Do you have to disqualify a bad supplier?

More food for thought, folks:

Subject: Q: Do you have to disqualify a bad supplier? /Naish
Date: Mon, 16 Aug 1999 12:59:50 -0600
From: ISO Standards Discussion <JENNEJOHNN@UWSTOUT.EDU>

From: PNaish@aol.com
Subject: Q: Do you have to disqualify a bad supplier? /Naish

This idea that you can always tell your supplier you will go elsewhere may work in most industries but not in all.

This brings up an interesting point. In two recent audits, one of a contract manufacturer and one of an electronics distributor, the auditor indicated the only time he would feel it was acceptable to not disqualify a supplier who did not meet either your delivery or quality needs was when they were the only source in the world for the product.

First, I see no requirement in the standard that says you MUST disqualify a supplier for either reason. If there is something I have missed, I would like to become better informed and welcome anyone who can indicate where it says you must disqualify a supplier and what the criteria is for when you must disqualify them.

Second, for many small companies it is not only not practical but not possible for them to disqualify a source even if they would like to. In the real world big companies like IBM, Motorola, Intel, AMP, 3M, and many others do not want to deal with the small quantity orders. So companies are forced to go to distributors to buy their materials. In some cases there may only be one or two and a small company, in order to compete on cost must make choices based on price for one and who will even sell to them for another. So disqualifying a source no matter how late or what the quality may not be an option.

Example: An electronic distributor (not the one audited above- lets call him SMALL GUY) had been buying direct from a major company. Let's call the supplier: ABC Co. earlier this year. SMALL GUY has been buying direct from ABC CO. for years. ABC Co. told this SMALL GUY that they had changed their distribution chain and were now only going to sell to distributor- MIDDLE GUY. So now SMALL GUY has to buy from MIDDLE GUY (who has been their competitor) or from some other distributor who is SMALL GUY ALSO. Since MIDDLE GUY knows SMALL GUY is the competitor, MIDDLE GUY fills orders for their own customers first and then SMALL GUY. SMALL GUY can go to ABC CO. but they don't really do anything but tell them to go back to MIDDLE GUY and work it out. SMALL GUY can go to SMALL GUY ALSO but he is in the same boat except he carries more stock to account for MIDDLE GUY's late delivery and mediocre quality (wrong parts, incorrect count, etc.) But if SMALL GUY goes to SMALL GUY ALSO he no longer can stay in business due to costs added by first MIDLE GUY and the SMALL GUY ALSO. So he is stuck with late deliveries, carrying some extra inventory and dealing with the quality issues.

Now some may say this is not real but it did in fact happen to a client of mine this year. More and more of the small companies, both assemblers and distributors, are getting caught in this mode due to increasing conglomorates who do not and will not deal with the small companies. There is also the problems with small company financials which the big guys and middle guys don't want to deal with forcing the smaller businesses to stay with suppliers which may not be the best in the world.

I am not saying that all small companies are stuck with bad suppliers because all small distributors are bad. To the contrary most smaller companies survive off of customer service. But there are some isolated instances and there are some get rich quick companies who service their bigger customers and the smaller ones have to wait. This can and does mean late and missed deliveries.

To stay in business the companies are forced to work the best they can with their suppliers. If they don't always get a response they still have to buy.

Phyllis

Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Whitcomb
Date: Mon, 16 Aug 1999 14:26:42 -0600
From: ISO Standards Discussion <JENNEJOHNN@UWSTOUT.EDU>

From: Gary Whitcomb <Gary_Whitcomb@4funlsi.com>
Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Whitcomb

>From :gary_whitcomb@4funlsi
Subject: Disqualifying Supplier

We had a similair experience (still do) with a supplier of plastic slides we incorporate on our structures. WE manufacture commercial playground equipment, and are a small-med sized company (250-300 employees; $70 mil per year sales). In our audits and subsequent surveillance audits we have shown a couple of suppliers that typically perform below our requirements for on-time delivery. We have worked with them continuously. Our auditor asked to see what we had done, by way of working with these suppliers, to help improve their performance. We showed them; even took the auditor to the company for him to see we had proved what we could to the supplier to be of service to the supplier. The unfortunate problem for us was (is) this supplier is bigger then we are and had other business waiting in the wings. While we are one of their top 10 accounts, it really would not have "hurt" them had we pulled our business from them.

At first, we had threatened to move our molds, etc, but found the supplier, while late, was by far a better deal than the competitors we looked at. I really didn't make any economic sense to change. The auditor even suggested a company must use some common sense when dealing with these issues. If the standard does indeed say one has to disqualify a supplier, which I am of the opinion it doesn't, then it seems the standard can (could) dictate other policies, if allowed to, as to how a company operates.

Gary

Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Humphries
Date: Tue, 17 Aug 1999 11:17:02 -0600
From: ISO Standards Discussion <JENNEJOHNN@UWSTOUT.EDU>

From: Edwin Humphries <edwin@humancapacities.zip.com.au>
Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Humphries

Phyllis,

You are absolutely right: the standard does not require a supplier to be disqualified; in fact, it does not speak of disqualification at all, neither does it speak of delivery or quality needs. It DOES speak of "evaluate and select subcontractors on the basis of their ability to meet subcontract requirements including the quality system and any specific quality-assurance requirements".

It seems to me there is a world of difference: who defines subcontract requirements apart from the company itself? And subcontract requirements presumably cover quality and delivery, but also many other things: payment, communication, etc. Why should quality or delivery (presumably defined narrowly rather than broadly) have a higher priority?

The things auditors should be asking for is evidence that subcontract requirements are identified and communicated, that they are enforced, and that when they are breached, action that is appropriate to the business circumstances is taken.

To blindly require disqualification of all suppliers who prove unable to meet quality and delivery requirements means that one would eventually have no suppliers: every company occasionally has problems.

Edwin Humphries

Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Pfrang
Date: Tue, 17 Aug 1999 11:09:26 -0600
From: ISO Standards Discussion <JENNEJOHNN@UWSTOUT.EDU>

From: pfrang@nicolet.com (Doug Pfrang)
Subject: Re: Q: Do you have to disqualify a bad supplier? /Naish/Pfrang

It depends upon what you mean by "disqualify." Of course the ISO Standard
doesn't require you to stop buying from them. It does require you to:

- "evaluate and select them on the basis of their ability to meet
subcontract requirements..." (Sec. 4.6.2(a)), and

- "define the type and extent of control exercised..." over their
activities (Sec. 4.6.2(b)).

If you determine that their quality is marginal, but you select them anyway because they are the only game in town, then you still have evaluated and selected them on the basis of their ability to meet your requirements (because meeting your requirements means more to you than just the quality aspect of their ability). If you then define what you are going to do to manage their marginal quality (for example by doing more thorough incoming inspection), then you have defined the type and extent of control exercised.

In other words, you have met the ISO requirements.

Thus, you might "disqualify" vendors in the sense of not treating them the same way that you would treat your more trusted (i.e., "qualified") suppliers, but you definitely do not need to "disqualify" them in the sense of no longer buying from them and, thereby, crippling your business.

Doug Pfrang

Subject: Re: Do you have to disqualify a bad supplier? /Naish/Gano/Taormina
Date: Wed, 18 Aug 1999 14:26:03 -0600
From: ISO Standards Discussion <JENNEJOHNN@UWSTOUT.EDU>

From: Virtuiso@aol.com
Subject: Re: Do you have to disqualify a bad supplier? /Naish/Ganor/Taormina

One of my client companies has several twenty year old distribution agreements that the suppliers would love to break and renegotiate with more favorable terms. They appear to intentionally miss committed schedules, ship incorrect materials and behave non-responisvely, hoping my client company will disapprove them and break the distribution agreement. In the operating procedures, there is a stipulation that only the president of the company can disapprove a supplier. Their procedures require them to track non-conformities, affect corrective action as they can with the troublesome suppliers and control quality by conformance inspection instead of by partnering, as they do with their preferred suppliers. They have got to have the products to meet customer requirements so they have designed a pragmatic system that is effective, but unusual. They have never had this procedure questioned by the registrar because it works for its stated intent.

Tom Taormina