Supplier quality management has emerged as one of the leading business practices in the past few years. A number of companies are making significant investments in systems and processes to improve supplier quality. This white paper briefly outlines some of the best practices implemented by such companies in Supplier Quality Management.

Why Supplier Quality is critical?

With companies outsourcing their service to strategic partners, the supply chains have become very long. As a result, any issue in supplier quality can quickly result in extended delays. As a result, they are under pressure to ensure that their products continue to meet or exceed client expectation and or legislative thresholds set by government. Hence, managing their own supplier’s quality is very high on the agenda for these companies. The following best practices enable these companies to improve their own quality by improving their supplier’s product and delivery quality.

Supplier Audit

Supplier Audits are one of the best ways to ensure that supplier is following the processes, procedures and pricing that you agreed to during the selection processes. The supplier audit identifies non-conformance in, invoicing process, and repair vs. replace policies etc. After the audit, the supplier and Insurer jointly identify corrective actions which must be implemented by the service provider within an agreed-upon time frame. A future audit ensures that these corrective actions have been successfully implemented. In our research, over 60% of the Insurers do not follow the best practices in audit, while engaging with their service providers. By implementing best practices, Insurers ensure that the audit process is effective and efficient and allows them to audit their entire service provider base at least once a year while maintaining a lean staff of auditors.

Service Provider Scorecard

Service Provider Scorecards are one of the best techniques in using facts to rank the supplier’s relative performance within the supply base and tracking improvement in supplier’s performance over time. Scorecards also provide a data point into any future business negotiations. Following are the key performance indicators, leading manufacturers track in their service provider scorecard:

  •  Quoted turnaround time measured against Actual turnaround time
  •  Quoted cost measured against Invoiced cost
  •  Compliance to SLA
  •  Average cost per claim against peers
  •  Implementing corrective actions of previous audits
  •  Hygiene and housekeeping
  •  Client Complaints
  •  Performance against benchmark

Closed Loop Corrective Action

Systematic reductions in the Cost of Poor quality can be attained by implementing a Quality Management System (QMS) that provides an integrated and closed loop corrective action process. When deviations, inflated costs, nonconformance, out of specifications, quality incidents or customer complaints occur, corrective and preventive actions need to be initiated to remedy the problems. Once a quality problem has been identified, the first step is to initiate an investigation and to properly identify the root cause of the problem. After the root cause has been identified, Corrective Action items are created and routed for approval. When approved, appropriate changes are implemented in the environment and then the corrective action is closed out. It is critical to deploy a closed-loop, integrated quality management system, rather than a set of loosely connected modules from one or more vendors. Integration ensures that the information flows out the corrective action process with a high degree of accuracy and velocity without falling through the cracks. It also ensures that the entire change control process is auditable from end-to-end - a critical requirement. Finally an integrated system ensures that audits become a core driver into the corrective action process and become a key tool for continuous improvement.

Engaging Suppliers in quality systems

It is critical for Insurers to engage suppliers in all aspects of their quality management system, so that the supply-base is fully integrated into the QMS being rolled out.

Key requirements include:

Suppliers should be able to provide quality-related data to the Insurer without having to deploy a mandated quality management system within their environment. This can be achieved by feeding information from supplier’s quality system into Insurer’s quality system (for larger suppliers or ones sharing their production line with multiple customers) or getting the supplier to use an Insurer’s web-based quality management system (for smaller suppliers or ones with dedicated lines for a customer).

A web-based quality management system dramatically reduces the cost of ownership for a supplier by providing the right information to a key customer without having to deploy software in-house.

The Insurer should be able to get every relevant stakeholder within the supply base to use the quality system without having to train every casual user. Emerging capability includes a scenario where an application form generates an email delivered by the system to the casual user at a supplier. When the user opens an email, they hit a link in the email and enter the data in the form and hit send. The data in the form is processed by the system as if it came from the screen. As a result the user does not need to learn to navigate the quality application, yet they can participate in the quality system.

By deploying these best practices, insurers can dramatically improve their supplier quality and achieve their own business objectives. Such practices have been implemented by world-class Insurers using enterprise quality management software.

We invite you to take a look at iOUTsource web based software suite and see how our solution can help you deploy such practices within your environment.


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