Ok, time to stir the pot a bit. I know there is a silent majority of people out there who roll their eyes while simultaneously pressing their lips at the mention of Approved Supplier Lists; they look at it as a necessary evil; a constant source of findings on internal and external audits; a down-right thorn in the side!

On the other hand, many of those same people, when presented the opportunity to get on a major customer’s Approved Supplier List, are heard to herald their unflinching dedication to all aspects of quality, and are seen to conspicuously post their quality pedigrees on their virtual sleeves. We love getting recognized by those major customers with neat trophies or certificates of recognition for on-time or other measured performance, don’t we? No problem with that, right? So, why the ambivalence?

Depending on which regulation or standard you fall under, the requirements regarding the elements of your Approved Supplier/Vendor List may vary, but they all have common threads: Who are you getting your parts or services from?; How are they qualified to get on your list?  

Nearly all findings by internal or external auditors are due to non-compliance with what was said in the firm’s own manual. Here’s a sampling:

• The manual states you won’t issue any Purchase Orders unless the supplier is on your list, but the auditor finds evidence to the contrary.
• In order to facilitate ‘hot’ or ‘AOG’ orders, the manual provides for an initial (Single) Purchase Order while the Approval process takes place, but the auditor finds several PO’s have gone out over a seemingly long period without the necessary approval.
• Your manual states that you will somehow track the quality performance of those suppliers, but in actual practice there’s no evidence of it.

Other problems include:

• The purchasing/sales staff at your firm have silently discovered how to work- around your process. In fact, taming this crew and getting them to follow published procedures is a common theme - There, I said it and I meant it.
• Many firms have purchased ERP systems with built-in capability to control who you issue PO’s to, and to list and report who comprises the Approved Suppliers, but:
• The firm or its employees don’t fully understand or use this capability. Typically, this includes the QA department – Dude, make the software you’ve paid for work for you!
•    The ‘Permissions’ to change things are granted to the wrong, or too many employees, thereby diluting the supposed controls.

Speak of ‘work-around’, another one used frequently in the industry is what I’ll call the ‘Hidden Supplier’. Many firms have active programs to reduce or place a cap on the number of suppliers they use, hence a reduced or capped Approved Suppliers List. This is somewhat understandable since after all, you have to manage all those firms on your list. Suppose you need a part, and the only supplier is not on your Approved, capped Suppliers List. No problem, just issue the PO to someone on the list, and by phone ask them to get the part from the firm not on the list, hence the hidden supplier. You get the part from an approved supplier (who got it from someone else), and everyone is happy, right? The problem is, both the approved supplier and hidden supplier got a price markup; two instead of one. This is one of the reasons why these caps or reduced-supplier-base initiatives seem to come and go.

And how about the data talking to you regarding the Quality History of your suppliers? Too often unfavorable data just sits there, dormant. Maybe it makes its way into an internal report. But how about sharing your information with the offending party; the supplier? The most common excuse is that the supplier is a big name, and you’re just a small fish; that they won’t listen you. Really? Have you even tried? If the extent of such communication is that you issue a ‘speeding ticket’ (a CAR or SCAR), then perhaps I understand why you don’t get any response. Pick up the phone, establish a colleague-to-colleague dialog with the person at the supplier; have your data and examples ready. Most of time you’ll see results and a genuine interest, and usually, thanks. Try it.

Then there are the firms that take their system for Approved Suppliers beyond merely meeting the base-line requirement of the standard or regulation; they want to actively meet the spirit and intent of the requirements. Attributes of such firms might include the following:

• Their ERP system is airtight; NO PO’s can be issued by anyone unless the supplier is already approved.
• They are as proud of their restricted suppliers list as they are of their approved list. Recurring reasons to restrict suppliers include:
  
  • Failure of the supplier to return surveys despite repeated attempts (don’t get me started on that one, it’s inexcusable; there, I said that too, and I meant it).
  • A percentage of the PO’s issued resulted in rejects when the product was received.
  • Financial squabbles.
  • Published ‘issues’ such as FAA Unapproved Parts Notices, DOT IG Reports, GIDEP Alerts, Debarred Lists, CAA Notices or Alerts, etc.
• Creation of periodic reports for management review which may include suppliers with great on-time performance and zero rejects, and of course, those with delivery or quality issues.
• For the household names or fortune 500 firms which have formal recognition rewards for their best performing suppliers – Bravo. For the recipients, we all love seeing those trophies, plaques, and certificates in the Main Lobby; it gets the supplier’s employees pumped.

For those minimalists satisfied with just meeting the standard, I hope you’ll challenge yourself to utilize the requirement as an opportunity to better serve your firm, and to develop meaningful relationships with the suppliers you’ve teamed with.

Leave a comment on this blog – your stories, observations, or best practices.

Over ‘n out

Roy Resto

www.AimSolutionsConsulting.com