• Rush freight
• Disposal of o;-spec product
• Higher inventory-carrying costs (if having to select specific
lots to meet certain specs).
Usually less glaring but also expensive, CoC includes costs
• Training, standards, process control and other quality
• Product analysis/inspection (often duplicated by suppliers
For example, both a customer and its supplier experienced
capacity increases, causing a significant challenge of shipping
16 trucks per day of a bulk chemical product. To achieve
delivery, the customer and supplier moved from an individual
certificate of analysis per truck to a periodic electronic transfer
of process sample analysis. A much-abbreviated inspection on
a sample from each load was performed while the load was
in transit. No inspection or analysis was done at the receiving
plant. If an issue was discovered — a rare occurrence — the
supplying plant lab called the receiving plant operators to
return the load. This reduced inspection/analysis costs and
improved speed of delivery.
WHAT IS A QIP?
One tool that can assist you in quality improvement e;orts is
a quality improvement plan (QIP). This evergreen document
shows what you’re trying to achieve, what’s been accomplished
and your plans going forward. You should initiate a QIP when
there is a supplier-quality issue causing product delays and the
like. Also, consider establishing a QIP to correct chronic issues
or make product or process improvements.
The initial steps in developing a QIP are to ( 1) clearly define
the problem or opportunity, ( 2) state a clear objective for
improvement (what and when) and ( 3) define the value that
might be expected if you achieve the targeted improvement.
Once you have a clear definition of what to accomplish
with the QIP, gain alignment and commitment of required
resources from your leadership and the supplier. As with any
negotiation, you ensure stakeholders understand the pain
points and the benefits of resolving them. Internal alignment
is typically easier, especially if the benefits support the
commitment of resources.
Getting a supplier on board is more challenging. It may be
di;cult to convince the supplier to work on continuous
improvement activities when there are no glaring issues.
If your case for action is strong, approach the supplier’s
organization to gain commitment, leveraging your senior
leaders as appropriate. If you have contract flexibility, use it to
gain supplier support.
Consider this example: A large shipping location with four
trucking suppliers measured performance on a range of
metrics that included on-time arrival, contaminated trucks
and customer complaints regarding the driver or equipment.
The company met quarterly with each supplier to review
results and progress on action items from the previous
quarter. To ensure the suppliers focused on continuous
improvement, the company adjusted supplier shares of
the business each quarter, based on the previous quarter’s
results. The data and the company’s use of it to adjust buying
decisions had a strong impact.
TIPS TO REMEMBER
When using a QIP, it’s important to consider:
Benefits. When the cost-of-quality benefit is accrued
primarily at the supplier, you need to know up front how
much of that benefit will be passed on to you as a reduced
price or other value.
Progress. Once you assign resources and begin work on
problem-solving, continually update the QIP with your
progress. Use it to keep stakeholders informed.
Continuity. As you implement solutions, consider how to
sustain improvement. You don’t want to have to solve the
same problems later. Documenting the agreed-upon steps for
sustaining improvement gains is the last part of the QIP.
Many tools, including control charts and complaint systems,
track improvement. Pick one that works best for your
situation. Some things to consider:
• Automate as much as possible. Most data can be found
in electronic form, so limit the manual collection of data
• Many data logging systems have email alert functionality.
Use this to highlight what must be reviewed. Establish
alert thresholds to limit the amount of information to be
Quality improvement e;orts, especially those with a clear and
definable improvement in cost of quality, drive sustainable
value creation in TCO for materials and services. Thus, a QIP
is an essential tool that supply management professionals can
use to enable the delivery of this value and improve supply
chain performance. ISM
David Allen of Houston recently retired from Shell Oil’s Contracting &
Procurement Group and is a member of Institute for Supply Management®’s
Learning Solutions Advisory Committee. David Coughlen is a Master
Black Belt at Hexion in Houston.