Purchasing and Reliability
Statement 12
Purchasing department has their focus mainly on the lowest cost price and/or availability and not in reliability
This one has the highest score of 78% agreements.
Purchasing plays a very important role in reliability matters even without knowing it. They determine what component is bought with what supplier for what price based on a certain specification.
In this specification a reliability requirement is often not present or meaningless. It was seen that after quite some pressure no reliability data were present. See <ST09 Reliability of suppliers>.
The reliability
- "What is the failure rate of your product?"
- "It is 1 ppm"
- "Can you prove it?"
- "Uh?"
- "Do you have a release report with relevant data?"
Often the answer is one of following:
- "No", or
- "No, but it is part of our specification", or
- "No, but if you pay we will test it", or
- "Yes, but it is confidential", or
- ...
If the test proved that 1 ppm was derived as specified they should be glad to share it. Via backdoors we noted that confidential means that the product is not as reliable as specified but for obvious reason they don't want it to be published and certainly not frighten a potential customer. Business is business. In fact this supplier is a potential weak link in the reliability chain
Sometimes the surprising answer was:
"Yes, of course we have. Do you want to have a copy?
Finally a collaborating supplier. Of course we wanted it. Then a study revealed that this reliability investigation was limited in a such a way that the time and number of products were too less to prove the required reliability.
"But we always use 10 samples for a 500 hours life test. It is our standard, we have an ISO certificate and so far we had not seen a failure"
Of course not. In order to test 1 ppm within 500 hours one needs 4600 test samples. The number of test units and the test time is too less to get a failure. Unless you are lucky and hit the jackpot.
Conclusion: Basic reliability is missing here. But they didn't know. A potential risk. Basically they had tried to test how good their product was in stead of how bad. In the latter case they could have given the right answer
There are suppliers who do a better job. They could be more expensive but not necessarily. It is the task of purchasing department (or in cooperation with reliability engineering) to receive a clear insight in the reliability capabilities of their suppliers. Unfortunately many purchasers
- do not know what reliablity is
- if they do their counterpart doesn't know, but at least he can now ask the right question.
Most communications are limited to:
- "What does it cost?"
- "When can yo deliver?"
These are the most important parameters. On short term, but not on long term. Also a different problem can be caused by a bonus appreciation.
Note: there are a lot of suppliers who do know what reliability is. This description is only based on non reliability aware companies.
Cost price and bonus
Next to the directive of reliability improvement there is often also a directive from top-down to lower costs. For a stimulation a bonus can be expected for purchasers who are able to accomplish this. The question is of course how a supplier can survive with lower prices. A side effect could be that one can be entangled in a downwards spiral. The costs decrease on short term but the unreliability increases on long term so the profit of your company caused by this cost price decrease could be changed into a loss caused by the much higher service costs. And then history repeats itself.
A bonus can be dangerous. If available then only pay it after evidence that the reliability is no less than before, meaning you have to wait 3 years before payment. Reliability is a long term issue.
Cost price reduction
Lowering the cost price is always good and can be done in various ways:
- Simplified design
- efficiency in production
- cost price suppliers
A simplified design is easier said than done. It takes time and money. Resources want to develop new things and not to put an old thing in a new jacket. More efficiency in the own production is another option.
Demanding a lower cost price with suppliers is easier. Just demand 10% less costs, otherwise...
On its turn the supplier has the same problem with their suppliers. How do they solve it?
- Simplified design
- efficiency in production
- cost price suppliers
The game repeats itself along the long chain of suppliers. If the supplier has a 40% profit margin then it could stop early. It is a matter of negotiation and it can and will be done. If the profit margin is too low and the supplier does not want to lose this customer then something must be done. For sure one does not want to make loss unless compensated by higher profits of their products for this same customer.
Often the efficiency of the own production is analyzed which is always a good action. It has been seen that in order to accomplish a lower price some measures are taken by the supplier which do not influence the quality directly but the reliability on longer term. Like skipping some essential inspections. It speeds up the flow and lower the costs. This can work for some period but all of a sudden one gets batches with long term issues
Purchasing is important for an audit of the suppliers but the reliability aspect should not be forgotten
<to be continued>