Introducing a Supplier Teaming and Quality Program

Author(s):

Edward J. Kovac, C.P.M.
Edward J. Kovac, C.P.M., Executive Director, Bellcore, Piscataway, NJ 08854, 908/699-7999

81st Annual International Conference Proceedings - 1996 - Chicago, IL

Introduction. "Manage your suppliers or they will manage you" was the motivation for a new supplier teaming and quality program at Bellcore. The program reinforces the principal that it is the responsibility of the customer and Purchasing to make sure that maximum value is obtained from suppliers.

Bellcore is a telecommunications software and consulting company which procures over $350 million in goods and services annually from over 1000 suppliers. Improved vendor management was viewed by upper management as a key area for improvement as the company strove to become more competitive.

The company consists of five functional areas: Software Development; Telecommunications Consulting; Applied Research; Marketing/Sales; and Finance/Administration. The initial team that addressed improved vendor management included Purchasing in Finance/Administration and quality managers in Software Development, the largest of the five functional areas.

A three-step strategy was developed for introducing a Supplier Teaming and Quality Program (STQP)at Bellcore. It included the following:

• Managing "critical supplier" quality
• Supporting "standard environments," both development & office automation
• "Teaming" with a few key suppliers

The objectives were, first, to increase the value of procured goods and services in the Software Development area of the company, and second, to expand the program throughout the remainder of the company.

Establishing a Steering Committee. The Supplier Teaming and Quality Program was developed to be consistent with an existing corporate quality program, which included ISO 9000 certification as a major goal. It was directed by a STQP Steering Committee initially comprised of Purchasing Managers and Software Quality Managers. The Purchasing managers acted as the primary interface with the suppliers whereas the Software Quality Managers interfaced with the internal product users, Subject Matter Experts (SME's). The Vice-President of Software Systems emerged as the senior management champion for STQP and was instrumental in launching the program in his area of the company.

Supplier Categorization. The Software Development Area where STQP was being introduced uses over 400 suppliers to provide computer hardware, software, maintenance, consulting, etc. These products and services support both software product development and the internal office automation infrastructure of the company.

The first step in supplier management involved classification of suppliers into three categories: critical (about 10%); major (about 20%) and minor (about 70%). The STQP strategy was to focus more attention on the "critical suppliers" to achieve the greatest impact on the corporate bottom-line, and to single out a few of them for more intense "teaming".

STQP Strategy #1: Manage Critical Supplier Quality. A five-pronged approach to managing "critical supplier" quality was developed by the Steering Committee and involved the following:

• Supplier Quality Report Cards
• ISO 9000 Status Tracking
• Support Response Criteria
• Issue Resolution Process
• Supplier Recognition Program

Supplier Quality Report Cards were issued semi-annually to internal users (subject matter experts). SME's rated suppliers/products in four basic categories: Operability; Defect Analysis; Documentation/Training; and Product Maintenance. Four rating grades were used; "exceeded"; "met"; "nearly met"; and "missed". Using a four point system each supplier's "report card average" was calculated. Hence, supplier grades for a given rating period could be compared as shown in Figure 1.

Figure 1: Critical Supplier Report Card Grades

In addition, a particular supplier's grade could be tracked over time to see if it improved or declined. Following each grading period, Purchasing set up conferences (or conference calls) with each critical supplier to review recent report card results and to suggest future actions.

The ISO 9000 Status of each critical supplier was also determined. If they were ISO 9000 certified, procurement could proceed. If they were not, a schedule to achieve certification (or equivalent) had to be specified and included in any contracts with the supplier.

Support Response Criteria were developed by the SME's for each given product/service on the critical list. Purchasing negotiated with the vendor to include these criteria in the contract. These support response criteria served as quality benchmarks for evaluating customer service.

An Issue Resolution Process was developed which escalated to higher levels of management as time progressed and resolution was not achieved. The final step in the process involved written documentation of the issue from the Executive Director of Purchasing to a high level executive in the supplier company. This invariably achieved results when all other avenues had failed.

A Supplier Recognition Program was instituted to name a "Bellcore Supplier of the Year". Recognition awards are presented to supplier representatives at an annual luncheon attended by appropriate SME's, Quality Managers, and Purchasing Managers.

STQP Strategy #2: Support Standard Environments. Standard environments (hardware and software) were specified for both software development and corporate office automation. These specs were developed by the appropriate SME's and Quality Managers in the Software Development Area where STQP was introduced at Bellcore. The STQP Steering Committee then published a list of approved product/suppliers of both computer hardware and software. Any purchase requisition for a product outside the approved list was flagged in Purchasing and required special senior management approval.

For example, a standard office automation environment was specified and implemented which included:

• Standard Desktop PC
• Standard Laptop PC
• Recommended Peripherals
  • printers
  • multi-media package
  • external CD-ROM
  • etc.
• Recommended Applications Software
  • word processor
  • spreadsheet
  • graphics
  • etc.

The benefits to the corporation of such a standard environment include:

• reduced first cost (volume discounts)
• reduced maintenance time/cost
• reduced training costs
• improved partnering with fewer suppliers

STQP Strategy #3: Team with a Few Key Suppliers. A few of the most critical suppliers were singled out for special "teaming" arrangements. The process involved the following:

• defining a close working relationship in a "teaming agreement"
• aligning development processes and schedules
• identifying mutual commitments/benefits
• conducting periodic Teaming Reviews

Initial teaming agreements were established with the following:

• embedded software supplier
• computer center mainframe supplier
• workstation hardware/software supplier
• PC re-seller for desktop office automation

These teaming arrangements took some time to establish and get up and running, but in the long run have proven to be extremely beneficial to both parties. Benefits included faster resolution of performance issues, more customer input on the priority of potential new features and shared (expedited) testing of new features.

Implementation Process. A detailed STQP Implementation Plan was developed by the Steering Committee and presented by the STQP Senior Management Champion to his peers. To lead by example, he also championed ISO 9000 certification of the Bellcore software development process (including Purchasing).

A "Supplier Data Base" of critical suppliers was established by Purchasing which recorded report grades over time, ISO 9000 status, contract information, etc. Also, a "Supplier Alert Data Base" was established by the Software Quality Managers to provide real-time access to supplier and other flash alerts regarding recent product problems, fixes, workarounds, etc.

Finally, after the first year of implementation, a STQP Communication Plan was developed to explain what had been achieved in the Software Development Area and to lay out a plan to extend STQP throughout the remainder of the company.

Conclusion.
Overall STQP was rated as highly successful by all concerned, including Suppliers, Internal Clients and Purchasing.
The Suppliers liked STQP because it:

• Provided timely feedback on their products and services
• Identified opportunities for new products/features
• Identified opportunities for joint activities (e.g. testing)

The Internal Purchasing Clients liked STQP because it:

• Used Purchasing as lever on suppliers
• Supported ISO 9000 certification
• Reduced their costs via standardization

Purchasing liked STQP because it:

• Improved partnering with internal clients
• Improved communication with suppliers
• Focused on fewer, better suppliers

A key element in the successful implementation of STQP was the emergence of a Senior Management Champion (outside of Purchasing). He re-enforced the idea that internal clients should team with Purchasing and allow it to take the lead in interfacing with suppliers. Another key finding was the realization that most suppliers responded positively to legitimate criticism and viewed STQP as a way to minimize confrontation. Finally, Purchasing, by stepping up to a leadership role in the new program, benefited from STQP because it increased Purchasing's value, respect, and visibility within the company.

REFERENCES

1. Dwyer, F.R., Schurr, P.H. and Sejo Oh, "Developing Buyer-Seller Relationships," Journal of Marketing, 51, (April 1987): 11-27.
2. Ellram, L.M., "Defining Strategic Alliances," NAPM International Purchasing Conference Proceedings, May, 1993.
3. Ellram, L.M., "Life Cycle Patterns in Industrial Buyer-Seller Partnerships," International Journal of Physical Distribution and Logistics Management, 1, 2, (1990): 1-19.
4. Ellram, L.M., "A Managerial Guideline for the Development and Implementation of Purchasing Partnerships," The International Journal of Purchasing and Materials Management, 27, 3, (Summer 1991): 2-8.
5. Hendrick, T., and L.M. Ellram, Strategic Supplier Partnering: An International Study, Tempe, AZ: Center for Advanced Purchasing Studies, 1992.
6. Landeros, R., and Monczka, R.M., "Cooperative Buyer-Seller relationships and a Firm's Competitive Posture," Journal of Purchasing and Materials Management, 25, 3, (Fall 1989): 9-18.
7. Spekman, R.E., "Strategic Supplier Selection: Understanding Long-Term Buyer Relationships," Business Horizons, 31, 4, (July/August 1988): 75-81.

Back to Top