Focus topics

Improve the quality of suppliers

By Renaud Anjoran, China Manufacturing Consultants (CMC)

A survey by the American Society for Quality showed that the biggest hurdle buyers face in improving their supply chain quality is “working together with suppliers to improve performance.” That was in 2016, and we believe very little has changed.

Many companies have tried various approaches to improve their key suppliers. This is especially difficult when these companies need to change to a so-called “zero defect” goal and their suppliers refuse to even take the first step.

What is Zero Defect?

Zero Defect is a quality goal that refers to improving manufacturing systems to the point where zero or nearly zero defects are shipped to buyers. It is a way of not only satisfying buyers but also eliminating all wasted activities and materials associated with defective manufacturing. Zero Defect can eventually become a mindset where the entire organization does not tolerate any form of poor quality.

Based on our experience guiding our clients through transformation projects, you will find our practical advice below. It starts with the buyer acting decisively. When consultants are involved, we also share some good practices.

What the buyer must do

If the buyer has no influence over the supplier and if the buyer is not willing to make consistent decisions, the switch to zero-defect conditions is not likely. Let us explain this in detail.

We should mention that there is one important requirement. As a buyer, you want your supplier to be fully aware of your quality standard and agree with your assessment of their product quality. Without this prerequisite, the supplier’s teams will focus on differences in their assessment and the definition of defect rather than working on improvements.

We have observed buyers taking several approaches that have been successful in convincing key suppliers to initiate a quality improvement program and ultimately move to a zero-defect mindset.

Here are examples of successful approaches.

Let the supplier know that they are at risk of losing your business:

  • Develop at least one backup source and make sure they can provide good quality.
  • Collect data on the number of PPM (parts per million) defects and make sure the supplier knows this. Also make sure to communicate your target.
  • Warn the supplier: If there is no significant improvement over the next six months, reduce their business by X percent (e.g., by 20 percent after six months, then by another 20 percent after 10 months, etc.).
  • In parallel, offer to help them improve their systems and processes.

Make the situation uncomfortable for the supplier:

  • Secure a backup source (as is usually the case in automotive supply chains).
  • Collect data about the number of PPM defects, but also about all the costs it causes to your company.
  • Charge the supplier for some/all of these costs.
  • Also, if you encounter multiple defects, force the supplier into containment (meaning they pay an inspection agency to inspect 100 percent of the parts/products until that agency finds zero defects).
  • Switch from traditional acceptance sampling (based on AQL or Acceptance Quality Limits) to an acceptance on zero plan. Your inspectors will then need to review fewer samples, and you will save on evaluation costs.
  • In parallel, we offer to help them improve their systems and processes.

There are ways to ensure that these approaches are more likely to succeed:

  • The buyer notifies the supplier of any costs incurred due to defects.
  • A buyer’s representative (who can be a consultant) spends a few days in the factory explaining how poor quality adds cost to the factory’s bottom line.
    Note: The supplier may not formally acknowledge these comments for fear that the buyer’s procurement staff will use this information to drive down prices. As a rule, when representatives of the buyer’s procurement department are involved, the supplier tends to be less open, provides fewer data, and is not as willing and ready to acknowledge the results.
  • A buyer representative begins to aid the supplier with some process and quality development work required to improve quality. This may take the form of go/no-go gauges, test fixtures, inspection equipment, etc. The supplier rarely opposes such assistance if there is a direct and measurable impact on the percentage of defects and if it does not add significant cost to their operation.
  • In some cases, to achieve Zero Defect, the buyer’s designers must make significant changes to their operations. Heeding factory difficulties and creating simpler designs can go a long way toward showing good will and getting a supplier to cooperate.

A good process for consultants to support the transition

If you decide to involve consultants, taking some “best practices” to heart can go a long way.

The lead consultant should arrange a management meeting at the factory to introduce his team and explain how he can aid the factory to achieve its goals.

Careful preparation and good communication are key:

  • Management needs to feel that consultants understand their operational problems (which requires a fairly thorough initial assessment) and have the expertise to address these issues.
  • If the factory’s management opens up and shares their challenges and goals, this can form the basis for a successful plan. In general, it is better to take a path that is important to the factory’s top management to reach their strategic goals, if this is a way to move much closer to zero defect. The breadth and depth of change required within the organization is only possible with the full support of its owners and managers.

How do I begin?

Many companies lack the confidence to apply pressure on some of their key suppliers. This is understandable.

A good start is to engage directly with your key suppliers and find a contact who is motivated – for example, senior management will become aware that change is necessary, and there is the prospect of additional business when their performance improves.

Once a project with one supplier has shown positive results, you’ll have more confidence to push your other suppliers harder. And as you gain experience implementing operational change in one part of your supplier base, you will be better at selecting the right candidates and convincing them to go the way you want.


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