Case 3 Managing Supplier Quality: Integrated Devices

Bill Edwards is a quality engineer assigned to the Injected Molding Commodity Team at Integrated Devices. The commodity team is responsible for evaluating, selecting, and negotiating agreements with plastic-injected molding suppliers to be used throughout Integrated Devices. The team is also responsible for improving service quality and material that Integrated Devices receives from its suppliers. Bill’s role after supplier selection involves working directly with suppliers that require training or technical assistance concerning quality control and quality improvement.

The company spends about 70% of each sales dollar on purchased goods and services, so suppliers have a major impact on product quality.

Bill just received a call concerning a recurring manufacturing problem at Integrated Devices’ Plant No. 3. The plant buyer said the plant is experiencing some quality variability problems with a key plastic-injected molding component supplied by Trexler Plastics. The component is sometimes too short or too long to fit properly with other components within the finished product. On occasion, the bracket snaps, causing endproduct failure. Although the unit cost of the plastic-injected molding component is only $1.55, these quality issues (length variability and snapping) are creating production problems that far exceed the component’s purchase price.

The local buyer announced he was having difficulty resolving the problem and asked for support from the corporate commodity team. The buyer said, “You corporate guys selected this supplier that we all have to use. The least you can do is to help us out of the jam your supplier choice is causing.” The buyer’s comment surprised Bill, although Bill would soon come to understand that plant personnel resented not being able to select their own suppliers.

After investigating the problem during a tension-filled meeting with Plant No. 3 personnel, Bill determined he would have to visit the supplier directly. He would work with Trexler’s process engineers to address the manufacturing variability caused by the nonconforming component. Bill went back and reviewed his team’s actions when selecting a single supplier to provide an entire family of plastic-injected moldings.

Trexler had quoted the lowest price of all competing suppliers and had provided samples that passed Integrated Devices’ engineering tests.

Upon his arrival at the supplier, Bill learned that Trexler did not have a dedicated process engineer. One engineer, Steve Smith, was responsible for plant layout, process, quality, and industrial engineering. This individual, who was hired only two months previously, was still becoming familiar with Trexler’s procedures. When Bill asked to review the supplier’s quality control procedures, Steve had to ask several people before he could locate Trexler’s procedures manual.

Bill decided that his first step should be to understand the process responsible for producing the defective component. At an afternoon meeting, Bill asked Steve for actual output data from Trexler’s process. Steve explained they did not collect data for process capability studies or for statistical control charting of continuous production. However, he did say that sometimes “things don’t seem to be operating well” with the equipment that produces the component. Trexler uses an inspector to examine every finished item to determine if it should be shipped to the customer.

After explaining the basics of process capability to Steve, Bill asked him to collect data from the process that produced the bracket component. Bill requested that Steve take exact measurements periodically from the process so they could draw statistical conclusions. Bill said he would return in three days to examine the data.

Upon his return three days later, Steve shared with Bill the details of the data collection effort (see Exhibit 1).

Component: #03217666 Description: Bracket

Design specification: 4 ± 0.06 inches

Once Bill calculated a preliminary process capability from this data and examined the training and quality control procedures at Trexler, he realized he had some serious work ahead of him.

ASSIGNMENT

1. Calculate the Cp and Cpk of the process that produces the component purchased by Integrated Devices. Remember—Process width = 6 times the standard deviation of the sample. Can the process at Trexler satisfy design requirements? What should be a target Cpk level?
2. Why is it important to prove that a process is proven capable before developing statistical control limits (i.e., SPC charts)?
3. Is Integrated Devices being reactive or proactive when it comes to managing supplier quality? Why?
4. Discuss the possible advantages of negotiating quality requirements directly into supplier contracts.
5. What is the risk of relying on product samples when selecting suppliers? What is the risk of relying too heavily on unit cost when making the selection decision?
6. Why was it so important for Bill to work with Plant No. 3 personnel before visiting Trexler?
7. The local buyer at Integrated Devices did not seem pleased that a corporate team selected the supplier that the local plants must use. Why do firms use corporate commodity teams to select suppliers? How can firms get support from plant personnel for companywide suppliers?
8. Is quality a major emphasis at this supplier? Why or why not?
9. What are the possible effects if Trexler’s inspector approves components for shipment that should be rejected due to nonconformance (Type II error)? What are the possible effects if Trexler’s inspector rejects components for shipment that are in conformance with specifications (Type I error)? How can we control error of measurement?
10. When evaluating supplier quality, why is it important to focus on the process that produces the material or service rather than on the material or service itself? What did Integrated Devices rely on?
11. Discuss the likelihood that Bill will resolve the problem(s) with this component.
12. If Integrated Devices decides to continue using Trexler as a supplier, what must both companies do to begin improving Trexler’s component quality?
13. Design a supplier quality management process for Integrated Devices that focuses on the prevention of supplier defects. (Hint: Activities performed during supplier evaluation and selection should be part of this process. Process capability analysis may also be part of your supplier quality management process.)