IATF 16949:2016 Clause 8.4.2.4 Supplier monitoring

Supplier performance monitoring is a systematic process of evaluating and assessing the performance of suppliers to ensure they consistently meet the required standards, contractual obligations, and customer expectations. It involves tracking and measuring various key performance indicators (KPIs) to gauge the supplier’s performance over time. On top of the initial evaluation and approval of suppliers, you are required to carry out ongoing monitoring of their performance. Use supplier monitoring indicators to evaluate the consistency, capability and reliability of their performance for quality, delivery, support, etc. Various tools are available to do this.On-time delivery is very important and disruptions (due to waiting for materials) at your customers or even your own facility must be avoided. You must track and evaluate all occurrences of premium freight on incoming deliveries, whether caused by you or your supplier. You must take corrective action where there a significant premium freight problem. If you have the misfortune to be put on hold, special alert or notification status by any of your OEM customers, the process for getting out of it can be very time-consuming and costly. Therefore, besides controlling your own product and delivery performance , make sure that you are on top of your supplier’s product quality and delivery using effective evaluation and monitoring controls as well as an effective problem resolution process when problems do arise.  You must encourage your suppliers to monitor their own manufacturing performance. Motivate them to use lean manufacturing tools such as – ANDON procedures; direct run first time quality results; lead time reduction; level scheduling; number of error-proofing opportunities implemented; planned maintenance; standardized work; workplace organization and visual controls deployed.

Supplier performance monitoring is a crucial aspect of supplier management and helps in maintaining a reliable and efficient supply chain. Here’s how it works:

1. Establishing Performance Metrics: Define specific performance metrics and KPIs that align with your organization’s objectives and requirements. These metrics may include on-time delivery, product quality, responsiveness, lead times, cost-effectiveness, and adherence to contractual terms.
2. Data Collection and Tracking: Gather data on supplier performance regularly, based on the established metrics. This data may come from various sources, such as purchase orders, invoices, quality inspection reports, customer feedback, and delivery schedules.
3. Performance Evaluation: Analyze the collected data to evaluate the supplier’s performance against the defined metrics. This evaluation provides insights into how well the supplier is meeting the agreed-upon criteria.
4. Rating or Scoring System: Implement a rating or scoring system to quantify the supplier’s performance. This system helps in comparing suppliers objectively and identifying top-performing and underperforming suppliers.
5. Periodic Reviews: Conduct regular reviews or performance meetings with suppliers to discuss their performance, address any concerns, and collaborate on improvement initiatives.
6. Action Plans for Improvement: Work with suppliers to develop action plans to address any identified performance issues or non-conformities. These action plans should be measurable and time-bound.
7. Continuous Improvement: Encourage a culture of continuous improvement among suppliers. Offer support, share best practices, and provide resources to help suppliers enhance their performance.
8. Risk Assessment: Identify potential risks associated with supplier performance and take proactive measures to mitigate these risks.
9. Supplier Relationship Management: Use performance monitoring as part of a broader supplier relationship management strategy to build strong, collaborative relationships with suppliers.
10. Supplier Development: Leverage performance monitoring data to identify suppliers with growth potential and collaborate with them on supplier development initiatives.
11. Compliance and Audits: Ensure that suppliers comply with the required standards, regulations, and contractual agreements. Conduct periodic audits to verify compliance.

By implementing a robust supplier performance monitoring process, organizations can make data-driven decisions, identify opportunities for improvement, and foster a reliable and high-performing supplier base. This approach contributes to a more efficient supply chain and ultimately benefits the organization and its customers.

Clause 8.4.2.4 Supplier monitoring

The organization must have a documented process and criteria to evaluate supplier performance in order to ensure conformity of externally provided products, processes, and services to internal and external customer requirements. The supplier performance indicators that needs to be monitored are delivered product conformity to requirements, customer disruptions at the receiving plant, including yard holds and stop ships, delivery schedule performance and number of occurrences of premium freight. If provided by the customer, the organization shall also include in their supplier monitoring the special status customer notifications related to quality or delivery issues and dealer returns, warranty, field actions, and recalls.

Supplier performance monitoring is the process of assessing supplier performance on an ongoing basis in order to identify areas of improvement. It involves tracking supplier performance against specific metrics and standards, and using that information to make decisions about how to improve supplier performance. There are many benefits to supplier performance monitoring, including improved quality of products and services, reduced costs, and improved communication between suppliers and buyers. Additionally, supplier performance monitoring can help to build and maintain relationships with key suppliers. There are a number of ways to collect data for supplier performance monitoring. One common method is to use surveys. Surveys can be used to collect data on a variety of factors, including quality, delivery times, communication, and overall satisfaction. Another method is to track metrics such as error rates, scrap rates, or customer complaints. Supplier performance monitoring should be an ongoing process, not a one-time event. Monitoring should be done on a regular basis, such as monthly or quarterly. It is also important to involve all stakeholders in the process, from senior management to front-line employees.

The benefits of supplier performance monitoring
As a business, it is important to ensure that your suppliers are meeting your standards in terms of quality and delivery. This is where supplier performance monitoring comes in. By tracking the performance of your suppliers, you can identify any issues early on and take corrective action if necessary. This helps to ensure that your business is getting the best possible value from its suppliers. There are many benefits to supplier performance monitoring, including:

1. Improved quality of products and services: By tracking supplier performance, you can identify any areas where they are not meeting your standards. This allows you to take corrective action to improve the quality of their products or services.
2. Reduced costs: By identifying issues early on, you can avoid costly mistakes further down the line. For example, if a supplier is consistently late with deliveries, you can look for alternative suppliers who can meet your deadlines more effectively.
3. Greater transparency: Supplier performance monitoring helps to create a more transparent relationship between you and your suppliers. This allows for better communication and collaboration when problems arise.
4. Increased customer satisfaction: Ultimately, by ensuring that your suppliers are meeting your standards, you can help to improve customer satisfaction levels. This is because customers will receive products or services that meet their expectations in terms of quality and delivery timescales.

The different types of supplier performance monitoring
There are four different types of supplier performance monitoring: financial, quality, delivery, and compliance. Financial performance monitoring looks at things like a supplier’s financial stability, their ability to meet payment terms, and their overall cost-effectiveness. Quality performance monitoring assesses things like the quality of the products or services a supplier provides, their ability to meet specifications, and levels of customer satisfaction. Delivery performance monitoring focuses on a supplier’s ability to meet delivery deadlines, their order fill rates, and their on-time delivery rates. Compliance performance monitoring covers a supplier’s adherence to regulations and standards, as well as their compliance with internal policies and procedures.

How to implement supplier performance monitoring
Supplier performance monitoring is the practice of assessing supplier performance on a regular basis in order to identify areas of improvement. There are a number of ways to implement supplier performance monitoring, but the most important thing is to establish clear objectives and metrics that will be used to assess performance. Once you have established these, you can begin collecting data and conducting regular reviews. One way to collect data on supplier performance is to use a supplier scorecard. This scorecard should include metrics such as on-time delivery, quality, cost, and responsiveness. You can also use surveys or interviews to gather feedback from customers or internal stakeholders about their experiences with suppliers. Once you have collected this data, you can start to trend it over time to get a better understanding of how suppliers are performing. Conducting regular reviews is crucial to effective supplier performance monitoring. These reviews should be conducted at least quarterly, but more frequently if there are issues that need to be addressed. During the review, you should discuss the data that has been collected and identify any areas of improvement. You should also set expectations for future performance and agree on any actions that need to be taken in order to improve supplier performance.

Documented Process to evaluate supplier performance

Having a documented process and criteria to evaluate supplier performance is crucial for ensuring the conformity of externally provided products, processes, and services to internal and external customer requirements. This documented process provides a structured approach to measure and monitor supplier performance, enabling the organization to make informed decisions and maintain a reliable supply chain. Here’s how to establish such a process:

1. Defining Evaluation Criteria: Determine the specific criteria and metrics that will be used to assess supplier performance. These criteria should align with the organization’s objectives and customer requirements. Common evaluation criteria include quality, on-time delivery, responsiveness, cost, and compliance with relevant standards.
2. Setting Performance Targets: Establish clear performance targets for each evaluation criterion. These targets should be measurable and achievable, reflecting the desired level of supplier performance.
3. Data Collection and Documentation: Develop a systematic method for collecting and documenting data related to supplier performance. This data may come from various sources, such as purchase orders, delivery records, inspection reports, customer feedback, and non-conformance reports.
4. Performance Evaluation Process: Define the process for evaluating supplier performance based on the established criteria and targets. Determine the frequency of evaluations, such as monthly, quarterly, or annually.
5. Scoring or Rating System: Implement a scoring or rating system to quantify supplier performance. This system may involve assigning scores or ratings to different evaluation criteria and calculating an overall performance score for each supplier.
6. Performance Review Meetings: Conduct regular performance review meetings with suppliers to discuss their performance, share evaluation results, and collaborate on improvement opportunities.
7. Corrective Actions and Improvement Plans: Work with suppliers to develop corrective actions and improvement plans if performance falls below the established targets. Monitor the implementation and effectiveness of these actions.
8. Performance Feedback: Provide timely and constructive feedback to suppliers on their performance, including both strengths and areas for improvement.
9. Continuous Improvement: Continuously review and refine the supplier performance evaluation process to enhance its effectiveness. Seek feedback from stakeholders and incorporate lessons learned from past evaluations.
10. Supplier Development: Use performance evaluation data to identify opportunities for supplier development. Collaborate with suppliers to enhance their capabilities and align with the organization’s requirements.
11. Supplier Segmentation: Consider segmenting suppliers based on their performance levels. This segmentation can help allocate resources more effectively and tailor the organization’s engagement with suppliers accordingly.
12. Integration with Supplier Management: Integrate the supplier performance evaluation process with the broader supplier management strategy, including supplier selection, qualification, and relationship management.

By having a well-documented process and criteria for supplier performance evaluation, the organization can maintain high-quality externally provided products, processes, and services. This approach ensures that suppliers consistently meet internal and external customer requirements, contributing to a more reliable and customer-focused supply chain.

Monitoring of Delivered product conformity to requirements

Monitoring the supplier performance indicator “delivered product conformity to requirements” is a critical aspect of supplier performance evaluation. It ensures that the products provided by the supplier meet the specified requirements and standards, contributing to the overall quality and reliability of the organization’s products or services. Here’s how to effectively monitor this performance indicator:

1. Clearly Define Product Requirements: Work with the supplier to establish clear and detailed product requirements, specifications, and quality standards. These requirements should be documented and communicated to the supplier in a well-defined manner.
2. Inspection and Quality Checks: Implement inspection and quality checks on the delivered products to verify their conformity to the specified requirements. This may involve using sampling plans, statistical process control, or other quality assurance techniques.
3. Non-Conformance Reporting: Establish a process for reporting non-conformances if any delivered product fails to meet the specified requirements. Ensure that non-conformances are documented, communicated to the supplier, and addressed promptly.
4. Performance Data Collection: Regularly collect data on the conformity of delivered products to requirements. This data may include acceptance rates, rejection rates, defect counts, and any relevant customer feedback or complaints.
5. Performance Evaluation: Analyze the collected data to evaluate the supplier’s performance regarding delivered product conformity. Calculate metrics such as the percentage of conforming products or the number of non-conformances.
6. Performance Targets: Set performance targets for delivered product conformity based on the organization’s quality objectives and customer expectations. These targets should be realistic and aligned with industry standards.
7. Regular Performance Reviews: Conduct periodic performance reviews with the supplier to discuss their performance in terms of product conformity to requirements. Share the evaluation results and collaborate on improvement actions if needed.
8. Root Cause Analysis: In cases of non-conformance, work with the supplier to perform root cause analysis to identify the underlying reasons for the discrepancies. This analysis helps in implementing corrective and preventive actions.
9. Continuous Improvement: Encourage a culture of continuous improvement with the supplier. Collaborate on initiatives to enhance product quality and ensure better conformity to requirements over time.
10. Supplier Development: Use the performance data to identify opportunities for supplier development. Provide support, resources, and guidance to help the supplier improve their processes and deliver conforming products consistently.
11. Communication and Transparency: Maintain open communication with the supplier regarding their performance. Be transparent about the evaluation process and the organization’s expectations.

By monitoring the supplier performance indicator “delivered product conformity to requirements,” the organization can ensure that the products received from suppliers consistently meet the desired quality standards. This focus on conformity enhances customer satisfaction, reduces the risk of product failures, and strengthens the overall reliability of the supply chain.

Monitoring of Customer disruption

Monitoring the supplier performance indicator “customer disruptions at the receiving plant, including yard holds and stop ships” is crucial for understanding the impact of the supplier’s performance on the smooth operation of the customer’s receiving plant. This indicator reflects the ability of the supplier to provide products that meet the required quality, quantity, and delivery schedule. Here’s how to effectively monitor this performance indicator:

1. Define Customer Disruptions: Clearly define what constitutes customer disruptions at the receiving plant, including specific events such as shipment delays, damaged products, incorrect quantities, or any issues that lead to operational disruptions.
2. Data Collection: Set up a system to collect data on customer disruptions caused by the supplier. This data may come from various sources, including receiving plant records, customer feedback, and communication with the customer.
3. Root Cause Analysis: If disruptions occur, conduct a root cause analysis to understand the reasons behind them. Identify any issues in the supplier’s processes, logistics, or communication that contribute to the disruptions.
4. Performance Metrics: Establish performance metrics to quantify the frequency and severity of customer disruptions. This could be measured in terms of the number of disruptions, the duration of disruptions, or the impact on the customer’s production.
5. Performance Targets: Set specific performance targets for the supplier to minimize customer disruptions. These targets should align with the customer’s expectations and the organization’s overall supply chain goals.
6. Regular Performance Reviews: Conduct periodic performance reviews with the supplier to discuss customer disruptions and their impact. Share the evaluation results and collaborate on improvement actions.
7. Corrective and Preventive Actions: Work with the supplier to implement corrective actions to address any identified issues leading to customer disruptions. Additionally, implement preventive measures to avoid similar disruptions in the future.
8. Performance Improvement Plan: Develop a performance improvement plan in collaboration with the supplier to address recurring issues related to customer disruptions. Set milestones and timelines for achieving the desired improvements.
9. Continuous Monitoring: Continuously monitor the supplier’s performance regarding customer disruptions. Regularly track progress towards meeting the established targets and evaluate the effectiveness of improvement actions.
10. Supplier Collaboration: Foster a collaborative relationship with the supplier to improve communication and address issues promptly. Encourage the supplier to share any potential challenges or concerns that could impact product deliveries.
11. Supplier Development: Provide support and resources to help the supplier improve their processes and avoid disruptions at the customer’s receiving plant. Collaborate on initiatives to enhance the supplier’s capabilities and performance.

By monitoring the supplier performance indicator “customer disruptions at the receiving plant, including yard holds and stop ships,” the organization can proactively address issues that affect the customer’s operations. This focus on customer satisfaction and supply chain reliability contributes to a strong and mutually beneficial partnership between the supplier and the customer.

Monitoring of delivery schedule performance and number of occurrences of premium freight

Monitoring the supplier performance indicators “delivery schedule performance” and “number of occurrences of premium freight” is crucial for assessing the supplier’s reliability, adherence to delivery commitments, and impact on logistics costs. These indicators directly affect the smooth operation of the supply chain and customer satisfaction. Here’s how to effectively monitor these performance indicators:

1. Delivery Schedule Performance:
   • Define Criteria: Clearly define the criteria for delivery schedule performance, such as on-time delivery percentage, early or late deliveries, and the allowed margin for deviations.
   • Data Collection: Collect data on actual delivery dates compared to the scheduled delivery dates for each shipment or order.
   • Performance Metrics: Calculate the on-time delivery rate and other relevant metrics based on the defined criteria.
   • Performance Targets: Set specific performance targets for on-time delivery that align with customer requirements and overall supply chain goals.
   • Periodic Review: Conduct regular performance reviews with the supplier to discuss delivery schedule performance, share evaluation results, and collaborate on improvement actions.
   • Root Cause Analysis: If there are deviations from the delivery schedule, work with the supplier to perform a root cause analysis to identify the reasons and address the underlying issues.
   • Performance Improvement: Collaborate with the supplier on a performance improvement plan to enhance delivery schedule reliability and meet the established targets.
2. Number of Occurrences of Premium Freight:
   • Definition: Clearly define what constitutes premium freight, such as shipments that require expedited shipping methods due to missed or delayed deliveries.
   • Data Collection: Record instances where premium freight is required and the associated costs.
   • Performance Metrics: Calculate the number of occurrences of premium freight and the associated expenses over a specific period.
   • Cost Analysis: Analyze the costs incurred due to premium freight and assess their impact on the overall supply chain expenses.
   • Performance Targets: Set targets to reduce the number of occurrences of premium freight, aiming to minimize additional shipping costs.
   • Collaboration and Improvement: Work with the supplier to identify root causes for premium freight incidents and implement corrective actions to prevent such occurrences in the future.
   • Communication: Ensure open communication with the supplier to promptly address any potential disruptions that could lead to premium freight requirements.
3. Continuous Monitoring and Improvement:
   • Continuously monitor the supplier’s performance related to delivery schedule and premium freight incidents.
   • Regularly review progress and improvement efforts, supporting the supplier in meeting performance targets.
   • Foster a culture of continuous improvement, encouraging collaborative problem-solving between the organization and the supplier.

By monitoring delivery schedule performance and the number of occurrences of premium freight, the organization can ensure a reliable supply chain, reduce logistics costs, and enhance customer satisfaction. These performance indicators contribute to a smooth and efficient flow of goods, benefiting both the organization and its customers.

Monitoring of special status customer notifications related to quality or delivery issues

Monitoring the supplier performance indicator “special status customer notifications related to quality or delivery issues” is essential for assessing the supplier’s ability to promptly address and resolve quality or delivery-related concerns that may impact the customer. Special status notifications are typically issued when there are exceptional situations that require immediate attention and action. Here’s how to effectively monitor this performance indicator:

1. Define Special Status Customer Notifications: Clearly define what constitutes special status customer notifications related to quality or delivery issues. These notifications may include customer complaints, non-conformances, quality escapes, missed deliveries, or any other significant concerns raised by the customer.
2. Data Collection and Documentation: Set up a system to collect data on special status customer notifications. Document the details of each notification, including the nature of the issue, the customer’s feedback, the response time, and the resolution provided.
3. Performance Metrics: Establish performance metrics to quantify the frequency and severity of special status customer notifications. Measure key indicators such as the number of notifications, average response time, and the time taken to resolve issues.
4. Performance Targets: Set specific performance targets for handling special status customer notifications. These targets should aim to minimize the number of notifications and ensure timely and effective responses.
5. Root Cause Analysis: For each special status notification, work with the supplier to conduct a root cause analysis to identify the underlying reasons for the issue. This analysis helps in implementing corrective and preventive actions.
6. Communication and Collaboration: Foster open and transparent communication with the supplier regarding special status customer notifications. Collaborate on resolving issues and preventing similar incidents in the future.
7. Corrective and Preventive Actions: Implement corrective actions to address immediate concerns raised by special status notifications. Additionally, work with the supplier to implement preventive measures to avoid similar issues in the future.
8. Continuous Improvement: Encourage a culture of continuous improvement with the supplier. Regularly review and refine processes based on lessons learned from handling special status notifications.
9. Performance Reviews: Conduct periodic performance reviews with the supplier to discuss special status notifications and the effectiveness of the responses. Share evaluation results and collaborate on improvement actions.
10. Supplier Development: Provide support and resources to help the supplier improve their processes and responsiveness in handling special status notifications. Collaborate on initiatives to enhance the supplier’s capabilities and performance.
11. Customer Feedback: Seek feedback from customers regarding the supplier’s handling of special status notifications. Incorporate this feedback into the evaluation process and improvement efforts.

By monitoring special status customer notifications related to quality or delivery issues, the organization can proactively address customer concerns and ensure prompt resolutions. This focus on customer satisfaction and issue resolution contributes to a stronger and more reliable relationship between the supplier and the customer.

Monitoring of dealer returns, warranty, field actions, and recalls

onitoring the supplier performance indicators “dealer returns, warranty, field actions, and recalls” is essential for assessing the quality and reliability of the products provided by the supplier. These indicators directly impact customer satisfaction, brand reputation, and the overall performance of the organization. Here’s how to effectively monitor these performance indicators:

1. Dealer Returns:
   • Data Collection: Collect data on the number of products returned by dealers due to quality issues, defects, or customer dissatisfaction.
   • Root Cause Analysis: Work with the supplier to conduct a root cause analysis for each return to identify the reasons behind the returns.
   • Performance Metrics: Calculate the dealer return rate and analyze trends over time to identify improvement opportunities.
   • Performance Targets: Set specific targets for reducing the dealer return rate, reflecting the organization’s quality objectives.
2. Warranty Claims:
   • Data Collection: Record data on warranty claims made by customers for products supplied by the supplier.
   • Root Cause Analysis: Analyze warranty claims to determine the underlying reasons for defects or failures.
   • Performance Metrics: Measure the warranty claim rate and analyze trends to identify areas for improvement.
   • Performance Targets: Set targets for reducing warranty claims, aiming to improve product quality and reliability.
3. Field Actions:
   • Data Collection: Monitor the number of field actions taken to address product issues or defects identified after delivery to customers.
   • Root Cause Analysis: Collaborate with the supplier to conduct root cause analysis for each field action to prevent recurrence.
   • Performance Metrics: Calculate the field action rate and evaluate the effectiveness of actions taken.
   • Performance Targets: Set targets to minimize the need for field actions, demonstrating improved product quality.
4. Recalls:
   • Data Collection: Track the number of product recalls initiated due to safety issues or severe defects.
   • Root Cause Analysis: Work with the supplier to perform a comprehensive root cause analysis for each recall.
   • Performance Metrics: Evaluate the recall rate and assess its impact on the organization and customers.
   • Performance Targets: Set targets to reduce the likelihood of product recalls, emphasizing product safety and quality.
5. Corrective and Preventive Actions:
   • Collaborate with the supplier to develop and implement corrective and preventive actions based on the root cause analysis.
   • Monitor the effectiveness of these actions in reducing the incidence of dealer returns, warranty claims, field actions, and recalls.
6. Continuous Improvement:
   • Foster a culture of continuous improvement with the supplier, promoting a proactive approach to quality enhancement.
   • Regularly review performance data, identify improvement opportunities, and collaborate on initiatives to address them.
7. Supplier Collaboration:
   • Maintain open communication with the supplier to promptly address any quality issues and implement improvement measures.

By monitoring dealer returns, warranty, field actions, and recalls, the organization can take proactive steps to improve product quality, safety, and customer satisfaction. These performance indicators directly influence the organization’s reputation and market competitiveness. Effective monitoring and collaboration with the supplier lead to a more reliable and customer-centric supply chain.