When to involve suppliers in a Six Sigma initiative is a topic that comes up in every organization that has made the commitment to improve. “We are only as good as our suppliers.” This statement by Göran Lande, quality manager at Sony Ericcson, at a recent Six Sigma conference, sums up the situation. It is certainly true that some percentage of product defects can be traced to supplier components. With European companies concentrating on design, and outsourcing more and more of the order fulfillment process, including manufacturing, their quality image is clearly dependent on supplier performance. So, when is the right time to involve suppliers in one’s quality improvement initiative?

Typical Challenges of Involving Suppliers

Some will argue that the most urgent problems originate with suppliers. Therefore, that is where the first Six Sigma projects should be initiated. This attitude is understandable. It is only human nature to blame one’s problems on someone else, somewhere else, rather than admitting one’s own failings.

Six Sigma demands that one look at issues related to customer satisfaction. Looking at field data may confirm that complaints or technical faults are traceable to supplier products or services. But, this ignores any of the company’s own responsibility for these faults. Why do processes exist that allow faulty parts to be assembled? Why are designs not robust against variation in supplied components? A narrow perspective on supplier quality problems hides the internal cost and hidden factory aspects. Instead, one should ask, “Where are the efficiency and capacity problems? What is the total cost of poor quality?” All of the above have a bearing on when to involve suppliers in quality improvement.

One objection to introducing suppliers to Six Sigma is that supplier companies are too small to warrant full Six Sigma programs. It is true, in many cases suppliers are small- or medium-sized organizations that supply single components or services (e.g., development or engineering, testing, customer support). In a company with 200 employees, it does not make sense to run company-focused Black Belt training. Alternative ways of involving suppliers should therefore be explored.

There are different approaches to involving suppliers in the deployment of Six Sigma. The following four approaches are in use by companies today. The best approach for a company is probably a mixture of alternatives, blended to suit the particular situation each company faces.

Approach 1 – Thou Shalt Do Six Sigma

A typical approach in industries advanced in the use of quality tools, such as the automotive industry, is to simply demand that suppliers use Six Sigma. Examples:

• Requiring sigma figures for process capability of supplied parts.
• Requiring a certain number of Belts to be trained and certified and/or numbers and titles of improvement projects in supplier (re-) qualification.

This approach depends on the influence and control of the customer company, and whether Six Sigma is used as a standard tool across the industry. The potential downside is that supplier companies are motivated to comply, but not motivated to realize the full power of Six Sigma.

If compliance becomes the overriding theme, then Six Sigma could well be treated just as some treated ISO 9000 – as a certification but not a quality management system.

If a supplier is forced to comply with a set of Six Sigma requirements, the supplier will probably free up the “best available resources,” rather than the best resources. The quality of resources devoted to Six Sigma will be directly reflected in the results from the supplier’s Six Sigma efforts.

Approach 2 – Projects at the Supplier

Another approach to involving suppliers is to conduct projects on the supplier’s processes. In this case, a Green or Black Belt from the customer tries to solve a problem that is within the scope of the supplier. The advantages of this approach are:

• Quick problem resolution. There is no need to train the supplier’s people as sponsors/Champions and Belts. The most important issues can be tackled immediately with shared resources (the customer’s Belt and supplier resources in the team).
• Supplier’s processes become transparent. Working with a project team and identifying influence factors within the supplier’s process helps to solve the problems, and in a lot of cases leads to the knowledge in the customer company about what the supplier needs in order to deliver good work (e.g., content and timeliness of information).

This approach has the prerequisite that the supplier give the customer company the access, information and freedom to get involved in their processes. For a successful Six Sigma project it is critical to solve the root causes of the problem by digging deep into the process and the factors influencing the results. Not all customer-supplier relationships offer this degree of trust or accessibility.

The disadvantage of this approach is that the supplier does not develop the skills and knowledge to solve similar problems in the future. However, in many instances the successful completion of projects leads supplier companies to become interested in Six Sigma and to start their own Six Sigma programs. This has been in the case with many Siemens suppliers.

Approach 3 – Involvement in Training

Many companies offer their suppliers the opportunity to participate in their Green and Black Belt training sessions. The offer can range from a simple communication of the opportunity, to the suggestion that the supplier participate, to the requirement of participation to further the business relationship.

A common way is to offer the training free of charge on the basis of one or two projects that must result in savings for the customer organization. The danger here is that the supplier company does not have the internal senior management support or organizational support to follow through. Mixing supplier Belts with the hosting customer Belts can be a mixed blessing. If the Belts from the host company are well chosen, work on important projects, get good support and achieve impressive results, the message will go back to the suppliers that the hosting company is serious about Six Sigma and quality. But the reverse also is true.

Approach 4 – Support Deployment

The most proactive approach to supplier Six Sigma is for the customer to help set up the program for key suppliers. This involves:

• Conducting Six Sigma awareness sessions for their own procurement staff so they understand the philosophy and methods, and have an overview of the tools and approach.
• Selecting suppliers based on business importance and readiness for Six Sigma.
• Conducting awareness session for supplier senior executives.
• Conducting a Champion workshop for those who will be sponsoring supplier projects.
• Training Belts and providing resources for coaching.

A potential downside is that the design engineering staff of the customer company is overloaded with requests – legitimate ones – for redesign work following root cause analysis by supplier Belts.

Clearly, the customer has to invest in organizing the Six Sigma effort on the supplier’s behalf. While the training costs can be recovered, it takes considerable managerial attention, focus and communication from the customer. So, why would a customer want to improve the performance of suppliers that work with competitors?

The most enlightened companies know that their competitive advantage lies in their business model, design and brand equity. Their attitude is that supplier quality cannot be allowed to erode the overall value of the business. Therefore, it is to their benefit to raise supplier quality – even if it also helps their competitors. Going even further, one can argue that if quality standards in the industry rise, it is good for the industry as a whole.

The table below provides a summary of the four approaches described above:

Each company must decide on the right balance of investment and expected benefits. And that decision largely depends on the maturity and openness of their relationships with key suppliers.

Conclusions: Greater the Investment, Greater the Return

Any company serious about improving quality through Six Sigma should consider when and how to involve their suppliers. Avoid the temptation to begin by blaming suppliers as the “source of most quality problems.” First apply Six Sigma to internal processes and product design. Deeper knowledge of one’s own processes and products will result in clearer supplier requirements. There are a variety of ways to involve suppliers, from arm’s length to proactive partnerships. The right approach will be a reflection of a company’s business and procurement strategy. As in any improvement effort, the more one is ready to invest, the greater the potential return.