Cost of quality-assigning $ to supplier performance?

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    Ed Caldeira

    Any ideas for assigning costs to levels of supplier performance so the total purchasing costs are better understood.? 
    In low-volume production we rate subconstractor quality on every job with a score of 1-5. The score indicates level of nonconformances.


    Michael Mead

    That is an excellent question Ed. I have worked in
    several places where they had some scheme to
    classify suppliers. None of them really worked–
    there were always too many exceptions. If you ate
    brave and willing to try something new, think about
    this: Why not make an “Impact Priority Number” for
    each occurrence. It would be similar to the “Risk
    Priority Number” on an FMEA, and based on the same
    criteria.Establish score definitions from 1 to 10 on each of
    these 3 elements: Severity (what is the impact such
    as line shutdown, sorting required, customer
    dissatisfaction, defective final product….);
    Occurrence (How often does it happen); and
    Detection (The ability to detect the defect, such
    as always for a part that will not assemble, or
    almost impossible if the component that is put into
    a product that cannot be tested until the customer
    uses it.)You wind up with a score between 1 and 1000. This
    should give you a good ranking of the importance of
    the defects you are receiving.One more thing: The smart thing is to prevent the
    defects by finding the best sources. I recommend
    you come to the ASQ World Conference on Quality and
    Improvement in Minneapolis in May and see my
    presentation “Toward More Objective Sourcing
    Decisions”.Good luck.


    Ed Caldeira

    Michael, a scoring system is already in place.  This is about assigning a dollar impact to those scores.



    I steer away from ICC when dealing with Supplier Development issues.   You have hard dollar impacts.   Use C/Q/D data to rack and stack them.

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