ASQ CQE Certified Quality Engineer – Section I – Management and Leadership (18 Questions) Part 8

57. 1H-2 Supplier Monitoring and Improvement

This topic of supplier management. In the previous topic we talked about techniques related to supplier qualification and evaluation. There we started the process of making a list of suppliers. Then we shortlisted that, we sent them RFQ, we got the bid, we evaluated the bid and based on that we avoided contract or purchase order to that particular supplier.

So this was one part of that. The next part is how do we monitor the performance of the supplier and how do we make sure that the supplier performance improves. So that is what we will be talking in this section, which is improvement. We have already looked at this supplier lifecycle management and we said that we will be looking at first to two parts of this. In this course, supplier selection was one which we have already talked. And the second part is performance monitoring, which we are talking right now.

In this section here we will be looking at how do you monitor the supplier performance, what are the aspects related to supplier performance. When it comes to supplier performance monitoring, the key thing here is, and the very important thing here is that whatever you do to monitor the performance of supplier, that will depend on risk.

We will talk about risk in the next lecture, but let’s understand here that the supplier performance is monitored based on the type of risk which we have. If we have a low risk level item, you really don’t need to spend too much time or effort in monitoring that particular supplier. But if there is an item which is highly risky, which is critical to your business there, you might want to put some extra effort to monitor the supply performance and make sure that it improves. And when it comes to the question that what do you monitor?

The important thing here is that whatever contractual obligations are so you need to fix some evaluating criteria beforehand, and you need to monitor supplier against those criteria based on whatever was in your contract, because your supplier is bound by the contract which you have between supplier and your organization. And this is something which we have already told that high value, high risk good will require high level of monitoring.

So something a big order or it’s a very risky order or an order which is critical to your own success, the success of your own organization. There you will be putting some extra effort and what are the types of things you monitor. Let’s quickly look at some of the examples on the next slide. So here we have some typical performance parameters which you can monitor. These can be broadly classified as cost, quality, schedule and responsiveness.

Depending on your own purchase order, you might have different set of performance parameters. When it comes to cost, you want to see whether your purchase order is being executed under or over budget. Is there any potential of cost saving? Is supplier offering some cost savings coming to quality. In quality, you might be interested in looking at the defect rates, you might be looking at the returns, failures, damages. These are the sort of things which you might want to look in quality performance. When it comes to schedule, you want your deliveries to be on schedule and you don’t want any shortages when you receive that particular order in your organization.

When it comes to responsiveness, you want to make sure that your supplier is responsive to your questions, your queries. So if you have some questions or something from the supplier, whether they are responsive or not, and in some cases your own requirement might change. So you want something today and for that you place the purchase order. But things change.

So if you want to change something, whether the supplier is responsive to that or not. So these are some of the things which you can use as supplier performance monitoring parameters. And as we earlier said, that the next lecture will be on risk because we said that the performance monitoring is based on the type of risks we have. So let’s understand what is risk and how do you mitigate let’s see that of the.

58. 1H-3 Supplier Risk – Introduction

In the topic of supplier management the next topic is risk. So what we will do in this section is we will start with the definition of risk. We will talk about risk management, we will talk about the risk management process very briefly and we will talk about three risk strategies and these three risk management strategies are business continuity planning, contingency planning and resilience. So how do we use these three things to manage risk? We will learn about that but before we talk anything, let’s talk about the definition of risk. What is risk? So here is the definition of risk as given by ISO 31,000 and the definition of risk is effect of uncertainty on objectives. Very simple definition, it is the effect of uncertainties. Uncertainties is something which you don’t know.

So first thing which you need to remember is risk is anything which is related to unknown thing which is related to uncertainty. If you know something is wrong then that is not a risk. The second part here is objective. So any organization or anything which you do has an objective. So let’s say my objective is to go from my home to my office so that’s my objective or that’s my task. What are the risk?

Anything which is related to uncertainties there and what are the uncertainties? Uncertainties could be a traffic jam, uncertainties could be a lighting system might be gone, the red light system might not be working, uncertainty could be I might end up in an accident all these things are uncertainty for my objective to go from my home to my office here we are talking about uncertainties. So if I know that something is already wrong, if I know that a road which goes from my home to office is already blocked, that is not an uncertainty because I know that thing.

So that’s something which you need to remember. So the definition of risk is effect of uncertainties on objectives and this could be positive and this could be negative. Many a times risk is considered to be negative, anything which is negative is considered to be a risk. Even in the example which I gave in regards to risk for going from home to office all things were negative traffic jam, road block, red light signal not working but then risk could be positive as well.

There could be some positive things as well which can help you in achieving your objectives. So you need to look at both of these things, what could go wrong and what could go good. So with this understanding of the definition of risk now let’s move on to the risk management and the risk management is coordinated activities to direct and control an organization with regards to risk.

So whatever you do to manage the risk is risk management. That’s very simple definition of risk management. All the activities which you do to direct or control an organization in regards to risk and in the definition of risk we were talking that risk could be negative or risk could be positive. So anything which is a positive risk is called as opportunity. Even in ISO 9000 and 121 five version, which is the latest version, their risk based thinking has been introduced there also it talks about risks and opportunities. So risk, anything which is negative is called as risk. Opportunity is all the risk which is positive in nature. So we would like to take the maximum advantage of the positive risk. Another thing which I told earlier was that risk is related to uncertainty.

Any future event which has not happened yet that’s risk. But if something has already happened, then that’s not called a risk, that is called as an issue. So that’s another definition you need to understand here we have some of the benefits of risk management. Why do you need to have risk management? Because with the risk management you can make a better decision making. Better decision making because now you know what could go wrong and you can take some action related to those risks. So if you know the risk and if you know the likely impact of that, you can take appropriate action well in time with the risk management you have fewer surprises because you have put your brain together and look at what could go wrong.

So probably if that thing goes wrong in future, that will not be a surprise because you would have already prepared for that risk and with the risk you can make effective use of resources, you can allocate some of the resources for these risks well in advance. So let’s say there are ten risks and based on that risk, based on the losses or the benefits which could happen because of that, based on the probability of that happening, you can allocate some amount well in advance. So that way you can have effective utilization of resources and it reassures stakeholders that whatever could go wrong, you are already taking care of that, you are already aware of potential risks so that gives a good assurance to your stakeholders as well. So these were some of the benefits of having a risk management process.

59. 1H-3 Risk Management Steps

Previously we talked about the definition of risk, definition of risk management and we looked at the benefits of risk management. Now let’s look at briefly the process of risk management. In risk management the first step is identify risk. So first thing is list down all the things which could go wrong or which could help you in achieving your objective. All the negative and positive risk, make a list of them ad that is the first step once you have made the list and this list might be a very big list. Even in my example of going from home to office, I could quickly list down three risks. If I do a little bit more brainstorming, I might end up with ten risks for simple process of me going from my home to office. But in a bigger process or in a bigger project or a project, you might have a very big list of risks.

You might not be able to attend to all those risks. So the next thing which you need to do is you need to prioritize based on number of factors, what’s the chance of that happening, what is the damage that could do based on that you prioritize those risks.
So the next step is to create a mitigation strategy so that you could avoid that risk from happening. So that’s mitigation strategy or the mitigation control and then you look at the mitigation effectiveness, you monitor that risk and over time you see that whether that risk has been mitigated or not, if that risk has mitigated, then you remove that from the list of potential risks. So this is generally a broad overview of risk management process. So now the next question is what are the strategies to deal with risk? So there are three strategies, let’s look at those on the next video.

60. 1H-3 Risk Management Strategies

So after understanding the process of risk management, which we did on the previous lecture, let’s look at risk strategies. And as we have earlier talk that there are number of supplier, there are number of risks. So what you need to do is you need to be selective here. So you only focus on those suppliers which are risky, which basically puts your organization at risk. Not all suppliers, suppliers are equally risky. So you need to focus on some of those and that way you can put your resources at the right place. There are some organizations, there are some countries which have higher risks. So based on your history, based on their past performance, you can list down that what all suppliers you want to focus more on. And then based on that, you allocate the appropriate resources to these high risk suppliers. Now, when it comes to risk, the saying is hope for the best and prepare for the worst. So in spite of all these risk controls, things could still go wrong and you need to be prepared for that.

Even though you have made a mitigation strategy, you have taken action to mitigate risk, but some of those risks might happen and they might put your organization at risk or your objective of the organization at risk. So that case, what do we do? So there are three commonly used strategies for risk. These are business. Continuity plan, contingency plan and resiliency. So let’s look at each of these, starting with the business Continuity plan. Business Continuity Plan is process of creating a system of preventing and recovering to deal with the potential threat to a company.

So this is how do you prevent and how do you recover from something wrong. In business Continuity planning, you basically list down all the big risks. Let’s say if there’s a flood, if there is a terrorist attack, if there is a war, if there is a total bankruptcy of the country or something like look at all those big risks, big ticket items here and plan for that. That how do you deal with them and how to recover from them. Let’s say in my place, if there’s a very heavy snowfall, employees cannot come to office. That is one of the big risk. So in that case, the business Continuity plan will have details of what to do. Under these circumstances, how would employees be notified that there is a big problem, there is a big snowfall, people cannot come to office.

Then how the business runs as usual, some people running from home. So all these things are stated in the business Continuity Plan that if something goes wrong, what would you do? That is business Continuity Plan and the common threats which are included here in BCP or the Business Continuity Plan is fire. What will happen in case of fire? So did we have a data backup? Did we have all our documents as a duplicate copy or all our critical documents stored separately in fire safe. All these things are related to fire, flood strike, earthquake, war, outages, cyber attack, terrorist attack. So all these things are listed in the Business Continuity Plan. Coming to the second strategy which is contingency plan. Contingency Plan is plan for outcomes other than usual plans. So you might think that contingency plan and the Business Continuity Plan look more or less similar. But the key difference here is in Business Continuity Plan you look at a very high or big risk. In contingency planning you look at slightly not that extreme cases as you deal in the Business Continuity Plan. In Business Continuity Plan you are looking at fire, you are looking at flooding, you are looking at attacks, you are looking at wars which are rare event. But if those things happen, those will affect your organization in a big way. In contingency planning you put things which have more chance of happening, but these are not that extreme.

So the cases such as supplier going out of business, not an extreme case. It does happen quite often. What do you do in that case? What do you do in case of bankruptcy? Your bankruptcy, your suppliers bankruptcy, what you do in case of a big fluctuation in the currency exchange rate. These things are considered in contingency planning. So after talking about the Business Continuity Plan and the contingency plan, now let’s move on to the third strategy which is resiliency. What is resiliency? Resiliency is the capability of organization to quickly jump back from difficulty. So this is basically the toughness of the organization. Out of the organization is how does organization quickly recovers from those bad situations? Resiliency of the organization is something like a spring. It should spring back quickly from that bad situation.

So that’s what is resiliency. In case of resilient infrastructure, there is a white paper issued by IBM probably if you want you can look at that which is improving your business resiliency. This is an IBM white paper. You can look at that. But I just want to quickly highlight six blocks which are provided in that. How do you make your organization more resilient? There are six blocks. One is recovery, how fast your organization can recover from the bad situation. Second is hardening. In hardening you make sure that how you make your organization less susceptible to these bad situations. How do you harden your organization? The next one is redundancy.

How do you make redundancy? Redundancy may means having spare things. For example your data of the organization lying in the organization and a copy of that is being kept separately in a cloud or in a server which is outside this office location. So that is redundancy or the duplication. And then other three blocks are accessibility diversification, autonomic computing. This is more related to basically automation or It industry, but these concepts definitely apply to any other industry.

So if you are interested you can look at that and I just thought to mention this here. When it comes to resiliency, there are a number of things which you can do so that your organization becomes resilient and is able to absorb the shock which it gets and recover back quickly just like a spring bounces back. So these are three risk management strategies. So with this we complete our topic of risk and also we complete our topic of supplier management. So the last thing which is left in this management and leadership topic is barriers to quality improvement. Let’s see that in the next video.

61. 1I Barriers to Quality Improvement

So the last topic in management and leadership topic is barriers to quality improvement. I will just keep this lecture very simple and plain. So with that, let’s look at some of the common barriers to quality improvement. When it comes to quality improvement, the first barrier to improve quality is knowing what is the definition of quality. Each organization has different service. So organizations need to define that what does quality mean for them.

For some, quality might be less defect. For some quality might be meeting client specification. For some, quality might be delivering a good product in time. So whatever product or service you are giving, first thing you might want to do is define quality in your organization. What does quality mean for your own organization? The second thing here in the barriers to quality improvement is lack of leadership. So even Deming has suggested in his 14 points of management that leadership needs to have long term commitment to the success of the organization. So that’s something which is important. If management or the leadership is not interested in quality, really you cannot achieve quality improvement. That’s another hurdle or the barrier to quality improvement.

Another thing is lack of data. Data is important. All the decisions which you take needs to be based on facts and data rather than based on your own personal opinion. So you need to create a culture of data based organization where decisions are taken based on data, based on facts. That’s another barrier to quality, where many organizations just work on the gut feeling of the management. And in addition to that, you need to have right qualified people for quality improvement. And of course, person like you who is working on doing the CQE certified quality engineer can be a valuable asset for the organization to look at how quality could be improved in the organization.

So, this was a brief introduction to barriers to quality improvement. And with this we have completed the first section of the CQE body of knowledge which was Management and leadership. And from this section, which is Management and leadership, you will be getting 18 questions in the exam. And as you would have seen, many of these topics are soft management related topics. So you might not get many questions which you can look in the binder and find the answer to them. Because many of these questions might be something which you could answer based on your own work experience. But having this knowledge definitely will help you in answering these questions. So with this we complete the first section. And now let’s move on to the second section, which is the quality system.

• Category: Uncategorized