Procurement quality

SmallBusiness.com: The free small business resource

Procurement quality is a measure of how well the procurement organization performs, as well as, a measure of the quality of the products or services it purchases. In procurement, "quality" is defined as the contractual obligation formed with suppliers to provide products or services that conform to given specifications.

Contents 1 Overview 2 Quality assurance 3 Code of ethics 4 Terminology 4.1 General 4.2 NASA Acronyms 5 Supply chain quality 6 Procurement QA manual 7 Procurement quality management 8 Measuring procurement quality 8.1 Baseline measures 8.2 First-order measures 8.3 Second-order measures 9 Quality standards 10 See also 11 External links 12 References

Overview

Procurement quality includes any and all aspects that involves the purchasing of products. The definition of procurement quality may sound simple but it is complex. It sounds simple because the definition assumes that specifications for design and production are well defined, including the determination of product comformance, measurement procedures, reliability and maintainability, packaging and delivery, environmental and legal issues have all been given required consideration. That is a complex assumption. ^[1]

There are key quality aspects of the procurement process itself. Ons such aspect is good communication between the purchasing agents. To ensure good communication, the agents should: learn about the sources; use site inspections; use a process based on objective supplier evaluation; and make decisions based on all factors, including price.

The role of Quality Assurance (QA) in Procurement has evolved over the years, resulting in QA becoming an integral element of material purchases. Today, QA engineers, electronic technicians, mechanical inspectors and administrative support personnel interface with numerous functional organizations, programs, suppliers and customer representatives to assure that customer expectations are satisfied with respect to purchased material.

Typically, about 80% of the cost of a product is determined when it is designed. Procurement Quality Engineers familiar with supplier capabilities and process limitations provide valuable information to design engineers, contributing to realistic requirements in line with cost targets. Active participation in the design process additionally enables the quality engineer to plan certification programs to eliminate unnecessary inspections and tests.

Procurement QA manages supplier quality performance through a combination of traditional and advanced methodologies. Traditional activities focused on defect prevention are pre-award surveys, requirements flowdown, and risked-based surveillance. A strong performance monitoring/corrective action system directly linked to all factory operations supplements these processes. Advanced practices such as supplier certification, key product characteristics management, statistical process control, design of experiments, etc. are constantly gaining wider application.^[2]

Quality assurance

Quality assurance plays a significant role in the procurement department's daily activities. To a large extent, it drives many of the fundamental processes. Taken in its broader functional terms, quality assurance is a set of activities through which one can define, measure, evaluate, and accept the products and services purchased, often within the structure of the organization's policies and standard operating procedures. Quality assurance also includes the formal process of identifying and correcting specific problems and deficiencies, and the methodology used to do so.

Large organizations have separate departments called quality control or quality assurance and often have special job titles that accompany the function, such as quality engineer or supplier quality engineer. Supplier quality and manufacturing quality sections are typically distinct within the enterprise, with the supplier quality function generally included within the procurement organization. In addition, to maintaining incoming inspection processes, supplier quality engineering groups have the responsibility for identifying, monitoring, and correcting quality problems originating within supplier's operations.^[3]

Code of ethics

There are also informal code of ethics established by ASQC for the "partnership" between agents so that both customer and supplier have an interest in obtaining the same goals.^[4]

• Personal behavior - Dealings between quality control and quality assurance functions must be conducted in a manner to credit the companies and individuals involved. Avoid compromising relations between quality functions of both cutomer and supplier.
• Objectivity - Both the customer and the supplier should address the fulfillment of all contractual requirements and objectives. The legal aspects of a contract can not be ignored, but there also is a moral obligation to achieve a satisfactory end product. It is to the mutual advantage of both parties that the objective attained is accompanied by a fair and equitable cost distribution. In this case, the customer and the supplier need to focus on what is required by each to achieve the desired outcome. If the customer is requesting some requirements that incur additional expense, that customer should expect to pick up part of those expenses.
• Product definition - The customer should furnish a complete description in writing of the quality characteristics for the procured item, including minimum workmanship standards. The customer's quality organization is morally obligated to ensure that all requirements are clear, complete, nonconficting, and correct. Assistance in the interpretation of requirements should be readily available to the supplier. All specifications should be understood by everyone, and any additional information to halp clarify the specs should be freely given.
• Mutual understanding - Direct communications between quality functions should be implemented at the initiation of all contracts and continue through the life of the contract. Direct communication ensures professional maintenance of the mutual obligation by the respective quality managements. To allow quality functions to be handled through others by default will result in product quality degradation and a loss of reputation for the professional. Allow the quality people to talk to quality people. Let the operators talk to operators. Keep the communications as direct as possible; avoid all intermediaries.
• Quality evaluation - It is the customer's responsinility to appraise the supplier's quality performance fairly and it is the supplier's right to be aware of this appraisal. The supplier has the benefit of knowing what their comparative quality position is with the customer, because this factor predicts the supplier's future. Common benefits are derived by working together. It is important to command a supplier when consistent, satisfactory performance is achieved. Evaluate the supplier with a consistent rating system. Let the supplier know the rating. Discuss possible areas of improvement and, where applicable, ways to achieve improvements.
• Product quality - Suppliers should honestly and fairly inform customers of the quality status of delivered items. Delivery implies that contractual objectives have been met. Certifications that fail to indicate deviations or commissions are misleading and demonstrate poor practice or lack of good faith. Unintentional descrepancies that could jeopardize a customer's program should be clearly communicated to responsible individuals to ensure maintenance of the supplier's quality and ethical reputation. Whaen there is a problem with a shipment, notify the customer. Data should be sent with every shipment if that is part of the contract. If a deviation has been granted, it should be noted on the data sheet.
• Corrective action - Corrective action should be actively pursued and implemented by both customer and supplier. The acceptance of this responsibility by both demonstrates good faith in the contractual relationship as well as quality discipline and technical competence. Working together to solve problems when they occcur saves time and money. It also fosters the partnership between two companies.
• Technical aid - Technical support should be provided by the customer when requested by the supplier. Care must be exercised because such efforts may confuse the question of responsibility. Technical support activities must be conducted with mutual respect for the respective specialties. When there is a requestfor technical support, the customer's two options are toprovide someone fro their company or to recommend an independent source. This does not mean that the customer assumes responsibility for the product that the supplier provides. It simply means that the customer is willing to help the supplier on a specific problem.
• Integrity - Facilities and services should be used by the visiting party only to the degree of the contractual obligation or as volunteered by the supplier or customer. Inspection, laboratory facilities, and equipment must be provided to the extent specified in the contract. The supplier must permit the customet access to the facilities where the customer can perform source inspection and/or other associated functions involved with the assurance of contractual obligations. The supplier should normally permit the custoemr to observe inspections or tests and to review the resultant data. The visitor must not accept gifts, entertainment, or other preferred treatment of any nature, thus eliminating any unethical behavior by which the level of quality may be compromised. Do not do anything that could embarrass you or your company.
• Rewards - Supplier quality management should encourage its purchasing agent to use only qualified suppliers. Quality management should compile and maintain a current list of qualified suppliers based on performance. The use of qualified suppliers from a quality control viewpoint should be considered when selecting suppliers, rewarding those suppliers that consistently produce conforming products. Establish a list and use it when selecting suppliers.
• Propriety information - Both parties should refrain from divulging proprietary information obtained in confidence. Divulging privileged information violates ethical and moral standards and is not in the best interest of either party. Betraying a trust is destructive to business relationships.
• Safeguard reputation - Both parties should avoid making false, unsupported, or misleading staements. Integrity and professionalism are paramount in every business relationship. There must be an open, honest relationship established if a partnership is to grow and develop. Anything less than that works against everything you are trying to accomplish.

Terminology

General

Key terminology in Procurement Quality Control/Assurance (PQC/PQA) includes: acceptance sampling, apparisal cost, attribute measurement, quality audits, bilateral tolerance, calibration, capability ratio, root cause, continuous improvement, control chart, corrective action, customer complaint, design of experiments, deviation, distributor, drawing, engineering support, external failure cost, final inspection, flowchart, frequency distribution, gauge R&R, incoming inspection, inspection, internal failure costs, key process characteristics, key product characteristics, lot control, material certification, measuring and testing devices, nonconforming material, normal distribution, prevention cost, process, process audit, process capability, process capability ratio, process survey, product audit, rating method, ship-to-stock, skip-lot, source inspection, special cause, specifications, standard deviation, statistical process control, supplier certification, survey, system audit, system survey, variable measurement, variation, vendor rating, verification and validation.

NASA Acronyms

Procurement-related NASA terminology includes:^[5]

• APIRL authorized procurement information requirements list
• APP advance procurement package
• ASPR armed service procurement regulation
• CP coordinated procurement
• CPSR contractor's procurement system review
• CSPO Control Systems Procurement Office
• DP delayed procurement
• DPD data procurement document
• IPC integrated procurement control
• MPC material procurement cost
• MPIIN modification procurement instrument identification
• NPC NASA procurement circular
• P&C Procurement and Contracts
• P&SM procurement and subcontract management
• PCD procurement control document
• PD procurement drawing
• PDC procurement document change
• PDP procurement data package
• PDRD procurement data requirements description or procurement data requirements document
• PDRL procurement data requirements list
• PI procurement item
• PII procurement instrument identification
• PIIN procurement instrument identification number
• PM Procurement Management
• PMC procurement method code
• PQA procurement quality assurance
• PQC procurement quality control
• PQE procurement quality engineering
• PR procurement regulation
• PRD procurement regulation directive or procurement requirements document
• RPA request for procurement action or request for procurement authorization

Supply chain quality

In procurement, the internal value stream is extended to include supplier's value stream, hence, extended value stream (EVS) is for the entire supply chain. Seven wastes of EVS are overproduction, transportation, unnecessary inventory, inappropriate processing, waiting, excess motion, and defects.

Procurement QA manual

The following components are typical of a procurement quality assurance (QA) manual.

• History of changes
• Distribution of manual
• Table of contents
• Supply Chain Management
• Minimum Quality System Requirements
• Special Processes
• Supplier Rating
• Graded Fastner Requirements
• No Change Clause
• Supplier Request for Process Change
• Certification
• First Piece Inspection
• Flow Chart / Control Plan
• CPS Source Inspection
• Inspection delegation
• First Article Inspection / First Article Test
• Control Test
• Corrective Action
• Supplier Quality Material Report
• Contact Information
• Web Site Map
• Frequently Asked Questions
• Appendix - Forms
  • Inspection Request Form
  • Flow Chart / Control Plan Work Sheet Request Form
  • Inspection Delegation Record / Resume Form
  • Corrective Action Form
  • Supplier Quality Material Report (SQMR) Request Form
  • SQMR Request Form Instructions
  • Supplier Process Change Request (SPCR)
  • SPCR Instructions

A sample procurement quality manual can be seen here.[1]

Procurement quality management

Executive authorities are responsible for the technical integrity of land materiel they procure, manage or maintain. Effective procurement quality management assists in achieving technical integrity by establishing confidence that procured goods and services conform to quality requirements. Quality management is dependent upon an effective quality management system and comprises: ^[6]

• Quality planning – the part of quality management focused on setting quality objectives and specifying necessary operational processes and related resources to fulfil the quality objectives
• Quality assurance – the part of quality management focused on providing confidence that quality requirements will be fulfilled
• Quality control – the part of quality management focused on fulfilling quality requirements
• Quality improvement – the part of quality management focused on increasing the ability to fulfil quality requirements

Measuring procurement quality

Baseline measures

• Timeliness: Percent of Procurement systems reports received on time (when promised/scheduled), from total number of reports produced.
• Accuracy: Percent of procurement system reports received without any observed errors (data entry or calculation errors), from total number of reports produced.
• Flexibility: Ordinal measure ("Low to high") of the level of effort required to reconfigure information displayed in procurement system reports (for example, adding or removing data items or calculations, or to rearrange data presentation layout.)
• Routinization: Percent of procurement systems reports generated to handle "exceptional conditions" from total number of reports produced.
• Routine workflows: A map showing the flow of procurement systems reports under (a) routine conditions, (b) "low frequency" exceptional conditions, and (c) during critical or problematic situations.
• Interactive report generation: Percent of procurement system reports generated by procurement system users (a) from total number of reports produced, (b) from each procurement system module, (c) across which users.
• Recurring cycle times: Ratio of forecast versus actual time spent performing recurring procurement processes, such as "procurement closings."
• System utilization: Percent of user time spent (a) preparing procurement system inputs, and (b) handling procurement system outputs, from total hours at work (e.g., per week)
• Open staff diaries: Each user of the procurement system or its outputs should be asked to keep a diary regarding their experiences with and impressions of the efficiency and effectiveness of the new fi nancial system. they should be asked to daily record (a) what worked best today, and (b) what was biggest problem of the day. Then, on a weekly basis, record (c) what changes should be made to make their work situation more efficient and more effective, and (d) how has the work situation changed from some time ago. Also, since diaries are open, then direct or indirect references to individuals/staff by name within your company should not be included.

First-order measures

Measures in this category represent the aggregation or composition of first-order measures. Representative measures of this category include:

• Responsiveness: For example, a measure of the rate at which the timeliness and accuracy of routine workflows improves in response to changes in system utilization.
• Stability: For example, the rate do routine workflows or recurring cycle times change over some period of time. Similarly, the rate at which the ratio of routinization over system utilization changes over time.
• Effectiveness: For example, the rate at which the ratio of accuracy over routinization changes over time.
• Self satisfaction: For example, the rate at which staff diaries indicate fluctuations in accuracy, system utilization, or routinization.

Second-order measures

Measures in this category are of the same kinds as listed for first-order measures, but with one important revision. Second-order measures focus attention to the rate of change or "velocity" of the first-order measures, or, alternatively, the rate and direction of "acceleration" of the baseline measures. Of primary interest here are measures of (a) customer satisfaction, (b) quality improvement, and (c) total resource utilization to achieve (a) or (b). ^[7]

Quality standards

• ISO 10012
• AS9003
• SAE AS9100
• AS/NZS ISO 9001:2000 – Quality Management Systems - Requirements
• Nadcap
• AS 3911 Series – Guidelines for Auditing Quality Systems
• AS/NZS 4360:1999 – Risk Management
• DI(G) LOG 02-1 – Quality Assurance of Procured Goods and Services
• DI(G)LOG 02-3 – Quality Assurance Arrangements with Foreign Governments
• IPC/EIA J-STD-xxx
• IPC-9191

See also

• Procurement
• Quality control
• Quality assurance
• Corrective and Preventative Action

External links

• Chartered Institute of Purchasing and Supply
• Systems Engineering Fundamentals. Defense Acquisition University Press, 2001
• National Institute of Governmental Purchasing
• National Purchasing Institute
• ASQ certification
• Example of a Procurement Quality Manual
• Government Contractors Certificate

References

• Improving the Extended Value Stream, by Darren Dolcemascolo, 2006 Productivity Press Publishing, ISBN 978-4-56327-333-9