Profit improvement through supplier enhancement

Profit Improvement through Supplier Enhancement Systems Innovation Series Series Editor Adedeji B Badiru Air Force Institute of Technology (AFIT) – Dayton, Ohio PUBLISHED TITLES Additive Manufacturing Handbook: Product Development for the Defense Industry, Adedeji B Badiru, Vhance V Valencia, & David Liu Carbon Footprint Analysis: Concepts, Methods, Implementation, and Case Studies, Matthew John Franchetti & Defne Apul Cellular Manufacturing: Mitigating Risk and Uncertainty, John X Wang Communication for Continuous Improvement Projects, Tina Agustiady Computational Economic Analysis for Engineering and Industry, Adedeji B Badiru & Olufemi A Omitaomu Conveyors: Applications, Selection, and Integration, Patrick M McGuire Culture and Trust in Technology-Driven Organizations, Frances Alston Design for Profitability: Guidelines to Cost Effectively Management the Development Process of Complex Products, Salah Ahmed Mohamed Elmoselhy Global Engineering: Design, Decision Making, and Communication, Carlos Acosta, V Jorge Leon, Charles Conrad, & Cesar O Malave Global Manufacturing Technology Transfer: Africa–USA Strategies, Adaptations, and Management, Adedeji B Badiru Guide to Environment Safety and Health Management: Developing, Implementing, and Maintaining a Continuous Improvement Program, Frances Alston & Emily J Millikin Handbook of Construction Management: Scope, Schedule, and Cost Control, Abdul Razzak Rumane Handbook of Emergency Response: A Human Factors and Systems Engineering Approach, Adedeji B Badiru & LeeAnn Racz Handbook of Industrial Engineering Equations, Formulas, and Calculations, Adedeji B Badiru & Olufemi A Omitaomu Handbook of Industrial and Systems Engineering, Second Edition, Adedeji B Badiru Handbook of Military Industrial Engineering, Adedeji B Badiru & Marlin U Thomas Industrial Control Systems: Mathematical and Statistical Models and Techniques, Adedeji B Badiru, Oye Ibidapo-Obe, & Babatunde J Ayeni Industrial Project Management: Concepts, Tools, and Techniques, Adedeji B Badiru, Abidemi Badiru, & Adetokunboh Badiru Inventory Management: Non-Classical Views, Mohamad Y Jaber Kansei Engineering—2–volume set • Innovations of Kansei Engineering, Mitsuo Nagamachi & Anitawati Mohd Lokman • Kansei/Affective Engineering, Mitsuo Nagamachi Kansei Innovation: Practical Design Applications for Product and Service Development, Mitsuo Nagamachi & Anitawati Mohd Lokman Knowledge Discovery from Sensor Data, Auroop R Ganguly, João Gama, Olufemi A Omitaomu, Mohamed Medhat Gaber, & Ranga Raju Vatsavai Learning Curves: Theory, Models, and Applications, Mohamad Y Jaber Managing Projects as Investments: Earned Value to Business Value, Stephen A Devaux Modern Construction: Lean Project Delivery and Integrated Practices, Lincoln Harding Forbes & Syed M Ahmed Moving from Project Management to Project Leadership: A Practical Guide to Leading Groups, R Camper Bull Profit Improvement through Supplier Enhancement, Ralph R Pawlak Project Feasibility: Tools for Uncovering Points of Vulnerability, Olivier Mesly Project Management: Systems, Principles, and Applications, Adedeji B Badiru Project Management for the Oil and Gas Industry: A World System Approach, Adedeji B Badiru & Samuel O Osisanya Project Management for Research: A Guide for Graduate Students, Adedeji B Badiru, Christina Rusnock, & Vhance V Valencia Project Management Simplified: A Step-by-Step Process, Barbara Karten Quality Management in Construction Projects, Abdul Razzak Rumane Quality Tools for Managing Construction Projects, Abdul Razzak Rumane A Six Sigma Approach to Sustainability: Continual Improvement for Social Responsibility, Holly A Duckworth & Andrea Hoffmeier Social Responsibility: Failure Mode Effects and Analysis, Holly Alison Duckworth & Rosemond Ann Moore Statistical Techniques for Project Control, Adedeji B Badiru & Tina Agustiady STEP Project Management: Guide for Science, Technology, and Engineering Projects, Adedeji B Badiru Sustainability: Utilizing Lean Six Sigma Techniques, Tina Agustiady & Adedeji B Badiru Systems Thinking: Coping with 21st Century Problems, John Turner Boardman & Brian J Sauser Techonomics: The Theory of Industrial Evolution, H Lee Martin Total Productive Maintenance: Strategies and Implementation Guide, Tina Agustiady & Elizabeth A Cudney Total Project Control: A Practitioner’s Guide to Managing Projects as Investments, Second Edition, Stephen A Devaux Triple C Model of Project Management: Communication, Cooperation, Coordination, Adedeji B Badiru Work Design: A Systematic Approach, Adedeji B Badiru & Sharon C Bommer Profit Improvement through Supplier Enhancement By Ralph R Pawlak CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2017 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S Government works Printed on acid-free paper International Standard Book Number-13: 978-1-138-70243-1 (Hardback) This book contains information obtained from authentic and highly regarded sources Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use The authors and publishers have attempted to trace the copyright holders of all material reproduced in this publication and apologize to copyright holders if permission to publish in this form has not been obtained If any copyright material has not been acknowledged please write and let us know so we may rectify in any future reprint Except as permitted under U.S Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978750-8400 CCC is a not-for-profit organization that provides licenses and registration for a variety of users For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe Library of Congress Cataloging-in-Publication Data Names: Pawlak, Ralph R., author Title: Profit improvement through supplier enhancement / Ralph R Pawlak Description: Boca Raton, FL : CRC Press, 2017 | Series: Industrial innovation series Identifiers: LCCN 2016047889| ISBN 9781138702431 (hardback : alk paper) | ISBN 9781315203614 (ebook) Subjects: LCSH: Industrial procurement Quality control | Production control Classification: LCC HD39.5 P38 2017 | DDC 658.7 dc23 LC record available at https://lccn.loc.gov/2016047889 Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com Dedication To my sons Glen and Ralph: You have become better fathers than I could have ever been Contents Preface Acknowledgments Author Chapter Introduction Features Means of supplier improvement Flow path of the book Chapter Problem history Supplier errors Three types of supplier problems Inconvenience Assessed severity Criminal activity Summary Chapter Need for enhancement Best and worst practices Bestpractices Worst practices Circumstances found Most important action Established practices Conditions eliminated or controlled Problems encountered Summary Chapter Supplier credentials Types of suppliers Supplier traits Narrative on suppliers Suppliers needing improvement Red dye problem Disappearing materials Supplier negligence Summary Chapter Supplier elements Focus of supplier traits Process control plans: Summary Chapter Course of action Incoming inspection elimination Employee responsibilities Immediate contact Conduct a series of meetings Supplier visits Supplier symposiums Problems that suppliers cause Mentor review Problem resolution Summary Chapter Record keeping Mandate origination Statement of the problem Description of failure modes Product containment Date code interpretation and use Process flow plan Summary Chapter Supplier readiness Other supplier features Supply chain concerns Installation concerns Manpower concerns Maintenance concerns Major issues and concerns Case 1: Wooden rulers Case 2: Whiteout Case 3: Unauthorized sign Figure 14.25 Tier supplier support audit sheet Figure 14.26 Tool room audit sheet Figure 14.27 Unauthorized changes audit sheet Figure 14.28 Workstation audit sheet Example audit considerations Summary Merely take a walk through the department under question and look to see what is happening But, before taking the walk, review one of the department sheets to understand what you are looking to investigate It shouldn’t take more than a minute or two for you to appreciate the conditions under review and to evaluate current practices As you complete your walk, notice the conditions present If you are unsure of a compliance, ask someone a specific question If you find something that troubles you or an operation that isn’t on the audit, make a mental note Finally, stop to record your observations If you have found everything to be satisfactory and in compliance, that’s great, but hardly likely! If you find items not in compliance or unsatisfactory or questionable, you have identified an auditable item If you recognize a required condition that is not on the audit sheet, add it to the sheet for the next audit Fill out the audit form and assign a champion to correct all adverse items observed Assign someone to conduct an audit at irregular times to ensure that all corrections and gains can be maintained These, then, are usable audits worksheets that can be used as a base for the improvement of suppliers whether they be internal or external to the parent organization They have been proven to be useful and easily applicable to the specified activities, controls, and methods required to provide a satisfactory product or service The can also be used to recognize other potentially harmful activities that can be added to a revised audit form They should be included in a continuous improvement program to aid both internal and external suppliers Now, it is obvious that all audits could not be contained in this book because of the many different manufacturers and service suppliers that have sundry operations in various fields It is now up to the reader to create applicable audits that can be of the most benefit to your organization, enhance suppliers, and improve profits The next chapter contains a summary of the information presented in this discourse chapter fifteen Summary In summary, there are many easy steps that can be employed to facilitate supplier enhancement Suppliers should be considered to be valued partners because they have a significant impact on the profitability of both their and the customers’ top and bottom lines Unfortunately, some suppliers not have the experience necessary to provide a qualified product economically If a supplier is not sufficiently capable or sophisticated, the costs associated with the product they provide to the customer can be excessive In other cases, the provision of substandard services or products can result in final customer dissatisfaction that will lead to reduced sales These expensive and unnecessary costs can be reduced through the application of supplier mentoring The effort involved in advising suppliers will have a direct impact on the performance and profitability of the customer and supplier organizations There are many different methods of enhancing the supplier base One of these is the use of mentoring when it is required The style of supplier tutoring is dependent on whether the supplier is internal or external to the customer organization Internal suppliers—that is, operations that precede a following operation—can be corrected within the supplier base by providing employee training This training involves the application of the Trilogy of Supplier Enhancement philosophy There is a further requirement to apply the Why Sequence as an economical means of reducing scrap, rework, and unnecessary work In addition to determining why a problem was caused, these three problemsolving steps require answers as to why the problem was not captured and why the problem was not prevented in the planning stages External suppliers, on the other hand, must be guided to accept their responsibility to provide the customer with a quality low-cost product or service There are many means to guiding external suppliers, including providing up-front expectations and holding quality meetings or symposiums that suppliers are required to attend All of these facets of requiring supplier services must be recognized and addressed These include A supplier agreement that absolutely no changes will be tolerated once a contract is established without prior customer approval This includes any changes to secondary suppliers, materials, tools used, location, methods, controls, tests, operation sequences, heat treatment, or any other anomaly not previously approved The incorporation of the Trilogy of Supplier Enhancement philosophy into mandated use and application by the entire workforce; the use of the Why Sequence to solve problems The practice of keeping accurate records that facilitate problem-solving skills by not only revealing why the current practice has failed but also why it was not recognized and why it was not prevented The creation and application of supplier audits to ascertain that new and experienced suppliers are qualified, competent, and effective in their actions; that they possess the credentials, elements, record-keeping, readiness, and problem-solving skills to effectively service the customer The use of audits to justify the continued acceptance of the methods employed by the supplier and the customer Recognition that it is necessary to trust suppliers but it is also necessary to verify their actions Now is the time to begin or to continue supplier enhancement It is not difficult or costly to apply these concepts The understanding and application of the above six precepts will greatly improve the effectiveness of a customer organization Of course, there is a necessity to ensure that all corrective actions are maintained Accurate record keeping and the use of a champion quality assurance philosophy will ensure success and provide an acceptable means of creating a lessons learned attitude that can be applied in other areas So, in review, the following information has been illustrated Supplier differences between internal and external suppliers are discussed and the common methods to improve both their performance and relationships are provided Techniques are given to simplify supplier problems and to innovate significant solutions The different methods employed by qualified suppliers compared with those less experienced are espoused The materials presented provide an understanding of how supplier improvements can substantially improve top- and bottom-line performance Examples, photos, forms, lists, and audit worksheets provide information and illustrate how to take a quality management approach to facilitate supplier improvements A series of worksheets is provided that can be used to establish an audit enhancement base at the customer or supplier organization I sincerely hope that you find this information to be useful May you have great success in its application Notes Chapter two * The information within does not describe those methods or procedures of design FMEA, process FMEA, or control plans that may be mentioned The operational description of these methods can be found in the Quality Control Handbook by J M Juran, published by McGraw Hill, Inc., New York Chapter five * The information within does not describe those methods or procedures of DFMEA, PFMEA, or control plans that may be mentioned The operational description of these methods can be accessed in the Quality Control Handbook by J M Juran, published by McGraw Hill, Inc., New York * The information within does not describe those methods or procedures of the PFMEA that may be mentioned The operational description of these methods can be accessed in the Quality Control Handbook by J M Juran, published by McGraw Hill, Inc., New York * The information within does not describe the methods or procedures of control plans mentioned The operational description can be accessed in the Quality Control Handbook by J M Juran, published by McGraw Hill, Inc., New York Appendix The following terms were used in the samples and explanations provided Audit A visual observation of the conditions present to determine if items requiring compliance are being followed CFR The document and requirements to comply with the Code of Federal Regulations Control plan The designated system to be employed to manufacture a product or provide a service in a specified manner, which includes the methods, checks, tests, and criteria to be used Corrective actions Those actions that are to be taken to minimize or eliminate adverse conditions from occurring again once a problem is recognized Dead time A term used to denote the period when an operation cannot be performed due to assignable but preventable causes Defect Any anomaly that detracts from the acceptability of a product or service It might be a flaw, a feature, or an occurrence DFMEA Design failure mode and effect analysis An instrument used in the design phase of a product that considers the failure modes associated with the design of the product DPMO Defects per million opportunities An indication of the likelihood of defects occurring External supplier Those suppliers that are from outside of the customer organization Internal supplier Those suppliers that are from inside the customer organization and are located upstream of the manufacturing or service process ISO The International Organization for Standardization, which develops and publishes international standards Lockbox A device that is used to capture and hold a defective part until an evaluative determination can be made No change without prior approval The understanding that a product, service, or method, no matter how insignificant, will not be made without the authorization of the customer base Perusal A cursory inspection or glance at a component or service to determine its acceptability or obvious deficiencies PFMEA Process failure mode and effect analysis An instrument used in the process planning phase of a product or service that considers the failure modes associated with and the methods used to control the outcome of the product used PPM Parts per million, as a frequency of occurrence Problem data sheet A problem-solving tool that is developed by the customer and the supplier to supply all the pertinent information available to define the current problem under review Problem resolution sheet A form that can be used to gather important information relative to the problem at hand Process parameters Those data or other information that describe the limits and operation of the process QS Quality system, established and developed to control the quality output of a service or product Sequester The impounding of suspect product that requires relocation to a secure area to prevent it from being processed or shipped until a determination can be made Spill A condition that allows defective materials to be shipped to a customer Supplier Those involved in supplying a component, product, or service that is upstream of the current operation Symposium A customer-provided supplier meeting where differences are resolved relating to supplier quality performance Table of comparison An analysis tool that can be used to differentiate components when a comparison is rendered between samples of five, allowing a decision to be made Tier supplier A supplier that provides a product to a customers’ main supplier—that is, a supplier two stations upstream Trilogy of Supplier Enhancement A trio of requirements that can lead to the improvement of internal and external suppliers These include a cursory review of supplied parts, the requirement to make good product, and the sequestration of questionable inputs, products, or services Why Sequence A structure that requires not only the cause of the problem to be determined but also requires a determination of why the problem was not prevented in the planning process and why the defect was not captured when it was created Work instructions Individual workstation or employee instructions that designate how the work is to be performed with the tools and methods specified Worksheets Sample audits that can be used as a basis for creating and conducting applicable audits Index A Audit charts, 96–125 Audit criteria, 149–177 example, 149–177 overview, 149 Auditing, 90, 94–96 C Certified supplier, 50 Compliance to customer requirements, 127–128 availability of records and information, 129–130 documentation of quality system, 128 implementation of quality plan, 128–129 management participation, 130–131 items of, 79–80 and performance readiness, 133 Container use, and practice, 68–69 Corrective action plan, 127 Criminal activity, 12–13 D Damaged containers, 68 Date code interpretation, and use, 52 Deliverables, 93–96 Design failure mode and effect analysis (DFMEA), 33, 77 Do check, 2, 39, 47, 79–80 Documentation, 128 Do Hold, 2, 16, 39, 79–80 Don’t Create, 2, 16, 39, 79–80 E Employee responsibilities, 39–40 Engine covers, leakage from, 80–81 External suppliers, 21–22, 23, 179 F Failure mode and effects analysis (FMEA), 13 Failure modes, 50–51 Finished material metrics, 134–135 FMEA, see Failure mode and effects analysis (FMEA) Front cover oil seal leak, 90 H Human contact, 40–41 I Illinois Environmental Protection Agency (IEPA), 62 Inspection elimination, 37–39 Installation concerns, 60 Internal suppliers, 21–22, 23, 179 L Leaking front seal problem, 86–90 M Maintenance concerns, 60–61 Management participation, and actions, 130–131 Mandate origination, 49–50 Manpower concerns, 60 Manufacturing metrics, 132–133 Mentor review, 46–47 Mixed parts prevention, 72–77 O Operational issues, 133–134 Opportunities, 67–78 container use and practice, 68–69 improvement, 67 method used, 77 other concerns, 77 overview, 67 people concerns, 72–77 prevention, 67–68 sorting concerns, 69–72 O-ring problem, 90–92 P Pareto listing, 41 PFMEA, see Process failure mode and effect analysis (PFMEA) Plant visits, and tours, 135 Prevention, 93 Problem resolution aids, 79–92 auditing, 90 front cover oil seal leak, 90 history, 80–86 items of compliance, 79–80 leaking front seal problem solution, 86–90 O-ring problem, 90–92 overview, 79 Problem-solving meetings, 41–45 Process control plans, 34–36 capability, 35 procedures, 35 work instructions, 35 Process failure mode and effect analysis (PFMEA), 33–34, 52, 77, 128, 140–141, 142 Process flow plan, 52–55 Product containment, 51–52 Q Quality process, 132 Quality spill, 18 R Raw material metrics, 134–135 Record keeping, 49–55, 129–130 date code interpretation and use, 52 description of failure modes, 50–51 mandate origination, 49–50 overview, 49 process flow plan, 52–55 product containment, 51–52 statement of problem, 50 Red dye problem, 25–26 Risk priority number (RPNs), 140, 142 S Seal automation loading system, 89 Seal installation, 80–81 Sorting operation, 69–72 Supplier, certified, 50 contract approval, 49 credentials, 21–29 disappearing materials, 27 narrative on, 23–24 needing improvement, 24–25 negligence, 28 overview, 21 red dye problem, 25–26 traits, 23 types of, 21–23 elements, 31–36 overview, 31 process control plans, 34–36 traits, 31–34 enhancement, 15–20 best and worst practices, 15–16 circumstances, 17 conditions, 18–19 established practices, 18 important action, 17–18 overview, 15 problems encountered, 19–18 errors, 7–11 external, 179 improvement, 2–3 internal, 179 mentoring, 179 overview, readiness, 57–66 installation concerns, 60 issues and concerns, 61–62 maintenance concerns, 60–61 manpower concerns, 60 other features, 59 overview, 57–59 supply chain concerns, 60 -related problems, 40–48 conducting problem-solving meetings, 41–45 human contact, 40–41 problem resolution, 47–48 symposiums, 46 visits, 45–46 specific criteria, 127–136 compliance and performance readiness, 127–133 contract requirements, 131 corrective action criteria, 127 manufacturing metrics, 132–133 operational issues, 133–134 overview, 127 plant visits and tours, 135 quality process, 132 raw and finished material metrics, 134–135 workstation operations, 131–132 tools for improvement, 137–147 achieving production schedules, 140–142 causes of failure, 143–144 document provided for flywheels, 142–143 flywheel final resolution, 144–146 overview, 137–138 problem prevention, 140 types of problems, 11–13 assessed severity, 11–12 criminal activity, 12–13 inconvenience, 11 Supply chain concerns, 60 System evaluation, 93–125 audit charts, 96–125 deliverables, 93–96 overview, 93 T Tier 1supplier, 8, 21–22 Tier 2supplier, 8, 21–22 Trilogy of Supplier Enhancement philosophy, 179, 180 W Workstation operations, 131–132 ... Chapter Supplier credentials Types of suppliers Supplier traits Narrative on suppliers Suppliers needing improvement Red dye problem Disappearing materials Supplier negligence Summary Chapter Supplier. .. for profit improvement in capturing the low-hanging fruit obtainable through supplier improvement Therefore, businesses large and small could improve profitability through the application of supplier. .. undertaking of supplier enhancement It has been written to transfer information about the methods that can be used to improve profitability through the application of supplier modification Suppliers