Value = Function / Cost
4. SPECIFYING WHAT TO BUY
potential of being the superior source as they have shown an ability to closely control production tolerances.
The senior author, responsible for the purchase of large quantities of motors, recalls how his company cooperated with several American motor companies to check the relative merits of Japanese motors. The bell curves for American shaft diameters were within tolerance similar to supplier A’s.
The bell curves for the Japanese suppliers were consistently narrow, similar to that shown for supplier B, except the curve was properly targeted. This was the only detectable difference between Japanese and American electric motors at that time, which helps explain the superior reliability of the Japanese product.
State-of-the-art quality producers use standard deviations from the ideal as reviewed earlier. Individual machining centers maintain online charts that track and record results as parts are produced. Using SPC allows suppliers to monitor and control measurable characteristics. Prompt detection, improvement, or degradation allows knowledge about quality. The results of using SPC are increased conformance to requirements and decreased costs of getting them.
those particular attributes or features that make the brand appealing. Then it becomes possible to provide an alternative if necessary.
Some companies buy by sample. Their spec reads, “as per engineering approved sample.” But this is rarely a good idea and often creates a problem.
As with the brand name, the important information is the attributes that make the sample acceptable, not the sample itself. But because this is most often done as a shortcut to considering what the desired features really are, this is not a wise practice.
A contrasting approach to customer-defined detailed specifications is
“specification by performance” that holds the supplier responsible for the purchased item functioning correctly. This type of specification probably should be used more often, but sometimes it can be difficult to enforce. This is sometimes referred to as buying a “black box” because there is a specification of the external dimensions and of the input and output features, without concern for what is inside the box. Buying a black box specification shifts the burden of specification from defining the physical attributes to defining the performance parameters, which can be more complex.
While there is a need for a complete and accurate spec, even this can be overdone. Consider an actual situation where a conscientious engineer was supervising the move of his testing equipment from an old to a newer nearby plant. While driving to work, this engineer noticed his equipment on a parked truck with the driver inside a coffeehouse. The next day a new spec was received by the buyer amending instructions to include the clause, “All moves are to be continuous, and drivers are not to take coffee breaks while transporting equipment between plants.” This spec change was unnecessary, as a phone call would have sufficed to solve this problem!
The spec should describe the requirement as precisely as possible, and at the same time should be as brief and as simple as possible. Most importantly, the specification should allow the receiving department to check that what was received was precisely of the quality intended. Companies should avoid using “accept as is” approvals for off-spec goods that have been rejected. If the specification causes goods that are acceptable to be rejected, the spec should be corrected. If, on the other hand, the spec is correct, then the goods should not be accepted.
The goal is to maintain adequate standards of quality. There is a cost associated with quality. Advertisements often suggest that the more expensive a product, the better the quality must be. You get what you pay for, right? Wrong! Many studies confirm what many consumers have long suspected, that high price and high quality don’t necessarily go hand in hand.
4.1 Efforts to Ensure Quality Through International Standards (ISO 9000 Series)
Buyers’ use of quality standards gives confidence that recognized quality procedures and standards are being met. The American National Standards Institute, Inc. (ANSI) issues standards that are based on a “consensus of those substantially concerned with its scope and provisions.” The standard is a guide to help manufacturers, consumers, and the general public to achieve quality assurance. Cooperating with this effort, the American Society for Quality Control (ASQC) set their quality assurance standards ANSI/ASQC Q90-94 series Guidelines for Selection and Use. In the interest of harmonizing global standards, they’ve achieved “technical equivalence”
with Europe’s ISO 9000-9004 series. This has been adopted within the U.S.
as the ANSI/ASQC Q90-94 series that uses English language terms and denotes the practices used. A cross-reference points out where differences may exist.
Buyers need to be familiar with the ISO standards. The International Organization for Standardization (ISO), Geneva, Switzerland, governs all standards [http://www.iso9000.org/]. The International Quality Systems Directory offers a detailed listing on their site of quality certified organizations. The ISO 9000 series was created to define minimum requirements for a quality management and assurance system. More than 125,000 organizations have been certified or registered by ISO. Since the standards have been adopted within the U.S. as the ANSI/ASQC Q90 series, the number of U.S. companies that hold ISO 9000 registrations has increased rapidly. As an indication of the pervasiveness of the standard, consider that even UPS’ Air Letter envelope states “ISO 9001 Quality registered”.
Following are the international ISO 9000 series standards for quality management and assurance:
ISO 9001—quality assurance systems for organizations that do design and development of their products or services as well as the production and delivery of them.
ISO 9002—quality assurance systems in production and installation, the same as 9001 except it does not contain the design and development requirements.
ISO 9003—quality assurance in final inspection and test, for organizations that do not participate in design and development, purchasing or have production controls. It is designed for organizations that only require final inspection and testing of their products and services to ensure that they have met the specified requirements.
A company meeting the ISO 9000 quality standard is better positioned to sell to all firms that recognize the standards. In the Greek language, ISO means “equal.” The objective is to achieve equality in the effectiveness of a wide variety of approaches to quality management through these worldwide standards.
Once registered, a company must pass periodic inspections that are determined by the third party agency selected. The four steps to begin are:
1.
2.
3.
4.
Set policy with a management commitment.
Develop a work manual—how to do the job.
Develop Standard Operating Procedures, by departments—how they are to do things.
Develop individual work instructions—details on doing the job.
4.2 Cooperation with the Quality Function Pays Off
Sometimes, purchasing managers think of the quality assurance (or control) function as interfering or impinging on their authority in dealing with suppliers. However, a progressive purchasing manager recognizes the important role of the quality control people and cooperates fully with them.
They can be among the best allies in the business world.
Purchasing and quality control working together can improve acquisition by concentrating on (1) design, (2) manufacture, and (3) purchase. Control of the “cost of quality” begins in the design phase by choosing suppliers who can meet the required quality levels. Quality improvements often reduce scrap and rework and will ultimately lower the customer’s costs. Quality can’t be inspected into any product, but must be inherent in the design, and care must be used when it was crafted.
Let us recall the four basic responsibilities usually assigned to quality control: (1) to assist engineering in establishing quality standards; (2) to measure how well these standards are met; (3) to see that corrective action is taken when necessary; and (4) to plan improvements in quality when substandard quality is evident.
Let’s look at each of these areas in some detail:
Assist engineering in establishing quality standards. The engineering department sets quality standards, in the form of drawings and other specifications. However, some factors—such as cleanliness, surface finish, run-out, alignment, and the like—may not be clearly specified.
These important details are worked out as the organization develops the specific processes for manufacturing their parts. An important role for the procurement professional is to bring the supplier’s knowledge into the 1.
process of determining the quality requirements. This can be done informally, but in cases where the supplier plays a significant role in the design of the item, they should be included in formal design reviews.
The Quality function generally has the responsibility of specifying sampling plans and indicating the degree of protection against failures these plans will provide. When inspection is called for, Quality advises the inspection people how to perform the work. By detailing all critical, major, and minor characteristics, inspectors can spend their time most effectively.
Measure how well these standards are being met. In measuring supplier performance against standards, Quality uses statistical tools, such as control charts, standard deviation, and the audit process. They may use an independent reliability test laboratory to check both purchased and manufactured components for longevity. They may random sample for overall control of quality. In the course of their work they will often uncover supplier problems. If so, Quality asks the supplier for corrective action. But if too many individuals are speaking to the supplier,
confusion can result, so here the buyer’s coordination role comes into play. From time to time, buyers may need to mediate disputes between the Quality organization and the supplier. It’s very easy to say the supplier is wrong, but there may need to be an impartial review to determine the best resolution. In this manner, buyers will retain the respect, support, and cooperation they must have to remain credible in their work.
See that corrective action is taken as necessary. Corrective action is required of both the using and the producing companies if problems are not to recur. Here, again, Quality can be a good partner in straightening out the “kinks” that are an inevitable part of all operations.
Plan improvements in quality. Whereas corrective action is a tactical approach of “putting out fires,” the planning of improvements is more analogous to strategic “fire prevention.” Generally, investments in prevention will be more cost effective than the money spent on solving problems after the fact.
2.
3.
4.
Poor supplier quality has many repercussions. It disrupts the production schedule and ties up floor space and inventory while units are awaiting the repair or replacement of defective parts or materials. Often, too, the cost of such repair or replacement is a substantial cost penalty to both the supplier and the buyer. Purchasing is primarily responsible for keeping losses in this area to a minimum.
5.