Supplier evaluation and Goals for small business.....HELP

As a small business, (less than 10 people, all of who have multiple duties) we have little time or resources for an extensive or superfluous examination of our suppliers.

The current methodology is to select a supplier based on historical use or advertised services.
If they perform adequately, we continue to use them, if we are dissatisfied, we stop using them.

Its as simple as that.

Our preferred or approved supplier list is the list of suppliers on the MYOB purchasing system.
In other words, one cannot generate a purchase document other than through this system.

We recently had a third party audit and the auditor was dissatisfied with this approach and has demanded a supplier evaluation criteria.
She obviously has never worked with a small business before and expects an unnecessary and overly complex process.

In addition she has demanded goals and objective above and beyond what we currently have.
Our goals are simple and the data collected as part of our business.
What am I doing wrong?

Our goals are
Better than 10% ROI Per annum measured bi annually and reported by the GM at management review.

Customer feedback better than level 3 as reported by the customer on their own report each month and reported at management review by the factory manager.

Finally LTI and MTI stats better than 1 LTI per month and better than 1 MTI per annum, measured monthly and again reported at Management Review by the factory manager.

 

Not to hijack, but that right there is the root of all quality vs. management problems.

 

Very frustrating when outsiders cause these kinds of problems. What are you buying? Do you have any issues created by suppliers?

Keep it simple. You probably should just create a simple form to "evaluate" suppliers. A couple of check boxes as to why you would or wouldn't choose a particular supplier. Put in in their file and pull it out when needed. A criteria can be "because the owner said so."

I am not sure where they can demand additional goals (I would have to check the standard). It is within your right to define those goals and objectives. One of our primary goals is a special gross profit number. Never had an issue. I might fight this one.

Good luck.

 

It is fine to have your approved supplier list described in your system - you just need to ensure it is kept up to date. So if a supplier is no longer approved then their record on MYOB needs to be updated to stop people buying from them. As a couple of people have noted you need to decide what it is that makes a supplier suitable. How much risk do their products and services import to your business? If, for example, a supplied product is no good will you pick it up easily in your processes before it hurts your customer? Do you have good evidence that your approach works? Does 'historical use' back this up?

When looking at your assessment criteria you are entitled to take into account anything that gives you confidence including their own company history, supply of products and services to similar organisations, ....

An auditor is not entitled to 'demand' anything. Their only course of action is to identify (by raising a finding) that your system does not comply with a requirement in the standard and to reference evidence that supports that finding. Perhaps you could quote the text on a follow up post (taking out any direct references) and we can make some recommendations.

Here I'm torn between supporting your view and that of the auditor. So, if a quality management system is effective you would expect there to be a direct impact on the company's ROI but without further explanation of the work you are doing to improve effectiveness and efficiency on its own this objective is too financial and not enough 'quality' IMHO.

Similarly with the OHS objective: there is correlation between organisations that have good quality and those that have good safety performance but the QMS is not there to deliver this. As with the financial KPI you should continue using these to drive the business but could usefully have some other goals that support objective 2 of good customer feedback. Typical supporting measures are customer returns / complaints, internal rejections along with many others.

Hope this helps.

 

Here is where it may be good to know the audience. Small company - 10 employees. Owner probably knee deep into everything - production, HR, finances, sales, customer service. House in hock. Bills to pay. Thus, the focus on ROI. You go to him saying "the auditor says we need more KPIs" and then suggest adding a bunch of measures he already knows about - customer returns (probably come right to him), internal rejections (probably came to him as well), etc. - and then wonder why he is skeptical of ISO. The most important point is that it has to work for the company. Small organizations are different than larger ones -- they don't need that much data because the managers (who is usually the owner) touches everything. Thus, ROI may be perfect for him and cover most everything he needs to know. As they grow, other numbers might become more meaningful. Just an opinion.

 

I would start over with the thinking. It's up to your organization to decide what criteria you'll use, just document it (quality, cost, and delivery, are popular metrics). And it's up to your organization to evaluate them on that. Figure out what you're already doing and plug it in there, don't chase rabbits.

 

I have convinced the auditor of the benefits of utilizing simplified functional and easily measured goals at this point.

As we get further down the track, we may be able to identify some other important goals, but its imperative that they be of some benefit to implement and monitor.

I keep thinking back to the old Stat Techniques, remember them?
We used to have to invent stats and report them on a regular basis just to satisfy the auditor.

When I became an auditor, I started to understand how correctly applied stats and Goals could be beneficial, but you had to work with the companies to demonstrate the benefits before they started using them properly.
This was what an auditor who was worth their metal did, and something I tried to give all my clients.

This emphasis on Goals and Objectives is a good thing, but the degree must be commensurate to the organisation and its size.
Small business has more emphasis on profit and money as its their lifeblood.
That is why I usually target ROI, customer satisfaction and LTI/MTI as these are crucial to a small business.
As they get comfortable with this I look at implementing other useful and functional goals, but "Gently, gently catchie monkey"

 

I've worked with a lot of small businesses over the years (and was one myself) so I get the focus on ROI. I've even put a blog post together that refers to it: http://blog.thecqi.org/index.php/tag/iso-90012015/page/2/

So let's be clear. It isn't the auditor who requires KPIs, these are requirements in the standard and, if the owner wants to give his / her customer confidence that the company can consistently deliver quality by having a 3rd party certificated quality management system then all the requirements need to be addressed.

Customers also want their suppliers to have objectives for dealing with things like customer complaints, internal rejects and efficient use of the resources (that they end up paying for). That is why the requirement is in ISO 9001 and that is why auditors expect to see more than just ROI when they look at objectives.

 

So this is a different scenario from the one I thought I was answering. As a consultant I would hope you can explain the benefit of goals and objectives to your clients. I'll be interested to hear what goals you managed to convince the auditor of. All measures, objectives and KPIs have value in the right setting. But here is where we disagree:

• If you have been convincing clients that three business goals is enough to gain ISO 9001 when two of those objectives are 'non quality' then that is not correct
• An auditor's role is not to 'work with the companies to demonstrate the benefits' it is to independently and impartially assess a system to see if it meets requirements.

I get the point you don't want to frighten the horses but as both a consultant and an auditor the gola is to ensure the system satisfies ISO 9001 requirements. The first to implement and the second to assess.