Suppliers normally provide something needed such as a product or service, whereas Sub-contractors carry out work on behalf of a business in line with the business’ requirements.
There is sometimes a common misperception amongst certain ISO 9001 auditors that normal service providers are seen as outsourced processes, e.g. Information Technology (IT), Accounting, etc. However, an outsourceing process is work done that is incorporated into the final product/service provision which affects the customer or their requirements directly, e.g. welds are performed on a product, but the testing of the welds, i.e. non-destructive testing, X-ray testing, etc. are outsourced because the organisation cannot perform these tests as they are not qualified or accredited to do so, or a transport company uses another transport company to deliver on their behalf, therefore carrying out their services through somebody else.
A common example of misinterpreting outsourced processes is a transport company delivering product/s for its customers, and the vehicle breaks down. A mechanic is sourced closest to the broken-down vehicle to fix the vehicle. This is sometimes perceived by certain ISO 9001 auditors as an outsourced process, which is incorrect. Remember, what is the nature of the company’s business? Its transportation, not the servicing and repairs of vehicles. If the company sourced another transport company to come and collect the load of the broken down vehicle for them to deliver the load, that would be an outsourced process. But the mechanic fixing the vehicle is merely a service provider.
However, this said, the ISO 9001 Standard and its requirements stipulate that a business should have control over its outsourced processes, meaning Service Level Agreements (SLA’s) should be in place stipulating exactly what both, the business’s and its customer/s’ requirements are, including how it will be monitored and measured for acceptance. It should also include what deliverables in the form of documentation is required upon the completion of the product/service provided.
All businesses, big or small, make use of Suppliers and/or sub-contractors to carry out their respective product and/or service provision to their customers. Therefore, it is imperative to manage these Suppliers/sub-contractors effectively to ensure the products and services they provide conform to requirements that satisfy both, the business and its customers.
When selecting suppliers/sub-contractors, prior to making use of them, companies must look at certain acceptance criteria that suit the company and its customer/s needs. Although the most common criteria for acceptance is the price, there are other factors to consider, e.g. location, lead-times, quality, professionalism, communication, etc. If one only looks at price, there’s a saying “You pay peanuts, you get monkeys!”, i.e. you get what you pay for. This sometimes results in double costs that could have been avoided. It’s always ironic how some businesses are willing to replace something instead of just spending a bit more money and doing something right from the beginning. Yes, it may be cheap just to replace the part/materials, but the time and effort are what’s costing the company.
It is also very important to monitor and measure the performance of suppliers/sub-contractors. The criteria in doing so need to be established and monitored over a period of time, normally bi-annually or annually. The information gathered in relation to the criteria established should be recorded and analysed after the said periods have lapsed to identify trends that impacts on your product/service delivery to your customers. It is extremely important to discuss these trends with your suppliers/sub-contractors and ensure that formal corrective action is taken by them to prevent the occurrence or reoccurrence of the trends identified, allowing them the opportunity to decide on a solution and implement the necessary controls to eliminate or reduce the occurrence of the trends identified.
With each product/service provision, where problems occur, e.g. incorrect quantities, damages, failures, late deliveries, etc., a Non-conformance Report (NCR) should be raised against the supplier/contractor to rework, replace or rectify the problem. These records should be maintained and should form part of the bi-annual or annual evaluation of suppliers/sub-contractors. Best practice dictates that a business should classify its suppliers/sub-contractors, i.e. preferred suppliers/sub-contractors, back-up suppliers/sub-contractors, sole suppliers/sub-contractors, etc. By evaluating your suppliers’/sub-contractors’ performances, you’ve got supporting evidence to justify why a supplier/sub-contractor could be upgraded or downgraded as a preferred or back-up supplier/sub-contractor. This is what is meant by the effective management of suppliers/sub-contractors.
Further to the above-mentioned, are the necessary controls between the various processes of a business and its Procurement/Purchasing Process. Communication is key and to ensure any misunderstandings, it is imperative to have a method or system in place to ensure that whatever products/services are required, are described in detail and communicated formally to the Buyer/s. Best practice in this regard is normally a Purchase Requisition being completed by the Requestor, signed off by the relevant process owner/department head, and issued to the Buyer. The Buyer would then typically generate a Purchase Order based on the information received via the Purchase Requisition. It is of utmost importance that the products/services required are described in detail for the Buyer to make the correct purchase. This process is needed to ensure there are no misunderstandings and finger-pointing with regards to the wrong products/services obtained. If it gets recorded, there is a paper trail and documented evidence. Many businesses see this process as a huge burden, but do not realise what its main purpose and objective are.
Another very important control is the authorisation limits of approval. Any business should have a hierarchy of authorisation levels, e.g. R 0 – R 5 000, the Buyer may approve, R 5 000 – R 50 000, the Procurement/Purchasing Manager or Head of Department must approve, R 50 000 and above, a Director must approve. These authorisation limits restrict Buyers to make unnecessary purchases, it controls stock-levels, i.e. the more people involved and checking whether it’s necessary the more and better control.
All of the above-mentioned, if not managed properly, can result in customers being unsatisfied. It can result in poor quality products/service provision, longer lead-times, unnecessary costs to the company, etc.
Call 9001 Consult today and let us help you manage your suppliers/sub-contractors more effectively and efficiently!