Supplier Disqualification - High Rejects and not following established Procedures

Hi Cove Experts,

We're currently in a dilema concering one of our contracted manufacturer overseas. We've been doing business with them since 2004, this is way before my time so I do not know how they were qualified. They build 80% of our products, their quality is substandard 25% rejects. Recently they changed a process and materials without letting us know which had major ramification with supplying materials to our end customers. Eventhough we have processes in place that requires our engineering, production and quality to approve changes, they do not follow what was established. It is easy to say "disqualify them" and look for another supplier, but we are so deep in with them it would be very difficult for us to cut ties and ability to provide products. What can do with this supplier at this time?

Thank you for your help & suggestions!

quality1 said:

Hi Cove Experts,

We're currently in a dilema concering one of our contracted manufacturer overseas. We've been doing business with them since 2004, this is way before my time so I do not know how they were qualified. They build 80% of our products, their quality is substandard 25% rejects. Recently they changed a process and materials without letting us know which had major ramification with supplying materials to our end customers. Eventhough we have processes in place that requires our engineering, production and quality to approve changes, they do not follow what was established. It is easy to say "disqualify them" and look for another supplier, but we are so deep in with them it would be very difficult for us to cut ties and ability to provide products. What can do with this supplier at this time?

Thank you for your help & suggestions!

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Time to buy a plane ticket and have someone on site in the foreseeable future. You can not afford not to.

Have a meeting with the owner / company owner. The time for phone calls has past.

quality1 said:

............. Thank you for your help & suggestions!

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'Put your foot down' so that they know you meant business.

I would do all the above plus begin qualifying a second vendor, TODAY.

Careful! You know the old saying about pointing a finger and having three more pointing right back? Well, it's true!

In my experience of supplier QA, most of the rejects had their source in our requirements. My worst supplier, our sister company made rejects, because we sent them rejects - they just assembled them! Plus, if this has been going on for so long, why is it only now anyone is thinking of doing something about it? It's called supplier development - or, as ISO 9004 refers to it 'mutually beneficial supplier relationships'...go and discover what your organization can do better...before finding another supplier and recreating the same errors!

This is why I am an advocate of regular supplier performance scorecard. I know that people have written they are pointless, they do not help and so on. But, at the end of the day if I have a supplier that is not performing and I can give a metric to those people that have the ability to change suppliers it is a more clean and clear conversation. They are supposed to perform at level X which they are well below. Our standards say they need to be replaced because we have tried A B and C to improve but our demands are beyond their ability (for whatever reason). Make the change.

I recommend a supplier rating system for now and in the future if you are so dependant on your suppliers.

As far as current supplier you should understand the culture of that suppliers location before making any rash decisions. I know you are the customer and you want what you want but there are some cultures where the management method will go no where.

Also, list out item by item specific issues to manage. Assign owners at their location and follow up everyday. You may need to send someone to their location frequently or on a short term (few weeks, months) to follow these issues. But you must address specifics and they must be assigned to owners. I suggest that you focus on both product (defects) and system issues (failure to comply with change mamangement requirements). I call this daily closing, just as bank tellers balance or close their drawer everyday this list/supplier should have a daily closing with you and your team at the end of THEIR WORK DAY. At the end of each day you are talking to them and they are talking to you about what progress or actions that were taken. At the end of that meeting you have a Plan for the next day. The supplier and your person at their location Do the plan. The supplier and you person at their location Check the results and at the Daily Closing meeting the team (yours and theirs together) Act on the results. Every day is a short cycle of the PDCA. If you can not have someone at thier location it is more difficult to manage but still have the same expectations and hold a closing meeting with them via web and phone conference. You need to be looking at the same information at the same time. The key is Every Day you need expect action.

jasonb067 said:

This is why I am an advocate of regular supplier performance scorecard. I know that people have written they are pointless, they do not help and so on. But, at the end of the day if I have a supplier that is not performing and I can give a metric to those people that have the ability to change suppliers it is a more clean and clear conversation. They are supposed to perform at level X which they are well below. Our standards say they need to be replaced because we have tried A B and C to improve but our demands are beyond their ability (for whatever reason). Make the change.

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Preachin' to the choir!!

Hi Andy,

We have been using this supplier long before my time, they're set up as a primary source hence the problem now. I understand that we can potentially supplied them with bad parts, but the kicker is they know about the bad parts even if we communicated to them not to use, they will turn around and use them and ship it where we have found in many instances. I've been working with them for the past 6 months and what I found from is deception instead of a partnership. Yes we're finally looking at alternate source, but it will take awhile since they do 80% of our builds.

quality1 said:

Hi Cove Experts,

We're currently in a dilema concering one of our contracted manufacturer overseas. We've been doing business with them since 2004, this is way before my time so I do not know how they were qualified. They build 80% of our products, their quality is substandard 25% rejects. Recently they changed a process and materials without letting us know which had major ramification with supplying materials to our end customers. Eventhough we have processes in place that requires our engineering, production and quality to approve changes, they do not follow what was established. It is easy to say "disqualify them" and look for another supplier, but we are so deep in with them it would be very difficult for us to cut ties and ability to provide products. What can do with this supplier at this time?

Thank you for your help & suggestions!

Click to expand...

Since I am new to this forum, but very much interested in the posting, thought I'd throw my 2 cents worth in. A key issue in most day to day operations is assessing your Risk associated with a supplier. If you can absorb the risk of high rejects (i.e. you can fix the rejects in-house at minimal cost or have another Vendor) and have no other supplier base to choose from, then it's my opinion, you haven't adequately assessed your Risk. Many times a supplier doesn't really have an incentive to improve or inform you when they make a process or materials change, as you may only be a very small percentage of their business. Kind of a catch 22 if you are limited in your suppliers. You don't have many options sometimes if you can't return (reject) defective products and oversee the daily operations of the supplier. I would say you need to reassess your Risk associated with this Supplier and rethink your options.