure compatibility. All gauges and test devices should be reviewed to ensure that calibration dates are current; Shop floor quality checks should be conducted at regular intervals to verify those performed during the process by production floor employees.

• Workers - Indicators of worker capability to look for might include the number of hours of statistical quality control (SQC) or total quality management (TQM) training, worker certifications held, and the use of process control charts by the equipment operators.

• Machines -The equipment capability can be monitored in several ways. The supply management professional can look at the maintenance history of key elements in the process for frequency of breakdowns and preventive maintenance activity. The presence of process control charts is another way to monitor machine capability.

• Process control -What types of quality detection and correction systems are used? Primary systems in effect today include statistical process control (SPC) and six sigma/Cpk. Validation of the manufacturing process should be properly documented. If the organization has a program of statistical quality control or statistical process control (SQC/SPC) in place, it should be reviewed. Statistical process control (SPC)/statistical quality control (SQC)

• SQC/SPC involves checking products while they are being produced. Samples are periodically taken by line employees and compared to the range of existing tolerance. If a product is out of its tolerance range, it is stopped and corrected. This ensures that no additional out-of-tolerance products are produced. There should be control charts at individual workstations indicating that checks are being made during production.

Six sigma/Cpk process bounds- Six sigma is a quality management program with a goal of no more than three defects per million parts and an outstanding commitment to quality. Cpk refers to a quality measurement index for process capability. This helps to determine whether or not products consistently meet their specifications.

Organization and management of quality systems -What are the overall organizational systems in place for quality? Is it the traditional "check after an item was made," or is it a proactive system that checks the work as it is being produced?

Documented systems/ procedures -All inspection procedures should be in writing, and a solid training program with periodic updates should be in place.

System certification/validation- Supply management professionals today are requiring various types of quality. certification .of suppliers. These range from being qualified, to being certified, to complete quality assurance. Many forms and distinctions are in use.

4) Organizational requirements for supplier certification (for example, evidence of SPC)

Some of the organizational requirements relative to ISO 9000:2000 and ISO/TS 16949 have been addressed. The following are some additional areas that organizations have examined to certify a supplier. These may vary on an industry-by-industry and organization-by- organization basis.

Management responsibility - Supplier management is responsible for defining and documenting its policies for quality along with its objectives and its level of commitment. Hence, quality policy must be documented as well as its implementation at all levels within the organization.

Quality system -A supplier must have a defined and documented system for defining how quality objectives will be met. This includes a process for planning quality improvement.

Contract review - Contract review involves the steps associated with contracting with suppliers. This includes acceptance of the contract or order, the tender of a contract and review of the contract. Contract requirements 1nust be adequately documented. Records of contract reviews are maintained and procedures associated with contracts are documented.

Design control - For those suppliers that design products, design controls focus on designing processes. To meet the requirements of the design control standard, suppliers establish and maintain procedures for controlling the design of the product. Among the areas that are addressed in design control are design and development planning. For example, suppliers to major automotive organizations must be qualified in skills such as. value engineering, geometric tolerancing and dimensioning, the Taguchi method and other approaches to design engineering.•

Document and data control - Document and data control Includes the procedures or approvals in issuing documents and data and making changes to such data. Exan1.ples of documents that are considered for document and data control include engineering drawings, engineering standards, inspection instructions, test procedures and other documented processes.

Procurement -To satisfy requirements for procurement, the supplier must establish and maintain documents of procedures to ensure that purchased products conform to specified standards. Procedures must be in place for developing subcontractors and scheduling production among subcontractors. Procurement documents must contain data clearly describing the product ordered, including product characteristics for the item being purchased.

Control of customer-supplied product -• In some circumstances, customers supply products to suppliers. At times, these are used in the production of components for the final products. The standard for this element is worded as follows: "Suppliers must establish and maintain documented procedures for the control of verification, storage and maintenance of customer-supplied product provided for incorporation into supplies or for related activities."

Product identification and traceability - Requirements for product traceability differ from industry to industry but often the ability to trace product components is important for legal regulatory or liability reasons. An example is beef for determining the origin of mad cow disease.

Process control -The element relating to process control establishes that suppliers identify and plan the production, installation and servicing processes that result in quality products. One condition is documented procedures defining the means of production, installation and servicing as well as how the lack of such procedures could adversely affect quality. Another condition is the use of suit-. able production, installation and servicing equipment as well as a suitable working environment. Process control documents demonstrate how the organization conforms to all government safety and environmental regulations. This includes compliance with codes and standards, quality plans and procedures.

Inspection and testing -To ensure that processes are functioning properly, inspection testing activities are put in place to ensure that specified requirements for products are met. This includes any acceptance sampling criteria that are established and procedures for using accredited laboratory facilities to provide external validation. This procedure includes requirements for receiving inspection and testing to ensure incoming product quality. Other aspects of inspection and testing that must be documented are in-process inspection testing and final inspection testing. Also, inspection and test records must be established and maintained to provide evidence that products have been inspected and tested.

Control of inspection, measuring and test equipment - So that inspections are accurate, measurement and testing equipment must be kept in top condition. In order for this to occur, suppliers must establish and maintain document procedures to control, calibrate and maintain inspection, measuring and test equipment - including test software used by the supplier.

Inspection and test status - Relating to inspection measuring that has been discussed, another aspect of inspection is maintaining current inspection and test status. This ensures that all products have passed required inspection and testing.

Control of nonconforming product -When nonconforming products are produced, four things can happen:

• They can be reworked to meet specified requirements.

• They can be accepted with or without repair or concessions.

• They can be regraded for alternative applications.

• They can be rejected and scrapped.

Corrective and preventive action -When problems occur with processes resulting in defective products for improving processes, • a standard process for addressing problems is needed so that corrective and preventive action can take place. Suppliers must use a disciplined approach to solving problems when errors occur in a process.

Handling, storage, packaging, preservation and delivery -This has to do with the supply management issues of logistics and inventory control. Among the areas to be documented are inventory control methods, such as models, how inventory turnovers are optimized, and how inventory levels are minimized. This might include a discussion of just-in-time GIT) methods used by the supplier. In addition, packaging standards are documented and labeling standards are discussed. If relevant, stock preservation methods are documented. Finally, supplier delivery performance monitoring, production scheduling and shipment notification, systems are documented.

Control of quality records -This standard states that the supplier must establish and hold documented procedures for identifying, collecting, indexing, accessing, filing, storing, maintaining and disposing of quality related records. The purpose of quality records is to show whether the quality system is achieving its intended goals of ensuring quality.

Internal quality audits -These are prioritized in relation to the importance of the various quality related functions that occur in the process. Individuals who do not have line authority in the organization must perform these audits. Follow-up audits verify that corrective action has taken place to address inadequacies in the quality delivery system.

Training -A supplier organization must have documented procedures for assessing training needs and for training all personnel who affect an organization's quality. Records of past training must also be kept.

Servicing - Interestingly, the verbiage for the servicing section is rather short. Basically, it states that servicing should meet the customer's specified requirements. In addition, a method for communicating about service n1ust be maintained.

Statistical techniques•- Appropriate statistical techniques are chosen during advanced quality planning and are to be kept in the control plan.