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About ComplianceQuest
Transform to a fully connected business with a next-generation AI-powered Product Lifecycle, Quality, Safety, and Supplier management platform, built on Salesforce.
Our connected suite of solutions helps businesses of all sizes increase quality, safety and efficiency as they bring their products from concept to customer success.
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The automotive industry is credited with pioneering the concept of an extended supply chain. According to a study conducted by McKinsey, over 80% of the product value of a car comes from external suppliers. In a typical CPG company, over 70% of the product value comes from suppliers. According to Toyota, a single car has over 30,000 parts including some smaller parts like screws. The majority of these parts come from a wide range of external suppliers. Even in pharmaceuticals, an industry which has traditionally been vertically integrated, the percentage of value outsourced to suppliers is 40 to 50%.
The reason companies rely on a network of suppliers is straightforward; High-quality parts require specialized research and development efforts and an enterprise is better off procuring these components from companies that specialize in a particular domain. For example, a brand like Toyota would rely on a range of suppliers for its steering gear, its brake lining, seatbelts, wheels, and windshields, to name a few components.
It is important to note that companies are constantly innovating and working on new offerings for their customers. A car manufacturer may want to add telematics and electronics-based components to enhance the customer experience. It may have to cater to new emission norms, which may require additional parts. Irrespective of how evolved your supply chain is – supplier qualification, re-qualification, onboarding and continuous improvement (CI) are critical elements of supply chain management. Qualifying and on-boarding right suppliers is fundamental for your supply chain success.
The key is to automate the entire process, ensuring your ecosystem of suppliers meets your “clearly defined” expectations. What do you think is the first step to doing that?
Read on, to find out more.
Tick off the following checklist to ensure your enterprise is doing whatever it takes to enhance the overall quality of all key suppliers. Run this checklist for each of your key supply requirements.
As a procurement leader, the first step to building a successful supplier qualification and onboarding process is to bring together key stakeholders to brainstorm and take the time to clearly define your expectations from each of your suppliers that you would like to on-board.
Documenting the success criteria clearly becomes extremely important, especially from a process design perspective. This will help optimize the supplier qualification process for both required quality metrics (which will help drive quality agreements), and risks that need to be mitigated.
Criteria for success will vary dependent on the type of component being procured. Addressing the following topics will help you determine your success criteria, with clarity.
Most organizations do not take the time to define this ‘success criteria’. This often results in having a wide range of problems with suppliers including delayed shipments, compliance issues, non-conformance of a high percentage of parts triggering quality and regulatory issues and often resulting in brand erosion.
Success criteria should also identify and capture of all key supplier-related risks – segregated by component and by criticality.
At ComplianceQuest, our supplier management solution not only automates quality and compliance processes but also helps with risk management. We notice that our clients clearly segregate their suppliers into various risk categories.
After you have defined the success criteria, it is important to document this into a set of formal requirements. This involves designing a structured supplier qualification checklist.
This includes creating a questionnaire for all suppliers, conducting supplier interviews, audits, and inspections. It also helps to understand the experience and expertise of your supplier in serving your company’s specific requirements. Quality, Cost, and Delivery (QCD) details of the suppliers that have to be analyzed has to be included at this stage.
Quality leaders rely on a data-driven EQMS like ComplianceQuest to automate their supplier qualification process. A cloud-based platform that is flexible and scalable will enable a collaborative approach. Without capturing data and garnering insights from a wide range of data sources, it’ll be difficult to get the supply and value chain right.
Once you have nailed down the formal requirements and qualifying steps, the obvious next step is to design a workflow. This must be automated using a supplier management solution in your EQMS.
Your qualifying steps must address the following :
In this phase, you evaluate various suppliers based on the inputs provided in the supplier qualification checklist. Ideally, you want to work with suppliers who are excited about partnering with your company. They need to have the required experience in serving your industry and have at their disposal the right capabilities and technology.
One area where companies often go wrong is to arrive at the shortlist, only based on whatever information the potential supplier provided. However, it is important to gather references from other customers, check the documentation, quality certifications, and other third-party data.
If you are a manufacturer, your suppliers must ideally comply with ISO 9001-2015 requirements. In healthcare and life sciences, regulations demand that your supplier is in compliance with ISO 9001-2015, ISO 13485:2016, GMP, and 21 CFR Part 11, as per their specific component.
ComplianceQuest works with one of the world’s largest auto components manufacturers that supplies rubber-based products to OEMs in the automotive industry. For their critical suppliers, the company has an elaborate documentation requirement right from the qualification stage. This includes capturing detailed information including compliance standards, quality certifications, industry-specific experience, financial stability, and manufacturing capacity by location. This information is then verified through supplier audits and interviews.
Depending on the type of product and also risk, on-site and offsite supplier audits must be conducted. The audit process must be thoroughly designed to ensure all information is captured – both to understand if the supplier is in line with our ‘success criteria’ and has the ability to mitigate supplier-related risks.
In this phase, we recommend the following questions be answered by supply chain and quality leaders:
List of suppliers shortlisted for high-risk category:
Ideally, you must have shortlisted suppliers across categories, keeping in mind the criticality of the product. This risk-based approach to shortlisting is a critical step to getting your supply chain right.
Once vendor assessments are complete, suppliers are onboarded into your supplier management system. A next-generation supplier management system will help drive continuous monitoring and improvement across all suppliers. The only way to do this right is by leveraging data in real-time. This has to be kept in mind, right at the time of onboarding. It’ll be too late to set down policies and guidelines down the line.
While you onboard suppliers, make sure you capture the following into your supplier management system in the EQMS :
Supplier qualification and on-boarding is not a one-time effort. Periodic audits, regular collaboration, and communication are part of a strategic supplier partnership. This is especially true for suppliers in the top three risk categories – critical, high risk, and medium risk.
The VP of Supply Chain of a Global Lifesciences Company that works with ComplianceQuest mentioned this to us in one of our conversations. “There is no point in finding problems in the supply chain too late and it is extremely expensive.” The key is to continuously assess, monitor and improve. This is absolutely essential to strengthen the supplier-manufacturer relationship.
During the onboarding process, one of the first steps is to develop and sign an agreement. The supplier agreement should cover the following aspects, from a quality management perspective :
The Role of a Next-Generation EQMS in Supplier Qualification and On-Boarding
A next-generation EQMS with a well-designed supplier management system can make life easier for quality and supply chain leaders.
But, what do we mean by next-generation?
The most important aspect a next-generation system is that it must enable easy collaboration. This includes collaboration amongst internal stakeholders, as well as engagement with leaders on the supply side. Legacy EQMS and supplier management systems serve as a system of record, wherein all data is captured. But these are not designed for collaboration. Be it supplier interviews and audits or change management or taking corrective action – collaboration helps deliver operational excellence.
We believe the following are critical features of next generation EQMS, from a supplier management perspective :
Supply chain leaders are embracing the latest digital transformation technologies to embrace Quality 4.0 and other best practices. The key is to drive a transformation that is constantly evolving and ever improving.
Look no further than ComplianceQuest, a next-generation EQMS with world-class supplier management capabilities.
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