Practical Application and Insights of Supplier Management and Audit Models in Aerospace Forging Enterprises

Practical Application and Insights of Supplier Management and Audit Models in Aerospace Forging Enterprises

Based on recent years, quality issues caused by supplier products have led to a series of problems affecting the company’s production and delivery, causing customer dissatisfaction and complaints, resulting in significant economic losses. This has negatively impacted the company’s reputation and performance ratings, increasing costs and pressure. Statistically, from 2018 to 2020, the number of batch quality issues reported by customers due to raw material quality averaged more than five per year, severely impacting product delivery schedules and model compatibility.

Supplier Quality Management Strategy

In modern supply chains, relationships between companies are not just simple “buyer-seller” relationships but strategic partnerships. Within quality management systems, suppliers cannot simply be seen as external factors but are considered part of the overall enterprise. Quality control and management during procurement should not merely involve incoming inspection but should encompass second-party management and auditing of suppliers, which involves supplier management and auditing.

Supplier Management and Auditing

Supplier management and auditing involve evaluating supplier performance and operations. This process is conducted after completing market research and preliminary screening of potential or existing suppliers, aimed at developing suppliers into strategic partners.

Levels and Forms of Supplier Management and Auditing

Depending on the form and level of procurement control, supplier management and auditing can include product audits, process audits, quality assurance capability audits, quality management system audits, and comprehensive audits of the entire business management system. The selection of audit modes can be tailored based on the nature of the issues. For instance:

• Product Audit: Confirms the quality of the supplier’s products through pre-delivery sample inspections and incoming material checks.
• Process Audit: Focuses on verifying the suitability of the production process and assessing the technical level.
• Quality Assurance Capability Audit: Focuses on quality control during the production process, including controlled conditions, internal audits, management reviews, and self-improvement status.
• Comprehensive Audit: Involves financial and cost control, production planning, manufacturing, information systems, and engineering capabilities.

Methods of Supplier Management and Auditing

Common methods include surveys, on-site evaluations, performance assessments, and comprehensive evaluations. Surveys are useful for collecting fixed information about suppliers but provide limited insight compared to other methods. Performance assessments evaluate existing suppliers’ delivery progress, product quality, pricing, timely feedback on quality issues, and service efficiency comprehensively. Comprehensive cost evaluation assesses procurement, quality, production, planning, and sales financially and systematically, identifying feasible cost-reduction measures and shared benefits.

Procedures for Supplier Management and Auditing

1. Market Research and Information Collection
   • Collect information about suppliers’ market analysis, product quality, prices, production scale, etc. This information forms the basis for supplier management and auditing.
2. Industry and Customer Recommendations
   • Industry surveys and customer recommendations can serve as effective ways to select suppliers.
3. Determine Key Indicators for Supplier Management and Auditing
   • Different suppliers have varying levels of importance and usage within the company. Tailor management and auditing methods according to the specific needs and characteristics of the company’s products.
4. Establish Independent Supplier Management Office and Audit Teams
   • Establish a specialized independent supplier management office responsible for organizing and managing suppliers. For low-value, low-quality products, a small audit team composed of procurement and quality departments can handle product audits. For high-value, high-quality products, the supplier management office should organize larger audit teams involving quality, technical, testing, procurement, and production departments, and possibly financial and auditing departments if necessary.
5. Comprehensive Scoring and Evaluation of Suppliers
   • Perform comprehensive scoring and evaluation of suppliers based on different weights assigned to each audit item, reflecting their importance.
6. Implementation of Supplier Audits
   • For example, quality assurance capability audits involve teams from procurement, technical, and quality departments assessing whether suppliers can produce products meeting standard requirements and whether they have the capacity to produce quality products consistently.

Technical Department Audit Focus

• Verify if suppliers can produce products meeting standard requirements.
  • Personnel capabilities: Composition and qualification of technical staff, field operators, inspectors.
  • Equipment status: Precision, usage, maintenance, and production capacity of major equipment.
  • Testing methods: Precision, calibration, and conditions of major testing equipment.
  • Technical documentation: Review of technical documents, process specifications, verification of technical state, and compliance with contracts and standards.
  • Order fulfillment: Assess how well suppliers meet contractual requirements, focusing on delivery dates, prices, product quality, and service responsiveness.

Procurement Department Audit Focus

• Contract fulfillment status: Evaluate based on previous contract execution with the supplier regarding delivery dates, prices, product quality, and service quality.

Quality Department Audit Focus

• Verify if suppliers can consistently produce products meeting standard requirements.
  • Documentation of quality management systems.
  • Operation of quality management systems (internal audits, management reviews).
  • Quality records and evidence throughout the product realization process (raw material procurement, production process, special processes, final inspection, nonconforming product control, document control).

Application of Supplier Management and Auditing Systems

Based on audit results, suppliers can be classified into three categories:

1. Qualified Suppliers
   • Suppliers meeting the following criteria can provide products to the company:
     • Technical department confirms that the supplier can produce products meeting company standards.
     • Established quality management systems ensure consistent production of quality products.
     • Sample products pass inspection or trial batches of three are satisfactory, and customer approval is obtained.
     • Effective corrective actions taken for nonconformities verified by the quality department.
2. Unqualified Suppliers
   • Suppliers failing any of the following criteria cannot provide products to the company:
     • Lack technical capability to produce products meeting company standards.
     • Sample products fail inspection or do not meet requirements after trial batches.
     • Serious defects in quality management systems or failure to report issues and complete corrective actions within specified timeframes.
     • Consistently provide nonconforming products and show poor performance despite corrective efforts.
3. Conditionally Qualified Suppliers
   • Suppliers meeting certain conditions can supply limited quantities of products, subject to stricter incoming inspection:
     • Sample products partially meet standard requirements.
     • Designated suppliers for specific customers or products.
     • Suppliers capable of timely corrective actions for identified nonconformities.

Specific Innovations and Typical Practices in Supplier Management

1. Establish a List of Qualified Suppliers
   • Develop a list of qualified suppliers through a process of qualification, evaluation, and annual performance assessment.
   • Implement dynamic management of the qualified supplier list based on performance metrics.
2. Enhance Supervision and Management of Suppliers
   • Conduct on-site inspections or surveys to prevent regional or systemic issues.
   • Develop a comprehensive checklist for audits, adjusting based on supplier characteristics and audit elements.
   • Supplement existing procedures with specialized audit management regulations for raw material suppliers.
3. Sign Quality Agreements with Suppliers
   • Shift quality requirements upstream to improve first-time acceptance rates of incoming materials.
   • Gradually implement quality agreements with all raw material suppliers to ensure consistent quality.
4. Explore Diversified Audit Supervision Models
   • Collaborate with military representatives, higher-level units, and end-users to form joint audit teams.
   • Conduct specialized audits focusing on quality capabilities, process stability, and technical assessments.
   • Implement these practices with raw material suppliers to achieve significant improvements.
5. Strengthen Supplier Evaluation Mechanisms
   • Conduct quarterly and annual performance evaluations of suppliers based on quality, delivery, pricing, and service levels.
   • Implement a ranking system using gold, silver, yellow, and red performance tiers.
   • Share evaluation results with suppliers and higher-level units to guide procurement decisions and improve competitiveness.
6. Address Significant Quality Issues from Raw Materials
   • Conduct specialized audits or process audits jointly with customers to identify root causes and implement corrective actions.
   • Engage in “double-zero” activities to enhance quality awareness and self-improvement capabilities among suppliers.
7. Leverage External Forces for Enhanced Supervision
   • Utilize multiple dimensions of supervision, including third-party audits, military representative oversight, and supplier monitoring.
   • Combine these efforts to enhance overall supplier management and product quality.

Expected Outcomes

Effective supplier management and auditing are critical components of the company’s supply chain and industrial chain. Over the past two years, implementing these measures has significantly reduced quality issues arising from suppliers. Continuous improvement in supplier management will lead to sustained provision of high-quality products, enhancing market competitiveness and product quality.

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