Supplier Quality Management (SQM) is a crucial component of any business dependent on suppliers to provide goods and services. As quoted by the ASQ, quality-related costs can amount to as much as 15-20% of a company’s sales revenue, sometimes even 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.
In this blog, you will learn about supplier quality management, its importance, and how SQM software like GoAudits can help you save costs and boost revenue.
What is Supplier Quality Management?
Also known as vendor quality management, supplier quality management (SQM) consists of evaluating, selecting, monitoring, and managing suppliers based on the quality of their products or services.
It involves various tools, processes, and techniques for products and services to meet customer requirements and expectations. These measures help streamline the supplier quality process, saving businesses time and money while avoiding potential pitfalls.
As part of SQM, you should cultivate strong relationships with suppliers to ensure that they are reliable, comply with your quality standards, and provide resources for you to deliver an exceptional customer experience.
SQM also requires you to monitor and identify potential quality issues early so you can take corrective actions before they escalate.
Importance of Supplier Quality Management System (QMS)
Here are the benefits of supplier quality management:
1. Minimizes Risk
Expanding your supply chain will never be risk-free. You might encounter risks related to quality, safety, or compliance.
With an efficient supplier quality system, you can monitor and have complete transparency over your supply chain. You minimize the risks and avoid costly problems that may arise otherwise.
2. Increases 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 lead to faster delivery times, increased inventory turns, and reduced lead times.
3. Reduces Production Cost
Proactive defect prevention through supplier selection, clear specifications, and regular audits minimizes rework and scrap. Early problem identification reduces costly production downtime and delays.
Additionally, strong supplier relationships enable you to negotiate competitive pricing and lower inventory needs through improved delivery and product consistency. This all translates to lower production costs, higher efficiency, and improved profitability.
4. Solidifies Supplier Relations
A supplier quality system paves the way for trust and collaboration with suppliers. Clear expectations, consistent audits, and timely feedback create transparency, allowing both parties to identify and address issues early.
This improves communication, reduces costly defects, and builds a sense of shared success, facilitating long-term, mutually beneficial relationships.
5. Helps Suppliers Stay Compliant
Suppliers may be subject to various regulations and standards, and ensuring compliance with these requirements is critical to avoid legal and financial penalties.
» Case Study: Discover how Independent Food Company audits supplier facilities for HACCP/food hygiene compliance with GoAudits.
6. Upholds Brand Reputation
The quality of your products directly impacts the quality of the materials provided by the suppliers. Poor supplier quality can lead to recalls and uninvited lawsuits.
Also, it can result in a damaged reputation for the manufacturer, leading to decreased sales and lost market share.
7. Guarantees Top-Notch Product Quality
Suppliers are responsible for producing high-quality materials and components for the manufacturer. If the quality of the materials provided is poor, it can lead to the production of defective products. This can result in customer complaints, returns, and reputational damage.
What is the Supplier Quality Management Process?
The Supplier Quality Management Procedure/Process (SQMP) is a series of steps that ensure suppliers consistently deliver goods and services meeting agreed-upon standards.
They are crucial for maintaining a smooth supply chain, reducing costs, and delivering high-quality products to your customers.
SQMP largely consists of five steps:
- Planning & Selection of Suppliers: Start with specifying expected quality levels for materials, products, and services. Evaluate the interested suppliers based on quality capabilities, certifications, performance history, etc. Choose suppliers who align with your quality standards and objectives.
- Onboarding & Communication: You must communicate quality requirements, specifications, and inspection procedures to suppliers. If necessary, train them on your quality systems. Also, establish clear and open channels for feedback, reporting, and defect resolution.
- Auditing & Corrective Actions: Regularly audit suppliers through document reviews, product testing, and on-site visits with an audit app like GoAudits. The supplier quality audit checklists should have metrics like defect rates, on-time delivery, and non-compliance issues. You must proactively address identified issues through collaborative corrective actions.
- Improvement & Collaboration: Work with suppliers to identify and implement quality improvement programs. Share insights and offer support to help them improve their quality processes. You can also develop a reward system based on achieving agreed-upon quality goals.
- Evaluation & Renewal: Regularly evaluate suppliers based on defined criteria and quality metrics. Depending on the supplier’s performance, you may renew or terminate their contract.
Supplier Audit Checklists
Here are some free supplier quality audit checklists to help you deliver high-quality products and enhance your brand’s reputation:
- Supplier Audit Checklist
- Supplier Factory Audit Checklist
- Supplier Self-Assessment Checklist
- Supplier Quality Audit
- Supplier Non-Conformance Report
- Supplier Quality Corrective Action Request Form
- Supplier Quality Corrective Action Response Form
- Supplier Audit Checklist For the Food Industry
- Vendor Quality Audit Checklist
» Use These Checklists: Sign up with a 14-day free trial to try these checklists.
How to Choose Suppliers?
While selecting suppliers, of course, price, on-time delivery, and compliance matter, but quality is the most crucial factor for a brand.
Let’s try to understand how each of these factors matters when selecting suppliers:
1. Quality
Research a supplier’s track record and quality history. Analyze if they will be able to deliver consistent product quality over time. Ask yourself if the product or service quality meets your business standards. What will be the return policy if supplies don’t match the expectations?
2. Price
Compare pricing competitiveness and negotiate payment terms. Don’t forget to factor in hidden costs like transportation, quality issues, and potential disruptions. Also, consider if their price reflects the overall quality, reliability, and service they offer.
3. On-time Shipment
Evaluate their historical performance in meeting agreed-upon delivery schedules. Consider their vulnerability to disruptions like material shortages or production delays. Also, research the supplier’s responsiveness to issues such as damage during transit or if the product doesn’t get delivered at all.
4. Supplier’s Compliance Percentage
It shows how well a supplier follows the compliance laws. The more a supplier adheres to the compliance laws and regulations, the lower the chances of them attracting risks.
How Do You Measure Supplier Quality?
Companies often set metrics or Key Performance Indicators (KPIs) to assess their supplier’s performance. Some common KPIs include on-time delivery, defect percentage and rate, lead times, compliance, order fill rate, inspection results, etc.
You can opt for scorecards to measure supplier quality. They allow procurement teams to measure, analyze, and manage supplier performance. Some of the best companies use digital scorecards, as they are available to both parties.
Some audit software like GoAudits assigns automatically calculated inspection scores to suppliers. The score is based on the cumulative audit results and gets updated in real-time with each new inspection, facilitating faster and more accurate supplier ratings.
Supplier Quality Assurance and Certifications
Checking supplier quality certifications helps mitigate risk. They ensure suppliers meet industry standards and your specific needs, giving you peace of mind about product quality, safety, and reliability.
Some of the top supplier quality certifications include:
- ISO 9001 is an internationally recognized standard that outlines a framework for implementing a QMS. It indicates a supplier’s commitment to continuous improvement and meeting customer requirements.
- ISO 22000 is a global food safety management system standard that combines the principles of HACCP and ISO 9001 and covers the entire food supply chain.
- OHSAS 18001 outlines a framework for managing occupational health and safety risks. It demonstrates the supplier’s commitment to a safe work environment and potentially reduces risks in your supply chain.
- TS 16949 focuses on quality management systems in the automotive industry, emphasizing defect prevention, continuous improvement, and supply chain management.
Supplier Quality Management Best Practices
Here are some of the best practices in supplier quality management to strengthen supplier relationships and help you deliver products of the highest quality.
- Measure the cost of quality, i.e. how much it costs to manufacture a good quality product. Then, estimate losses due to poor quality – scrap, rework, warranty, recall costs, etc.
- Introduce digital scorecards to measure supplier quality. Since it is available to both parties, it increases transparency and strengthens relationships.
- The auditors must perform both on-site and off-site supplier audits at regular intervals. They help you identify areas of improvement – safety, quality, cost, production, on-time shipment, etc.
- Implement corrective actions. Decide response and resolution process and timeline, define priorities, assign stakeholders, and track progress.
Why You Should Use SQM Software?
Supplier audit software helps you automate the supplier quality assurance process and ensures that the necessary steps for quality control are taken in time. Thus, increasing the accuracy and efficiency of the process.
An auditor app can provide an organized way to monitor supplier quality, in addition to your internal quality and safety standards. Not only does that allow 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.
Supplier audit software will help you standardize the audit process across your supply chain, ensuring you assess all suppliers consistently, objectively, and regularly.
How GoAudits Can Help
GoAudits is a powerful tool companies in over 70 countries use to manage quality and safety across their supply chain. With GoAudits, you can evaluate various metrics like compliance, non-conformances, lead times, and more.
The following features of GoAudits make it ideal for supplier quality management:
- Ready-to-use and customizable audit checklists
- Capability to audit suppliers based on pre-decided quality parameters
- E-signing the inspection reports
- Instant generating and sharing of reports with stakeholders
- A scoring system for each audit to assess a supplier’s performance
- Capability to assign and track corrective actions
GoAudits helps you monitor and manage the supply chain so you respond quickly to problems. Additionally, with the advanced inspection dashboard, you identify recurring patterns, track supplier performance, and make informed decisions.
With a rating of 4.7 stars on Capterra, GoAudits is trusted by some of the biggest names in the industry.
» GoAudits Reviews: Read how organizations leverage GoAudits to build an efficient supplier management system.
