IATF 16949:2016 Clause Supplier selection process

The standard requires the organization to evaluate and select suppliers on the basis of their ability to meet product conformity and uninterrupted supply of the organization’s product to their customers, quality and delivery performance and conforming quality management system requirements. The process for selection of suppliers varies depending upon the nature of the products and services to be procured. The more complex the product or service, the more complex the process. You either purchase products and services to your specification (custom) or to the suppliers’s specification (proprietary). For example you would normally procure stationery, fasteners, or materials to the supplier’s specification but procure an oil platform, radar system, or road bridge to your specification. There are gray areas where proprietary products can be tailored to suit your needs and custom-made products or services that primarily consist of proprietary products configured to suit your needs. There is no generic model; each industry seems to have developed a process to match its own needs. However we can treat the process as a number of stages, some of which do not apply to simple purchases, At each stage the number of potential suppliers is whittled down to end with the selection of what is hoped to be the most suitable that meets your requirements. With “custom” procurement this procurement cycle may be exercised several times. For instance there may be a competition for each phase of the project: feasibility, project definition, development, and production. Each phase may be funded by the customer. On the other hand, a supplier may be invited to tender on the basis of previously demonstrated capability but has to execute project feasibility, project definition, and development of a new version of a product at its own cost. Suppier capability will differ in each phase. Some supplier have good design capability but lack the capacity for quantity production, others have good research capability but lack development capability. You need to develop documented process that define your subcontractor evaluation and selection process and in certain cases this may result in several closely-related process for use when certain conditions apply. Do not try to force every purchase through the same selection process. Having purchasing policies that require three quotations for every purchase regardless of past performance of the current subcontractor is placing price before quality. Provide flexibility so that the policies’ and process complexity match the risks anticipated. Going out to tender for a few standard nuts and bolts would seem unwise. Likewise, placing an order for $1m of equipment based solely on the results of a third party ISO 9000 certification would also seem unwise.

Preliminary suppliers assessmentTo select credible suppliersProprietary Tailored Custom
Pre-qualification of suppliersTo select capable biddersTailored Custom
Qualification of suppliersTo qualify capable bidders Custom
Request for Quotation (RFQ) To obtain prices for products/serviceProprietary Tailored
Invitation to Tender (ITT) To establish what bidders can offer Custom
Tender/quote evaluation To select a subcontractorProprietary Tailored Custom
Contract negotiation To agree terms and conditionsProprietary Tailored Custom

Clause Supplier selection process

The documented supplier selection process must include an assessment of the selected supplier’s risk to product conformity and uninterrupted supply of the organization’s product to their customers; relevant quality and delivery performance; an evaluation of the supplier’s quality management system; multidisciplinary decision making; and an assessment of software development capabilities, if applicable. Other supplier selection criteria that should be considered are volume of automotive business (absolute and as a percentage of total business); financial stability; purchased product, material, or service complexity; required technology (product or process); adequacy of available resources (e.g., people, infrastructure); design and development capabilities (including project management); manufacturing capability; change management process; business continuity planning (e.g., disaster preparedness, contingency planning); logistics process; customer service.

Determine how important the purchased product is to design, manufacture, assemble and maintain your end product. You must apply criteria for product quality, life, reliability, durability, maintainability, timing and cost to purchased product going into your end product.  Categorize your purchased products accordingly. Then determine what controls you need to ensure consistent purchased product quality and consistent supplier performance. You can apply different controls for different purchased products and suppliers.  Besides product quality, your criteria for supplier selection and evaluation may include the potential supplier’s – financial capability; technical and manufacturing capability and capacity; reliability; reputation; flexibility to handle changes; support; service; cost; etc. The importance of these criteria will vary according to the items materials or services you purchase, and so you can apply different criteria to different supplies. You can categorize your suppliers accordingly based on these criteria. It might be useful to maintain a list of all qualified suppliers.  Not all suppliers of purchased product need to conform to IATF 16949/ISO 9001. Look at the importance of the purchased product and their quality performance, to qualify them .  

Preliminary supplier assessment
The purpose of the preliminary supplier assessment is to select credible supplier and not necessarily to select a supplier for a specific purchase. There are millions of supplier in the world, some of which would be happy to relieve you of your wealth given half a chance, and others that take pride in their service to customers and are a pleasure to have as partners. You need a process for gathering intelligence on potential supplier and for eliminating unsuitable suppliers so that the buyers do not need to go through the whole process from scratch with each purchase. The first step is to establish the type of products and services you require to support your business, then search for supplier that claim to provide such products and services. In making your choice, look at what the supplier says it will do and what it has done in the past. Is it the sort of firm that does what it says it does or is it the sort of firm that says what you want to hear and then conducts its business differently? Some of the checks needed to establish the credibility of supplier are time consuming and would delay the selection process if undertaken only when you have a specific purchase in mind. You will need to develop your own criteria but, typically, unsuitable supplier are that:

  • Are unlikely to deliver what you want in the quantities you may require
  • Are unable to meet your potential delivery requirements
  • Cannot provide after-sales support needed
  • Are unethical
  • Do not comply with the health and safety standards of your industry
  • Do not comply with the relevant environmental regulations
  • Do not have a system to assure the quality of supplies
  • Are not committed to continuous improvement
  • Are financially unstable

You may also discriminate between supplier on political grounds, such as a preference for supplies from certain countries or a requirement to exclude supplies from certain countries. The supplier will therefore need to be in several parts:

Technical assessment.
This would check the products, processes, or services to establish they are what the supplier claims them to be. Assessment of design and production capability may be carried out at this stage or be held until the pre-qualification stage when specific contracts are being considered.

Quality system assessment
This would check the certification status of the quality system, verifying that any certification was properly accredited. For non—ISO 9000 registered supplier, a quality system assessment may be carried out at this stage either to ISO 9000 or the customer’s standards.

Financial assessment
This would check the credit rating, insurance risk, stability, etc.

Ethical assessment
This would check probity, conformance with professional standards and codes.

These assessments do not need to be carried out on the supplier’s premises. Much of the data needed can be accumulated from a supplier questionnaire and searches through directories and registers of companies, and you can choose to rely on assessments carried out by accredited third parties to provide the necessary level of confidence.

Supplier’s risk Assessment

Assessing the selected supplier’s risk to product conformity and uninterrupted supply is essential for maintaining a smooth and efficient supply chain. Let’s dive into the key aspects of this supplier risk assessment:

  1. Risk Assessment Criteria: The organization establishes specific criteria to assess supplier risks related to product conformity and uninterrupted supply. These criteria may include factors such as supplier capabilities, experience, financial stability, production capacity, quality management systems, and past performance.
  2. Supplier Audits and Evaluations: The organization conducts supplier audits and evaluations to thoroughly assess the supplier’s processes, capabilities, and adherence to quality standards. These audits help identify any potential risks that could affect product conformity and supply continuity.
  3. Quality Management System of Suppliers: The organization examines the supplier’s quality management system to ensure it aligns with industry standards and customer requirements. An effective quality management system enhances the supplier’s ability to deliver conforming products consistently.
  4. Capacity and Capability: The organization assesses the supplier’s production capacity and capability to meet the required demand. Understanding the supplier’s capacity ensures that they can deliver products without disruptions and maintain continuity in the supply chain.
  5. Financial Stability: Financial stability is crucial as it impacts the supplier’s ability to invest in resources, maintain operations, and sustain long-term partnerships. A financially stable supplier is more likely to provide uninterrupted supply.
  6. Past Performance and References: The organization considers the supplier’s track record and gathers references from other customers to understand their reliability and ability to deliver products that meet the required standards.
  7. Geographical Considerations: In the automotive industry, supply chain disruptions due to geopolitical factors or natural disasters can affect product availability. The organization may assess the supplier’s location and logistics to mitigate such risks.
  8. Risk Mitigation Plans: Based on the risk assessment, the organization collaborates with the supplier to develop risk mitigation plans. These plans outline actions to address identified risks and ensure product conformity and uninterrupted supply.
  9. Contingency Planning: In addition to risk mitigation, the organization may establish contingency plans to address potential disruptions in the supply chain, such as alternative suppliers or safety stock arrangements.
  10. Ongoing Monitoring: Supplier risk assessment is not a one-time activity. The organization continuously monitors supplier performance and risk factors to ensure ongoing compliance with quality and supply requirements.

By conducting a thorough supplier risk assessment, the organization can select suppliers that are capable of consistently delivering conforming products and ensuring uninterrupted supply. This strengthens the automotive company’s ability to meet customer demands, maintain high product quality, and effectively manage supply chain risks.

Relevant quality and delivery performance

the supplier selection process in the automotive industry must include a thorough evaluation of the supplier’s relevant quality and delivery performance. Assessing these aspects is crucial for ensuring that selected suppliers can consistently meet the organization’s quality requirements and deliver products or services on time. Let’s delve into the key considerations for evaluating supplier quality and delivery performance:

  1. Quality Performance Metrics: The organization establishes specific quality performance metrics to assess suppliers’ ability to deliver products that meet the required quality standards. These metrics may include measures such as product defects, non-conformities, customer complaints, and corrective actions.
  2. Supplier Quality Certifications: The organization may consider whether the supplier holds relevant quality certifications, such as ISO 9001 or IATF 16949. These certifications demonstrate the supplier’s commitment to maintaining a robust quality management system.
  3. Quality Audits: Conducting on-site quality audits is essential to evaluate the supplier’s processes, capabilities, and adherence to quality standards. These audits help identify any potential quality issues and assess the effectiveness of the supplier’s quality management system.
  4. Product Sampling and Inspection: The organization may perform product sampling and inspection to verify the quality of the supplier’s products. This involves assessing product conformance to specifications and requirements.
  5. Customer Feedback: Gathering feedback from other customers who have worked with the supplier provides valuable insights into their quality performance. Positive feedback indicates a strong track record in delivering quality products.
  6. Delivery Performance Metrics: Evaluating delivery performance involves measuring the supplier’s ability to meet agreed-upon delivery schedules. Metrics may include on-time delivery, lead time, and delivery accuracy.
  7. Capacity and Lead Time: The organization assesses the supplier’s production capacity and lead time to ensure they can meet the required demand and deliver products on time.
  8. Past Performance and References: Reviewing the supplier’s past performance, including their track record in delivering products and meeting delivery deadlines, provides valuable information for supplier evaluation.
  9. Continuous Improvement Initiatives: The organization may consider the supplier’s commitment to continuous improvement and willingness to collaborate on addressing any quality or delivery issues.
  10. Supplier Performance Management: Implementing a supplier performance management system allows the organization to track and monitor the supplier’s ongoing quality and delivery performance.

By incorporating relevant quality and delivery performance evaluation in the supplier selection process, the automotive organization can ensure that selected suppliers have a strong focus on quality, can deliver products on time, and are committed to meeting customer requirements. This process helps establish a reliable supply chain and contributes to the overall success and reputation of the automotive company.

Evaluation of the supplier’s quality management system

Evaluating the supplier’s quality management system is a critical part of the supplier selection process in the automotive industry. This evaluation ensures that the supplier has robust processes in place to consistently deliver high-quality products and services. The quality management system assessment helps the organization identify suppliers that align with their quality requirements and can contribute to the overall quality and reliability of the automotive products. Here are the key aspects of evaluating the supplier’s quality management system:

  1. Quality Management System Requirements: The organization defines the specific requirements for a supplier’s quality management system. These requirements are typically based on relevant international standards such as ISO 9001 or automotive-specific standards like IATF 16949.
  2. Supplier Documentation Review: The organization reviews the supplier’s quality management system documentation, including quality policies, procedures, work instructions, and quality manual. This review helps assess whether the supplier has a well-documented and well-implemented quality system.
  3. Quality Management System Certification: The organization considers whether the supplier holds relevant quality management system certifications, such as ISO 9001 or IATF 16949. These certifications indicate the supplier’s commitment to maintaining a robust quality system.
  4. Quality Management System Audits: Conducting on-site quality management system audits is essential to evaluate the effectiveness and compliance of the supplier’s quality processes. The audits help identify any non-conformities and assess the overall health of the quality management system.
  5. Risk Management Processes: The organization assesses the supplier’s risk management processes to understand how they identify, evaluate, and mitigate risks that may impact product quality or delivery.
  6. Continuous Improvement Culture: The supplier’s approach to continuous improvement is evaluated to determine their commitment to ongoing quality enhancement and process optimization.
  7. Corrective Action and Preventive Action (CAPA) Process: The evaluation includes an assessment of the supplier’s CAPA process, which is essential for addressing non-conformities, identifying root causes, and implementing corrective and preventive actions.
  8. Training and Competence: The organization considers the supplier’s approach to training and ensuring the competence of their employees in executing quality-related tasks.
  9. Supplier Performance History: Past performance data, including customer feedback and any performance issues, is reviewed to assess the supplier’s track record in maintaining a robust quality management system.
  10. Integration with Customer Requirements: The evaluation ensures that the supplier’s quality management system aligns with the organization’s specific quality requirements and any relevant customer-specific requirements.

By evaluating the supplier’s quality management system, the organization can make informed decisions about selecting suppliers who demonstrate a commitment to quality, adherence to standards, and continuous improvement. This process is instrumental in building a strong supply chain that consistently delivers high-quality products and services to meet customer expectations.

Multidisciplinary decision making

a multidisciplinary decision-making approach is essential in the supplier selection process in the automotive industry. This approach involves involving representatives from various departments or disciplines within the organization to collectively assess and make informed decisions about potential suppliers. A multidisciplinary team brings diverse perspectives, expertise, and insights, which leads to more comprehensive supplier evaluations and better-informed choices. Here are the key benefits and considerations of incorporating multidisciplinary decision making in the supplier selection process:

Benefits of Multidisciplinary Decision Making:

  1. Holistic Assessment: Different departments, such as purchasing, engineering, quality assurance, supply chain, and finance, each have unique perspectives and requirements when evaluating suppliers. By involving these departments in the decision-making process, the organization gains a more holistic view of potential suppliers.
  2. Comprehensive Risk Assessment: A multidisciplinary team can conduct a more thorough risk assessment by considering various factors that may affect supplier performance, such as quality, delivery, financial stability, technological capability, and regulatory compliance.
  3. Informed Supplier Selection: Collaborative decision making ensures that all stakeholders understand the selection criteria and collectively agree on the best supplier based on the organization’s overall objectives.
  4. Improved Supplier Relationships: Involving different departments in the decision-making process fosters a sense of ownership and accountability. Suppliers are more likely to feel valued and engaged when they interact with a team representing various functions within the organization.
  5. Effective Communication: A multidisciplinary team facilitates communication and knowledge-sharing between departments, leading to a better understanding of supplier needs and requirements.
  6. Risk Mitigation: Diverse perspectives allow for the identification of potential risks that might be overlooked if the supplier selection process were solely driven by a single department.
  7. Better Negotiation: A team comprising representatives from different functions can better negotiate with suppliers, addressing concerns and expectations from different angles.

Considerations for Multidisciplinary Decision Making:

  1. Clear Objectives: Clearly define the supplier selection objectives and the criteria for evaluation. This ensures that the multidisciplinary team is aligned with the organization’s goals and requirements.
  2. Cross-Functional Collaboration: Encourage open and constructive collaboration among team members. Establish a positive and respectful team dynamic that values diverse perspectives.
  3. Communication and Transparency: Facilitate open communication and transparency throughout the supplier selection process. Share relevant information and data with the multidisciplinary team to make informed decisions.
  4. Decision-Making Process: Define a structured decision-making process that considers input from all team members and leads to a well-informed and consensus-based decision.
  5. Efficiency and Timeliness: While involving multiple stakeholders, ensure that the decision-making process is efficient and does not lead to unnecessary delays in supplier selection.

By incorporating multidisciplinary decision making, the automotive organization can make more comprehensive, informed, and strategic decisions when selecting suppliers. This approach helps ensure that the selected suppliers align with the organization’s requirements, resulting in improved product quality, supply chain efficiency, and overall customer satisfaction.

Assessment of software development capabilities, if applicable

when dealing with suppliers involved in software development for automotive products or systems, assessing their software development capabilities is a crucial part of the supplier selection process. With the increasing importance of software in modern vehicles, the ability of suppliers to develop high-quality, reliable, and secure software solutions becomes paramount. Here are the key considerations for assessing software development capabilities during the supplier selection process:

  1. Software Development Experience: Evaluate the supplier’s track record and experience in software development for the automotive industry. Experience in developing software solutions for automotive applications is essential for understanding the unique challenges and requirements of the sector.
  2. Quality of Software Products: Assess the quality of software products or solutions developed by the supplier. This may involve reviewing past projects, product demonstrations, or obtaining customer references.
  3. Compliance with Standards: Ensure that the supplier follows relevant automotive software development standards and industry best practices. Key standards include ISO 26262 (Functional Safety for Road Vehicles), Automotive SPICE (Software Process Improvement and Capability Determination), and other relevant ISO/IEC standards for software development.
  4. Cybersecurity Capabilities: Evaluate the supplier’s cybersecurity capabilities, especially if their software interacts with critical vehicle systems. Suppliers must have robust cybersecurity practices to protect against potential cyber threats and ensure the safety and integrity of software.
  5. Development Process and Methodologies: Understand the supplier’s software development processes and methodologies. Agile, Scrum, or other recognized development methodologies are commonly used in the software industry and should be aligned with the organization’s preferences.
  6. Testing and Validation: Assess the supplier’s testing and validation processes for software. Adequate testing is crucial to identify and fix software bugs and ensure compliance with safety and functional requirements.
  7. Software Maintenance and Support: Inquire about the supplier’s software maintenance and support services. Ongoing support is vital for timely bug fixes, updates, and improvements throughout the product lifecycle.
  8. Collaboration and Communication: Consider the supplier’s ability to collaborate effectively with your organization and communicate progress, issues, and updates promptly.
  9. Technical Expertise and Resources: Evaluate the supplier’s technical expertise, qualifications, and available resources, such as skilled software developers and engineers.
  10. Innovation and Future-readiness: Assess the supplier’s commitment to innovation and staying current with emerging technologies and industry trends.

By thoroughly assessing the software development capabilities of potential suppliers, the automotive organization can make informed decisions and partner with suppliers who can deliver high-quality, reliable, and innovative software solutions. This contributes to the successful development and integration of software-intensive systems in modern vehicles, ensuring they meet safety, quality, and functional requirements.

Other criteria

Each criterion plays a vital role in ensuring the quality, reliability, and overall success of the supply chain. Let’s delve into these criteria in more detail:

  1. Volume of Automotive Business: Consider the supplier’s volume of automotive business, both in absolute terms and as a percentage of their total business. Suppliers with a significant automotive focus are likely to have a better understanding of industry-specific requirements and challenges.
  2. Financial Stability: Evaluate the financial stability of potential suppliers to ensure they have the resources and capabilities to meet production demands and sustain a long-term partnership.
  3. Purchased Product, Material, or Service Complexity: Assess the supplier’s ability to handle the complexity of the purchased products, materials, or services that are integral to the automotive manufacturing process.
  4. Required Technology (Product and Process): Determine whether the supplier has the necessary technology, both in terms of product features and production processes, to meet the automotive industry’s technological requirements.
  5. Adequacy of Available Resources: Evaluate the supplier’s resources, including skilled personnel, infrastructure, and equipment, to support the production of high-quality automotive products or services.
  6. Design and Development Capabilities (Including Project Management): Assess the supplier’s design and development capabilities, including their proficiency in project management, to ensure they can effectively deliver innovative and compliant products.
  7. Manufacturing Capability: Evaluate the supplier’s manufacturing capabilities, such as production capacity, process efficiency, and quality control, to meet the automotive industry’s production demands.
  8. Change Management Process: Consider the supplier’s change management process to ensure they can effectively handle design or process changes with minimal disruption to production.
  9. Business Continuity Planning: Assess the supplier’s business continuity planning, including disaster preparedness and contingency planning, to mitigate potential risks that may disrupt the supply chain.
  10. Logistics Process: Evaluate the supplier’s logistics processes to ensure smooth and timely delivery of products and materials to the automotive organization.
  11. Customer Service: Consider the supplier’s commitment to customer service, responsiveness, and the ability to address any concerns or issues promptly.

By carefully considering these supplier selection criteria, the organization can make well-informed decisions and build strong partnerships with suppliers that can effectively meet their specific needs and requirements. This approach fosters a reliable and efficient supply chain, ultimately leading to the successful production of high-quality automotive products and services.

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