It is true that there is “gold in those hills” with respect to supply chain management. The first place to look for cost reduction opportunities is in the familiar Control Plans that have become an ISO requirement for most world class suppliers. Many LEAN initiatives conduct 5S and workplace organization activities which create a clean and streamlined factory. While these are necessary and worthwhile projects, scrap and rework remain deeply embedded in many plants because chronic/difficult quality problems are simply accepted as part of the DNA of the supplier’s process. The result is that the costs of scrap and rework are passed on to customers in higher prices. By “walking” the control plan of a given supplier each operation is thoroughly evaluated according to the following criteria:

1. Is this step actually adding value that I would be willing to pay for?

2. Are the customer requirements clearly quantified & measureable?

3. Is each step/process viewed as having a supplier & customer?

4. Is the process capability of each step measured, documented & acceptable?

5. Are control plans viewed as useful tools for continuous improvement rather than customer required “eye wash”?

6. Are quality feedback signals traveling up & down the chain of internal & external customers?

The second area of focus is the customary “cost of quality” system for quantifying the main categories of:

· Internal Failure – Scrap & Rework (This is The Hidden Factory You Do Not See)

· External Failure – Warranty Costs (Ask The Supplier What They Struggle With Here)

· Appraisal – Inspection Labor (Many Times This is “Wrapped” Into Standard Work)

· Prevention – Training & Continuous Improvement ( The  Best Companies Leverage This Well)

It has been our observation that the very best suppliers have a rigorous cost of quality system that assures balance between all categories so that the total cost of quality is being reduced in a steady & continuous manner. These best-in-class suppliers will be able to validate these costs & will usually share them openly because the data speaks to a culture of continuous improvement & the belief that “the facts are our friends”.  Our experience has shown that these same suppliers can deliver the lowest total cost of ownership & they are able to deliver a flawless launch of new products in partnership with their customers.

So how can small to mid-sized companies carry out a comprehensive supplier selection process that addresses the items listed above when economic pressures limit staff recruitment & hiring? KISMET Strategic Sourcing Partners is designed for such a purpose by acting in your behalf to operate as your procurement function. Our team has a proven track record of navigating the maze of supply chain options to find the very best suppliers so you can focus on your business.

                                                                                                                     Ray Beerhorst

Finding Opportunities to Reduce Quality Costs in the “Hidden Factory”


We give customers a strong voice in a supplier dominated industry

Ray Beerhorst

Associate Partner & VP of  Operational Excellence

KISMET Strategic Sourcing Partners, LLC

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