The Fundamentals of Supplier Quality Management Basics (SQM)

nts-unitek | 10/3/24

Supplier Quality Management (SQM) is essential to ensuring your products and services meet the design requirements and production delivery schedule. At its core, this process involves overseeing the quality of materials you receive from suppliers and confirming they meet your company’s requirements and specifications. SQM can make a pivotal difference in product quality while helping your company maintain a competitive advantage.

Understanding Supplier Quality Management Basics

SQM is crucial in manufacturing, where the quality of your final product largely depends on the quality of the materials or parts you use in production. Part of SQM involves conducting supplier audits, which are systematic assessments of the suppliers product, process or overall quality system. Overall, understanding the fundamentals of SQM includes setting clear quality expectations, partnering with the right suppliers, and monitoring their performance and fostering continuous improvement.

Benefits of SQM

Organizations can spend 15% to 20% of their gross revenue correcting quality-related issues. Supplier quality management can help your manufacturing operations become more accurate, efficient and competitive. The benefits of SQM include:

Improves product quality: Ensuring suppliers satisfy strict quality standards helps you produce higher-quality products with fewer defects and recalls.
Reduces costs: Finding and addressing potential quality concerns early in the supply chain reduces your risk of costly rework or warranty claims.
Minimizes risk: SQM lowers the risk of receiving subpar materials that can cause regulatory noncompliance or safety concerns.
Strengthens supplier relationships: SQM helps you partner with reliable suppliers, streamlining contract and vendor management.
Maintains supply chain integrity: SQM includes measuring past Quality and On Time Delivery performance metrics. Details can be evaluated at a detailed part number level or at an aggregate level covering multiple part numbers.
Cultivates a strong customer base: Improving supplier quality increases product quality, which meets customer expectations and creates customer loyalty.

The Supplier Quality Management Process

Ensuring your suppliers consistently meet the necessary requirements and standards in their goods and service delivery starts with planning and selection. Choosing the right suppliers will simplify your SQM processes and create more product consistency:

Review their track records, quality history and how they handle corrective action responses for nonconforming product.
Compare supplier pricing and negotiate competitive rates, making sure their fees reflect their overall reliability and quality.
Consider their on-time shipment performance, vulnerability to disruptions like production delays or material shortages, and responsiveness to unforeseen challenges like delivery delays.
See how the supplier follows industry standards including compliance to laws and regulations. If they are in good standing, your risk of receiving subpar materials will be lower.
Check if they comply with manufacturing regulatory standards, such as ISO 9001 and AS9100.

Measuring Supplier Quality

You need a standardized set of metrics to evaluate your suppliers’ performance, which also lets you review their historical performance. It is essential to keep these assessments transparent — doing so helps you build and maintain a good relationship with stakeholders in your supply chain. Common performance metrics you may use include:

On-time delivery rate: Track the percentage of supplier deliveries that arrive on time. Divide the number of on-time deliveries by the total deliveries and multiply by 100.
Defect rate: Calculate the percentage of defective products from the total items you receive. Divide the defective items by the total number of items and multiply by 100.
Conformance to specifications: Evaluate the percentage of products or services that meet your required specifications or standards. Divide the number of conforming products by the total number of products you receive by each supplier and multiply by 100.
Responsiveness: You can measure response rate by dividing the total time taken to respond to requests by the number of requests you submit. For example, if you submit 10 requests in a month and have a total response time of 50 hours, the average response rate would be five hours per request.
Acknowledgment rate: Track how often suppliers acknowledge receipt of requests by dividing the number of acknowledged requests by the total number of requests and multiplying by 100.

Quality Management Best Practices

Quality management is vital to keep your production moving efficiently. SQM is a part of quality management. This multi-step process relies on clear communication, collaboration and software tools. Adopting best practices helps your business optimize its SQM and overall success. Key components of SQM best practices are:

Supplier selection: You should choose suppliers based on their ability to meet your quality and production requirements. During the selection process, assess their capabilities, certifications, history, and scalability potential.
Quality agreements: Set formal contracts or agreements that outline your quality requirements and flow down’s to their sub tiers along with the supplier’s responsibilities and procedures for handling any potential quality issues.
Problem resolution: Follow a structured approach to identify, address and resolve quality issues. This set plan should include the root analysis and corrective actions your supplier should take.
Documentation: Keep accurate records of all quality inspections, communications and audits to support your accountability efforts and serve as a basis for continuous improvement.

Challenges in Supplier Quality Management

One common opportunity for growth and improvement in your supplier management program is assuring your suppliers consistently align with the quality requirements and industry standards. This requires ongoing effort and coordination, as keeping track of these needs across various suppliers with diverse capabilities and processes can be time-consuming. Addressing and resolving any quality issues can be other challenging endeavors, requiring open communication channels and strong partnerships.

A third-party service provider is instrumental in helping your business mitigate any challenges in supplier quality management. They offer specialized expertise and resources, providing thorough evaluations, continuous improvement and effective problem resolution. Partnering with a reputable supply chain management team can give you valuable insights and enhance your overall suppliers’ quality management efforts.

Partner With NTS Unitek for Supplier Audits and Inspections

Your suppliers’ performance affects the performance of your entire supply chain, so proactive measures to identify and improve gaps in the process are essential. SQM is about maintaining consistency and reliability throughout your supply chain to make sure the products you manufacture meet regulatory requirements and customer expectations.

NTS Unitek has over 45 years of experience helping original equipment manufacturers (OEMs) and suppliers in various industries manage their processes. Our technical specialists have specialized tools and a regimented plan to help you effectively assess and manage your supply chain. Whether you work in industrial manufacturing, aerospace or another industry, we can handle your supplier performance management so you can focus on your core business competencies.