The cost of business has increased since 2001, which is why the stat that unplanned downtime costing $260,000 per hour is so alarming. And, with 47% of manufacturers attributing recalls to supply chain issues, the we know it’s a broad enough problem that almost every company could stand to improve their quality management processes a bit.
The good new is there are companies making changes. They’re implementing systematic supplier quality programs and cutting non-conformances by 50%, preventing recalls and achieving zero regulatory findings.
Knowing this, we decided to look at what they’re doing to improve supplier quality and what you can learn from it.
Here’s the 90-day action plan we came up with.
Weeks 1-4: Audit and Baseline Your Current State
Before you can improve supplier quality, you need data. Start by mapping your supply chain beyond Tier-1 suppliers. Create a visual diagram showing which suppliers touch critical components and which ones could halt your line if they deliver defects.
Owen Mumford increased visibility into their extended supplier base, uncovering supplier-driven quality risks that had previously gone unmanaged. This visibility allowed them to implement controls that eventually helped them achieve zero FDA 483s across all four manufacturing sites.
Next, pull actual performance numbers from your systems. Pull defect rates from incoming inspection records, calculate on-time delivery percentages from your ERP and document incident frequency over the past 12 months. Don’t rely on relationship perceptions or gut feelings. Trane Technologies used centralized supplier data and audits to surface quality performance issues that were previously difficult to see across a distributed supply base.
Calculate your true cost of poor supplier quality by tracking rejected parts, expedited freight charges, line downtime hours, engineering investigation time and administrative overhead. Research shows the cost of poor quality is often 15-20% of operating costs — and sometimes as high as 40% — but most manufacturers have never quantified what supplier quality problems actually cost them. Run a simple analysis that captures these costs over the past quarter to establish your baseline.
Finally, create supplier scorecards tracking parts per million (PPM) defective, on-time delivery percentage and responsiveness to quality issues. Share these scorecards internally first to identify which suppliers need immediate attention.
Weeks 5-8: Implement Quality Gates and Inspection Protocols
Now build the barriers that prevent defects from entering your operation. Start by deploying risk-based incoming inspection protocols. Implement 100% inspection for new suppliers or those with recent quality issues, sampling inspection for established suppliers with good track records and dock-to-stock only for suppliers who’ve demonstrated six consecutive months of zero defects.
Create quality gates in your procurement process by requiring suppliers to submit quality plans before any purchase order is issued. These plans should detail their inspection methods, process controls and how they’ll handle non-conformances. Require material certifications for critical components and evidence of statistical process control for key characteristics.
Establish a rapid response protocol for when supplier issues occur. Document everything in a system that captures supplier quality data automatically. During regulatory inspections or customer audits, documentation is sometimes your only defense.
Owen Mumford’s move to automated quality documentation was instrumental in achieving zero FDA 483s across all four of their manufacturing sites.
Week 9-12: Deploy Scorecards and Prevention Systems
Transform your program from reactive to proactive by launching supplier scorecards that share monthly performance data. Calculate and share each supplier’s PPM defects, on-time delivery percentage and responsiveness score. Rank suppliers into clear categories, such as preferred, acceptable, development needed, disqualified, and tie these rankings to actual business decisions like quote opportunities and purchase order allocation.
Conduct on-site audits of your critical suppliers’ quality management systems, process controls and corrective action effectiveness. Schedule these audits quarterly for your highest-risk suppliers and annually for others.
Build genuine partnerships with your best suppliers by providing training on your quality requirements and collaborating on process improvements. When suppliers understand why your specifications matter (and not just what they are) compliance improves dramatically. Consider embedding a quality engineer at your most critical supplier sites.
Finally, you could consider requiring suppliers to give you early warning of any process changes, material substitutions or events that could impact quality. Make this a contractual requirement and provide a simple notification form or portal where suppliers can report these changes before they ship potentially affected material. Though, this may not work in every situation.
The ROI You Can Expect
As you saw above, companies executing this 90-day offensive are seeing measurable results. When you prevent even one major recall, you’ve paid for your entire supplier quality program many times over.
Prevented downtime delivers immediate savings. Remember that $260,000-per-hour cost of unplanned downtime? Supplier quality issues are a leading cause of line stoppages. Every prevented incident saves more than your program costs.
Your Next Steps
Start the audit phase next week. Pull supplier data, calculate baselines and identify your top three problem suppliers.
Implement quality gates for those three first. Require incoming inspection, demand quality plans and establish rapid response. Once proven, scale across your supply base.
The manufacturers taking action today prevent tomorrow’s recalls, stoppages and warranty claims. Your supply chain is either your biggest risk or strongest advantage.
The next 90 days determine which one it becomes.
And if you’re looking to replicate the results using the same tools as the companies mention in this blog, check out Reliance.
