SUPPLIER

CERTIFICATION

How to

Establish an

Effective Program

Ernesto J. Díaz - RiveraAugust 18, 2011

Four Points Sheraton & Casino, Caguas PR

AGENDA

Learning Objectives

Introduction

Regulatory Requirements

Supplier Certification Program Goals

Steps to succeed

Planning Phase

Initiation Phase

Execution Phase

Maintenance Phase

Program Benefits

Things to Avoid 2

LEARNING OBJECTIVES

Provide an introduction to most important

aspects of modern Supplier Certification

Program

Review key concepts for establish and

maintain a Supplier Certification Program

How win-win strategies can simultaneously

improve service and reduce costs

3

INTRODUCTION

What is a Supplier

Certification Program? Client – Supplier relationship where

cost, quality and delivery agreements

are encouraged to promote both parties

improvements

4

INTRODUCTION

What is a Supplier

Certification Program? Team effort (Client – Supplier) to

reduce the final product cost

Partners pursuing win – win situation

5

INTRODUCTION

Why a Supplier Certification

Program? Elimination of waste (Lean Manufacturing)

Reduce the JIC inventory (Just-in-Case)

Obtain product in the correct time frame

Obtain product in good conditions

Avoid extreme price fluctuations

6

INTRODUCTION

Why a Supplier Certification

Program? Minimum incoming inspections

Reduced inventory space

Eliminate premature payments because you

depends on supplier deliveries

Decrease internal and external cost because of

consistent quality

7

INTRODUCTION

The certification program requires a

significant amount of hard work to

qualify the suppliers, and strong

follow up to keep the program

pointed in the right direction

8

INTRODUCTION

How many certified supplier my

company needs?

9

INTRODUCTION

Definitions

Approved Supplier:

Supplier who has met minimum

qualification criteria and has been

approved to supply a required item

10

INTRODUCTION

Definitions

Preferred Supplier:

Approved supplier who is actively

participating in the certification

process.

Typically his quality history is

excellent

11

INTRODUCTION

Definitions

Certified Supplier:

“One who, after extensive investigation, is

found to supply material of such quality

that is not necessary to perform routine

testing on each lot received”. Pharmaceutical

Manufacturers Association

12

AGENDA

Learning Objectives

Introduction

Regulatory Requirements Supplier Certification Program Goals

Steps to succeed

Planning Phase

Initiation Phase

Execution Phase

Maintenance Phase

Program Benefits

Things to Avoid13

REGULATORY REQUIREMENTS

21 CFR 820 & 211

820.50 Purchasing controls

211.84 Testing and approval or rejection

of components, drug product

containers, and closures

14

AGENDA

Learning Objectives

Introduction

Regulatory Requirements

Supplier Certification Program Goals

Steps to succeed

Planning Phase

Initiation Phase

Execution Phase

Maintenance Phase

Program Benefits

Things to Avoid15

SUPPLIER CERTIFICATION

PROGRAM GOALS

16

Create a new culture management philosophy

Obtain product in the correct time frame

Obtain product in good conditions

Avoid extreme price fluctuations

PLANNING PHASE

ROADBLOCKS

Create an Appraisal Team

Collect Data from existing approved suppliers

Create a performance measurement system

Evaluate each supplier against the measurement

system

Perform a deep audit to the supplier quality

systems

Add new suppliers as needed

17

PLANNING PHASE

WHO WILL BE INVOLVED?

18

Purchasing

Planning & Scheduling(Logistics)

Design & Development Engineers

Production

Quality

PLANNING PHASE

PLANNING AND SOURCING

Create a Supplier Performance Ranking (SCOR)

19

Performance

Metric

Complexity

Measures

Configuration

Measures

Practice

Measures

Plan •Planning Costs

•Financing Cost

•Inventory days of

supply

•% order changes

•Production volumes

•Inventory cost

•Product volume by

channel

•# of supply chain

locations

•Planning cycle time

•Forecast accuracy

•Obsolete inventory

on hand

Source •Material

acquisition cost

•Source cycle time

•# of suppliers

•% of purchasing

spending by distance

•% of purchasing

spending by distance

•Supplier delivery

performance

•Payment period

Make •# of defects /

complaints

•Product quality

•# of SKU’s

•Upside production

flexibility

•Manufacturing

process steps

•Capacity Utilization

•Value add %

•Build to order %

•Build to stock %

•# of mfg. order

changes due to

internal issues

Delivery •Fill rates

•Line return rate

# of orders by

channel

% of line items

returned

•Delivery locations •% invoices

containing billing

errors

•Order entry

methods

SCOR = The Supply Chain Operations Reference

PLANNING PHASE

PLANNING AND SOURCING

20

Criteria to classify your suppliers

Quality

Delivery

Technical Support

Management Attitude

Cost

PLANNING PHASE

PLANNING AND SOURCING

Quality

Level of conformance to

standards

Measure your suppliers

consistently and report regularly

in a data based manner

21

PLANNING PHASE

PLANNING AND SOURCING

22

Delivery

Measure on time delivery

Minimized stocks (Lean

manufacturing)

Just-in-Time

Ship to use program

PLANNING PHASE

PLANNING AND SOURCING

23

Technical Support

Client - Supplier engineering

talent

Detect gaps in process

Help to improve process

PLANNING PHASE

PLANNING AND SOURCING

Management Attitude

Responsiveness

Interest demonstrated in your

end product

Ongoing communications

Demonstration of partnership

relationship24

25

Cost

Handling

Service

Inspection

Lost production time because

of rejects

PLANNING PHASE

PLANNING AND SOURCING

INITIATION PHASE

Criteria to start a supplier in the

Certification Program

Virtually no nonproduct–related

rejections for a significant time

period

No product related rejections for a

time period

No production-related negative

incidents for a stated time

period26

INITIATION PHASE

27

Criteria to start a supplier in the

Certification Program

Successfully passed a recent on-site

quality systems evaluation

Having a totally agreed on product

specification

Having a fully documented

process and quality systems

EXECUTION PHASE

28

System Administration

Create detailed procedures

Basic responsibilities

Purchasing – initial contact and

arrangements for future visits

R&D – review of basic specifications and

verify tolerance spreads

QA – accumulates historical data and

performance indices, and performs the

necessary evaluations.

EXECUTION PHASE

System Administration

Notify the management about the status of each vendor for each material or piece part

Its important that this system be accurate and responsive

Constant customer – supplier communication

An uninspected bad lot material in your approved stock is a time bomb 29

EXECUTION PHASE

30

System Administration

Reward the sources that are

certified

Recognition is great for motivation

EXECUTION PHASE

Quality Agreements It becomes imperative to develop an

agreement as to the ongoing methods of

control of the variable factors of the production

process involved

The greatest benefit is that an agreement

around quality gives the supplier clarity in

what is expected of him in this relationship

and gives the client clarity in what can be

expected from the supplier as to the levels of

quality being shipped31

EXECUTION PHASE

32

Quality Agreements Provides for formalizing the communication

protocol between client and supplier

Build a partnership

around quality will enable

both companies to become

more competitive through

elimination of redundant

inspections and over

checks

MAINTENANCE PHASE

33

Problem Solving Who is responsible of resolve an

unexpected problem?

First steps of the customer:

Increase the number of inspections

Send an auditor to supplier facilities

Perform more tests

Fill out a complaint report to supplier

MAINTENANCE PHASE

34

Client Supplier

Purchasing Sales

Engineering (R&D) Engineering

Quality Quality

Manufacturing Line Manager

Problem Solving

Second Step:

Client – Supplier Cross Functional

Team

MAINTENANCE PHASE

Post-certification Activities

Five areas to follow up

Continuing evaluation of the equipment

involved in the process is necessary

Process set up criteria

Adequate statistical process control methods

Self-audits by the supplier quality unit

Client must teach the supplier on what he

considers critical, important, and trivial

35

MAINTENANCE PHASE

36

Decertification and Recovery

Is the first lot rejected since they been

certified

What you do?

From here on, everything depends on

the severity of the problem

AGENDA

Learning Objectives

Introduction

Regulatory Requirements

Supplier Certification Program Goals

Steps to succeed

Planning Phase

Initiation Phase

Execution Phase

Maintenance Phase

Program Benefits Things to Avoid

37

PROGRAM BENEFITS

• Elimination of waste (Lean

Manufacturing)

• Reduce the JIC inventory (Just-in-

Case)

Obtain product in the correct time

frame

Obtain product in good conditions

Avoid extreme price fluctuations

38

PROGRAM BENEFITS

Minimum incoming inspections

Reduced inventory space

Eliminate premature payments because

you depends on supplier deliveries

Decrease internal and external cost

because of consistent quality39

THINGS TO AVOID

40

Select a supplier simply on the basis of

volume or cost

Different ambitions and goals between

appraisal group and management group

Lack of commitment from management

group

REFERENCES

R.A. Mass, J.O. Brown, J.L. Bossert. Supplier

Certification: a continuous improvement

strategy.

J.L. Bossert. The Supplier Management

Handbook, sixth edition.

D. Blanchard. Supply Chain Management: Best

Practices.

M. Hugos. Essentials of Suppliy Chain

Management. 41

CONTACT INFORMATION

43

Ernesto J. Díaz RiveraASQ – CQA, CQE

ediaz@asq1500.org