Leasing vs. Purchasing (clause 7.4), etc.

[Dexter]

Our company is based in the Philippines and was founded to help entrepreneurs and business professionals take advantage of low cost outsourcing of communications with a personal touch. Our company operates due to the advent of seat leasing and shared floor space. When I join our company I haven't done an actual work of getting an ISO certification, what I have at the moment is just knowledge of what ISO is. I was given the position of Quality Management Representative but I am confused about clause 7.4. Purchasing and its sub-clauses because we have no major supplies to purchase. We only purchase office supplies without impact on call center operation. I think there will be no need to establish criteria/accreditation to our service provider (ISP & telecom) since everything were in placed prior to the idea of going for ISO 9001:2000 certification. But the problem is we have no direct control over our ISP & telecom providers since they are only our third-party providers. Our “main provider” of outsourced services to run the business is the direct recipient of these third party providers (ISP & telecom). We are only leasing our infrastructures from the said main provider in complete package and everything were bound by contract prior to the idea of making efforts to have our quality management certified to ISO 9001. Here’s my question: Is leasing different from purchasing? If so, can I consider clause 7.4 as permissible exclusion? Although we could evaluate the performance of our main provider but there might be a possibility of finger pointing if technical problems arises because of this setup. The only thing we could do is to make an effective communication with our main provider. I will appreciate any opinion or recommendation regarding this case.

 

[Wes Bucey]

Welcome to the Cove

You have asked your question at the start of the weekend for most of our Cove visitors. The traffic is often very low over the weekend. If you have received no replies from a knowledgeable person by Monday (North American time), I'll "bump" your request up to the top of the Queue.

 

[qualitygoddess - 2010]

An intriguing question. You can certainly exclude 7.4, you just have to make certain that all the requirements in 7.4 do not apply to your company's situation. Do you have to issue purchase orders to the main supplier--when you renew the contract? Does someone at your site review that contract and "approve" it?

If not, then it might make sense to treat them just like one of your product realization processes. Like they are part of your company. You 'control' them under 7.5.1, and maybe 7.6.

Just thinking out loud............

 

[qualitymanager]

Purchasing requirements

Hi Dexter,

Welcome to the Cove.

Also remember that 7.4 relates to supply of services - one way to start thinking about this clause is to look at your Income Statement and Balance Sheet and find out what are the critical areas of expenditure.

Or ask the question another way - who do we rely on for goods/services? If it's just the parent company, you evaluate them as a supplier & I'd suggest that you carefully review the Guidance document on outsourced processes to see how it fits (if you don't plan to use a consultant, that is - did I mention I am close to the Phillipines? )

 

[Govind]

...... Our “main provider” of outsourced services to run the business is the direct recipient of these third party providers (ISP & telecom). We are only leasing our infrastructures from the said main provider in complete package and everything were bound by contract prior to the idea of making efforts to have our quality management certified to ISO 9001. Here’s my question: Is leasing different from purchasing? If so, can I consider clause 7.4 as permissible exclusion? Although we could evaluate the performance of our main provider but there might be a possibility of finger pointing if technical problems arises because of this setup. The only thing we could do is to make an effective communication with our main provider. I will appreciate any opinion or recommendation regarding this case.

They may be treated differently from accounting point of view. From QMS point of view I do not see any major difference. Either leased or owned you still are responsible for the service offered to your customer using the infrastructure. You may treat the vendor as a service vendor. I realize as a monopolized vendor, you have to live with the vendor’s service either Good or Bad. But that will not make you interpret the standard in different manner.

There are few things you can do when working with a monopolized vendor (that too when this vendor is most critical to Supply Chain).

Internal risk assessment: Assess risk of using this vendor’s leased service. Historically has this vendor been reliable in service? Has this vendor been honouring service agreement? What are the typical failures? Have corrective actions been prompt? Etc.

By collecting this data either from your past experience or from other users experience, you can create your contingency plan. Also keep your customers informed on dependency with this monopolized vendor, potential risks, and your preparedness.

This will protect your customer by providing both your contingency planning and keeping them informed of known risks. This is the way I would interpret and act while interpreting 7.4 in your current situation.

Regards,
Govind.

 

[Dexter]

I appreciate the comments I received so far from Govind, qualitymanager and qualitygoddess. All of you have awesome view! In our company we tried to self-educate with the help of knowledgeable people at Cove so qualitymanager need not to worry. Leasing is very simple concept. We only pay for the portion of the infrastructure’s worth that we are actually using. Though spending money could be so hard but I realized that controlling the outsourced processes are more challenging.