How to Optimize Your Supplier Quality Costs with a Supplier Audit Software

How to Optimize Your Supplier Quality Costs with a Supplier Audit Software

Supplier Quality Management (SQM) is a crucial component of any business that depends on suppliers to provide goods and services. As quoted by the American Society for Quality (ASQ), quality-related costs can amount to as much as 15-20% of a company’s sales revenue, sometimes even as much as 40%.  Supplier compliance audits are particularly essential in industries governed by regulatory mandates, such as those issued by the U.S. Food and Drug Administration (FDA), ISO and similar regulatory bodies.

An effective SQM system can provide businesses with a comprehensive way to monitor supplier performance and keep track of product quality, cost, compliance, and other critical metrics. Throughout this article, we will discuss supplier quality management, its importance, and the ways in which a supplier audit software can help you save costs and increase revenue. 

Why is Supplier Quality Management important for your business?

Supplier quality management (SQM) is the process of evaluating, selecting, monitoring, and managing suppliers based on the quality of the products or services they provide. SQM involves the use of a variety of tools, processes, and techniques to ensure that products and services meet customer requirements and expectations. These measures can help streamline the supplier management process, saving businesses time and money while avoiding any potential pitfalls. 

As part of SQM, it is also essential to cultivate strong relationships with suppliers to ensure that they are reliable, they comply with your quality standards and can provide the necessary resources for an exceptional customer experience. By monitoring and identifying potential quality problems early, you will be able to take corrective actions before the problems expand. In essence, SQM is a way of ensuring that the products or services your business receives from its suppliers are of high quality and meet your standards. 

The impact of supplier quality management

  • Product Quality: Suppliers are responsible for providing high-quality materials and components for the products produced by the manufacturer. If the quality of the materials provided by the supplier is poor, it can lead to the production of defective products, which can result in customer complaints, returns, and reputational damage.
  • Cost Reduction: Poor-quality materials can also increase the cost of production due to increased scrap, rework, and downtime. Ensuring supplier quality can reduce these costs, resulting in higher profits for the manufacturer.
  • Supply Chain Efficiency: Ensuring supplier quality can also improve supply chain efficiency by reducing the need for inspection, expediting, and other quality-related activities. This can result in faster delivery times, increased inventory turns, and reduced lead times.
  • Compliance: Suppliers may be subject to various regulations and standards, and ensuring their compliance with these requirements is critical to avoid legal and financial penalties.
  • Reputation: The quality of your products is directly linked to the quality of the materials provided by the suppliers. Poor supplier quality can result in a damaged reputation for the manufacturer, leading to decreased sales and lost market share.

Supplier quality has a direct impact on the finished product as well as your brand reputation, production costs, supply chain efficiency, and last, but not least compliance with regulations. Poor supplier quality can lead to delays in production, customer complaints, and legal liabilities. If suppliers do not meet certain standards, this can lead to lost sales, customer dissatisfaction, and reputational damage. 


Costs of poor supplier quality

The Cost of Poor Quality (COPQ) refers to the total cost incurred by an organization as a result of producing defective or non-conforming products or services. COPQ can be divided into four categories:

The Cost of Poor Quality Supplier - GoAudits

1.Prevention Costs: These are costs incurred to prevent defects from occurring in the first place. Prevention costs include activities such as training, quality planning, reliability, operations, production, inspection and process improvement. These costs are usually incurred before production begins.

2. Appraisal Costs: These are costs incurred to detect defects before they reach the customer. Appraisal costs include activities such as inspection, testing, and quality audits.

3. Internal Failure Costs: These are costs incurred as a result of defects that are detected before the product is delivered to the customer. Internal failure costs include activities such as rework, scrap, and downtime.

4. External Failure Costs: These are costs incurred as a result of defects that are detected after the product has been delivered to the customer. External failure costs include activities such as warranty claims, product recalls, and customer complaints.

These four categories of COPQ provide organizations with a way to identify areas for improvement and take corrective action, resulting in reduced costs and better quality. It is important to understand that COPQ is not just a cost metric but a measure of quality. COPQ also serves as an important indicator for management to track overall performance, and it can be used to compare different companies in the same industry.

How can a supplier audit software assist your business?

A supplier audit software can help you automate the process of quality assurance and ensure that the necessary steps for quality control are taken every time, thus increasing accuracy and efficiency of the process. Even if there are many helpful supplier quality tools and methods such as DMAIC (Define, Measure, Analyze, Improve, and Control), DMADV (Define, Measure, Analyze, Design, and Verify), The 5 Whys, The 5S System (Sort, Set in order, Shine, Standardize and Sustain), among many other that are a part of the 6 Sigma methodology, leveraging an auditing and inspection software can help streamline the supplier quality audit process.

A supplier audit app such as GoAudits can provide an organized way to keep track of supplier quality standards. Not only that allows you to conduct quality audits more frequently and efficiently, but it also helps to identify weak links and areas for improvement in the supply chain. 

Five Step Process For 5x Faster Inspections - GoAudits Graphic

A supplier audit software will  help you standardize the audit process across your supply chain, ensuring that all suppliers are evaluated consistently, objectively and on a regular basis.

Simplify the inspection process with a mobile app that enables you to take and attach pictures of any non-conformances, add annotations and share the audit reports in real time. Schedule supplier audits at your preferred frequency and automatically receive reports with the GoAudits’ report feature.

factory floor audit app

With GoAudits auditing and inspection app you can automate the supplier monitoring process. Identify trends and patterns in supplier performance, making it easier to point out areas for improvement or potential risks that could harm your brand reputation in the long run. 

Assign Corrective actions to specific team members, internally or externally. Share audit results and feedback with suppliers in real-time, enabling suppliers to address any non-conformances quickly and effectively. 

The GoAudits supplier audit app will reduce the costs associated with manual processes, remove complexity and inefficiency, as well as improve communication and collaboration with your suppliers

Free Supplier Quality Audit Checklist

Start your supplier audits immediately, download the app and check out the FREE Supplier Audit Checklists from the GoAudits checklist library

Wondering if GoAudits is right for you? Check success stories from our customers. With our unrivaled expertise and attentive customer support, we deliver tailored solutions to meet your organisation’s quality goals.

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