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Receiving inspection, a failed policy.

By Ed Bones

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Published: 11Jun2009
Word count: 671
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The implementation of a quality management system such as ISO 9001 requires consideration of virtually every aspect of an organisation's structure and working practices. Included are the policies and practices associated with the procurement of product and other supplies from external vendors.

Prior to the introduction of today's documented management systems the process of purchasing would have required a purchasing agent to identify suitable suppliers for any given product, who after negotiating terms and conditions would place purchase orders and subsequently receive the required product.

The delivery of product, and particularly in the case of hardware product, would have invoked an acceptance process where the goods having been subject to some level of inspection would be accepted, or rejected to the supplier as unsatisfactory. These arrangements, although not ideal, were common for decades until the arrival of formal documented management standards with their specific requirements and their inbuilt capacity to be misinterpreted.

The current (2008) version of ISO 9001, building on its predecessors, requires that a purchaser should ....... 'evaluate suppliers based on their ability to supply'.... Nothing wrong with that until the requirement is taken up by the company bureaucrats. A misreading of the standard has commonly resulted in the development of 'vendor control' processes that do little to enhance business efficiency, or to improve the perceived quality of supplies. The stated benefit being improved supplier performance and reduced procurement cost. The simple fact is that it doesn't work.

The idea of vendor assessment is sound, if done by a group having the necessary expertise and experience and provided as a support to the procurement function. Little of this is true in most of cases. Ask a supplier who appears and for what purpose as representing vendor control for their customer. Almost certainly a representative of the QA department, having a passing acquaintance with ISO based management systems and virtually no understanding of manufacturing engineering or management. These are the people who will determine the acceptability of the vendor and his continued status as a supplier. They claim to be able to determine from such nodding contact with an organisation just how that company will perform as a supplier. However it doesn't end there.

It might be reasonable to conclude that the use of that vendor is a comparatively risk-free decision. But the QA function doesn't actually believe this in most cases. Look at what happens when product arrives at the purchaser's premises. It's called receiving inspection, incurring a cost that is irrecoverable.

The cost of incoming inspection is a cost of procurement not normally calculated as such, but often allocated to an administrative overhead or to the QA costs of doing business. Given the forgoing explanation of the vendor assessment and selection process why do these organisations not believe in the efficacy of that assessment process? If they were to believe then receipt inspection would not happen. It would be seen as unnecessary. The outcome of some if not all inspection is a product deficiency requiring some attention and a recent assessment of a number of engineering organisations indicated a 25% probability of a material delivery having some reason for dispute with the supplier.

The conclusion surely is that the vendor assessment cost isn't worth the expense and inconvenience since it demonstrably doesn't improve anything. In this generalisation I will exclude the performance of high volume procurement, as for example in the motor industry, where the altogether different staffing and methods result in a different approach to vendor assessment approval and control.

So long as vendor assessment and approval is performed by staff having allegiance and responsibility other than to those charged with the procurement task nothing will improve. A step forward that would act as a driver for further change would be to change the procurement cost base from being one of material cost plus purchasing staff costs, to include all inspection and handling costs until the product was available for use.

In a cost sensitive organisation this new enlightenment could be the start of a real improvement across the entire procurement process.

Ed. Bones is a chartered quality professional, an IRCA registered Lead Auditor, and is a senior partner with Meon Consulting Group, providing expert audit and consultant services for ISO9001 & ISO14001 management systems. The company web site provides detailed information, and includes the offer of FREE Advice.

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