What are the 4 measures to reduce the risk of supplier non-quality?

In the business world, quality is a fundamental pillar of success. However, when it comes to working with external partners, such as suppliers, certain situations can sometimes be beyond our control. An omnipresent risk is hidden in the shadows: The risk of non-quality or supplier risk linked to non-quality. The consequences of faulty or non-compliant products or services can be disastrous for a business, ranging from customer dissatisfaction to significant additional costs, to a tarnished reputation. However, by identifying and mitigating these supplier quality risks, businesses can protect themselves against the pitfalls of non-quality and embark on the path of excellence. In this guide, discover how to understand supplier risks and make quality an essential asset in your supply chain.

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The risk of supplier non-quality: what are we talking about?

Working with a supplier presents potential risks that should not be underestimated by the business. One of these risks is the risk of non-quality supplier or supplier risk linked to non-quality.

The latter refers to the possibility that the products or services provided by a supplier do not meet the quality standards required by the client company. This includes situations where products are faulty, do not meet agreed specifications, have manufacturing or design problems, or are not delivered within the agreed time frame. These non-conformities can lead to negative consequences, such as additional costs, customer dissatisfaction, disruptions in the operational cycle, and damage to business reputation.

La supplier risk management for non-quality involves the establishment of processes and measures aimed at evaluating, monitoring and controlling the quality of products or services provided by suppliers, in order to reduce negative impacts and ensure customer satisfaction.

What are the consequences of supplier risks due to non-quality?

The consequences of supplier risks linked to non-quality can be multiple and have a significant impact on the company. Some of the best known include:

• Additional costs : Poor quality products or services may result in additional costs for the business. This may include costs related to product returns, product repairs or replacements, contractual penalties, or disputes. Non-quality issues can also cause supply chain interruptions, which can have a financial impact on the business.
• Customer dissatisfaction : poor quality products can lead to customer dissatisfaction or frustration. This can damage the company's reputation and lead to the loss of these customers.
• Decreased productivity or disrupted operations : Delayed deliveries, inventory shortages, and faulty products can disrupt business operations and lead to production delays and lower productivity.
• The risks associated with non-compliance with standards and regulations : the supplier risks non-quality may also involve non-compliance with current regulatory or compliance standards. The client company may therefore be exposed to legal or regulatory sanctions, such as fines or disputes.
• Loss of competitiveness and tarnished brand image : when a supplier delivers poor quality products to a company, it can damage the company's reputation and brand image. Dissatisfied customers can effectively share their negative experiences with others, which can affect the overall perception and competitiveness of the company in the market. Customers will prefer to look at competitors who offer better quality products.

How can the risk of supplier non-quality be reduced globally?

Here are some things you can do to reduce the supplier risk related to non-quality at the global level (Later, we will talk again about measures for the specific case of important suppliers):

Evaluate suppliers

Establish a rigorous process for evaluating suppliers before selecting them. Check their history, certifications, market reputation, and technical capabilities to ensure they meet your quality criteria.

• Conduct a thorough assessment of potential suppliers using criteria, such as experience, customer references, technical capabilities, quality certifications, etc.
• Conduct site visits to assess their facilities, manufacturing processes, and quality standards.
• Use third-party questionnaires, audits, or evaluations to gather information about their past performance and quality management practices.

Establishing clear contracts and agreements

• Clearly define technical specifications, quality criteria, delivery times, regulatory compliance obligations, guarantees, and penalties for non-compliance.
• Ensure that contracts are mutually understood and accepted by both parties.
• Include clauses in the contract that allow for remedies, dispute resolutions, and contract terminations in the event of serious and repeated non-compliance.

Communicate regularly

Maintain regular communication with your suppliers. This will resolve issues quickly and avoid last-minute surprises:

• Establish effective communication channels, such as regular meetings, phone calls, or online messaging systems, to discuss quality issues or concerns related to supplier risks for non-quality.
• Encourage open and transparent communication, where both parties can share concerns and discuss possible solutions.
• Be proactive by quickly reporting any quality issues or potential risks identified.

Follow up and quality control

• Put in place monitoring and quality control procedures to assess supplier performance.
• Conduct regular product inspections or manufacturing process audits to ensure compliance with specifications and quality standards.
• Conduct laboratory tests and analyses to verify the quality of raw materials or finished products

Establishing a collaborative relationship with suppliers

Establish a collaborative relationship based on trust and openness with your suppliers. Work together to address quality issues and identify opportunities for continuous improvement. Involve them in your quality improvement process by collecting their suggestions and encouraging them to implement best practices. Share information about your quality expectations.

Diversifying suppliers

Avoid relying on a single supplier as much as possible. Diversify your supply sources to reduce supplier risk of non-quality and to be more responsive in the event of a problem with one of them.

• Identify and assess potential new suppliers on a regular basis to diversify your supply sources.
• Ensure that alternative suppliers meet the same quality standards as your current suppliers.

Train and raise awareness

• Provide training to your own employees on quality criteria, control procedures, and expectations of suppliers.
• Make them aware of the importance of quality of suppliers and the impact that this can have on customer satisfaction.
• Encourage employees to report quality issues as soon as they notice them and to participate actively in continuous improvement initiatives

A good understanding of quality expectations will allow them to better assess the products or services provided by suppliers.

By applying these measures, you will be able to effectively manage supplier risk of non-quality and to guarantee high quality products or services for your customers.

Four measures to reduce the risk of supplier non-quality in case of major suppliers

Major suppliers have many advantages, but they also have supplier risks significant in terms of supply. Solving problems with a large supplier can be trickier than with a smaller one. Finding the right contact person, capable of managing a problem and getting him to deal with it as a priority can be very tedious! Unfortunately, you often discover this after engaging with the supplier in question.

But you can predict how likely these problems are to occur. We suggest that you prevent as much as possible these pitfalls that are often very harmful for your business:

#1 - Require a unique contact

When requesting a proposal, always require suppliers to designate a contact person who will be responsible for managing situations that require a high level of interaction (in addition to everyday relationships).

This makes it easier to communicate and manage non-quality issues. This single contact should be clearly identified and responsible for coordinating all quality-related issues. This helps avoid confusion and delays in resolving issues because you'll know exactly who to go to for answers and take action.

Ask your single contact

Once you have identified your unique contact with the supplier, ask them thoroughly about the procedures and measures put in place to ensure the quality of the products or services. Ask questions about the quality checks carried out, certifications, problem resolution processes, response times, etc. This will allow you to assess their commitment to quality and determine if they have the resources and skills to meet your requirements.

The ability to make single contact can reduce or increase supplier risks related to procurement. Before engaging with a supplier, you will need to assess the designated person's communication skills, knowledge of various aspects of their business, and relationships with key contacts in each area. If the person seems to be unqualified in these various fields, supplier risk is increased.

Ask for a “climbing plan”

As good as your contact is, some purchases are simply too risky or too critical to expect a response from them. Ask the supplier to attach to their proposal an “escalation plan” with the names and contact details of the persons to contact in case of no response from them within a set period of time.

An “escalation plan” is a pre-established process for resolving non-quality issues that cannot be resolved by your initial single contact. This will ensure effective management of supplier risks of non-quality, ensuring that problems are dealt with quickly and appropriately.

This plan should specify the steps and who to contact in case of major or persistent problems. It should start with the name of your contact, and end with the name of the manager, with an appropriate number of intermediate levels in between.

Test the “climbing plan”

To make sure that the “climbing plan” is working properly, it is important to test it. Simulate problem situations or ask hypothetical questions to assess the supplier's responsiveness and effectiveness in resolving non-quality issues. You can also organize real test scenarios to assess the implementation of the plan and check if the actions taken are adequate. If deficiencies are identified, work with the supplier to correct them and reinforce the escalation plan.

Try to reach the people shown in the map. Are they answering the phone? If not, leave a voice message telling them to call you back in a short time. If they don't contact you again, again the supplier risk related to procurement is increased.

Although each purchase project includes supplier risks, going through these different phases can help you assess the risks associated with selecting an important supplier, and thus guide you in this most important step.