Supplier Quality Management (SQM) is an extensive approach and strategy, using a broad array of activities, quality expertise and tool-set to ensure that the suppliers of a particular company deliver products and services fitting to the customer’s expectations. SQM is not industry specific, it is widely applied in many economic sectors, such as automotive, construction, healthcare, IT, financial services, and many others.

SQM is crucial, as every economic entity has suppliers, and without supplier management the long-term results can be painful. On top of that, the quality of purchased goods highly influence the quality of the finished product. The ISO 9001 quality standard briefly notes, that suppliers must be evaluated, selected and re-evaluated, while the automotive specific IATF 16949 quality management system standard - and its predecessor ISO/TS 16949 specification - even goes further with the requirement of supplier quality management system development and supplier monitoring.

Managing the quality performance of our suppliers is one of the most difficult sections of quality management, as influencing another companies can be more problematic, than taking effect on our own organization. SQM is a much diversified field with many obstacles, however it has a wide literature, containing best practices and focus points.

The first question is, what we need to do to select, deal with and cooperate with the best possible suppliers. The first step is to change our attitude and business strategy. Perhaps the answer is very evident, it is still true. Various companies do not invest into a centralized supplier quality management, and without that there is no chance for success. Conducting our own manufacturing environment on the highest level is vain without paying attention to our suppliers. The cooperation with our supplier must be long-term, focused on partnership and trust.

Juran pointed out a totally new approach in his quality handbook, visualizing the differences between traditional and strategic view:

But how can we create such a partnership with our suppliers? The answer is not simply having an expert SQM team. Instead, all other influenced fields must be in the game, especially purchasing, engineering & development, manufacturing, finance and business planning. Good supplier performance starts with the selection and contracting phase, focusing on the requirements (what we expect from our supplier). Such as in manufacturing and development, quality must be built into the product, and this is relevant also in case of the purchased parts. The following chart contains major sequences of sourcing and supplier quality management.

SQM must have a very active role from the supplier sourcing, and must be in the lead function during cooperation with the supplier. The following table contains the key points of supplier quality management:

As we could see in the table, supplier quality management has to closely cooperate with purchasing (procurement), development, manufacturing and other departments of the company. In terms of quality related topics, SQM is the bridge or interface between the supplier and the stakeholders of the customer.

Depending on the company, supplier quality expert are named differently, e.g. Supplier Quality Engineer (SQE), Supplier Quality Developer (SQD), Supplier Technical Assistant (STA), etc. Some companies combine these roles, while some divide it into separated ones. At bigger companies, even the supplier quality engineer and supplier quality developer are separated roles. In the latter case, the SQD is deliberately focusing on the development of the suppliers.

The key roles and responsibilities of supplier quality management:

A typical layout of quality departments in a business organization, including the position of SQM:

Supplier selection and integration is an extensive framework. The following points well define what the customer should be focusing on to evaluate the preconditions of quality at a given supplier:

Of course a higher cost manifests in these points, so top-notch suppliers apply a higher price, however it brings return during the long-term cooperation (see Cost of Quality).

Many of the above mentioned points are included in VDA 2 (Quality Assurance of Suppliers). This automotive standard defines a so called Quality Assurance Agreement (QAA), which is a contract between the supplier and its customer, related to details of quality management and expectations. QAA takes effect as soon as it is signed by both parties (after the supplier is selected, and the quality management points are agreed).

There are many key quality (or quality related) metrics that are often used by SQM, especially in the automotive or aerospace industry. Usually these metrics are combined into one or a few scores, giving a higher understandability:

Example: the company tracks various supplier quality metrics, and combines them into one major KPI that represents the monthly performance of the given supplier.

Based on general roles of supplier quality management, it has a systematic frame of tools and methods, many of them are overlapping other quality fields.

As a concrete example, the knowledge of the following tools and methods is essential for a supplier engineer or supplier quality developer, to be successful in the automotive industry:

Sourcing of supplier

Integration of supplier

Maintenance of supplier performance

Create your company’s supplier manual, than contains quality requirements. Supplier specific details about quality expectations will be contained in the contract. Nowadays not only multinational companies, but more and more SMEs (Small and Medium Enterprises) create their own supplier manual.

Integrating quality expectations and metrics into the contract is as crucial as the financials or operational requirements. On top of that quality affects financials and operations on the long-term!

Establish your supplier scoring system (metrics, scorecard, and summarizing dashboard) that is not only transparent, but also reflects the performance of the supplier, based on your needs. Your (and your customer’s) main requirements must be reflected in the scoring, e.g. if you are focusing on the number of incidents, overweight the related metric, which may honour or punish the supplier, depending on its performance. Of course these conditions must be included in the contracting, and the supplier must agree to these special terms.

Honour the high performance of your best suppliers. Make awards for them which expresses your satisfaction, and also can be motivating for them (and even for those ones that were not performing on the highest level).