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How to Determine Critical Suppliers (vs. Non-critical Non-critical Suppliers) B on API Specication Q1 9th Edition or API Specication Q2 by Miriam Boudreaux (http://www.mireauxms.com (http://www.mireauxms.com/about-mire /about-mireaux/about-ou aux/about-our-president) r-president),, published September 21,
A reader asks, “I am currently working on transition transition to t o API Specication Q1 9 Edition (http://mireauxms.com/iso-api-sems-consulting/api-q1-consulting) a got stuck at 5.6.1.1 a) Determine Criticality. We are a repair/remanufacturin rep air/remanufacturin facility for the oil and gas industry (http://mireauxms.com/iso-api-semsconsulting/oil-gas). Would you mind helping me understand how to determin criticality? Should it be in terms of products or activities or their ability to pro products or activities?” The topic of supply chain and critical suppliers is one of my favorites, and Mireaux Management Solutio always preached the concept of grading suppliers prior to reevaluation. Even when ISO 9001 (http://mireauxms.com/iso-api-sems(http://mireauxms.com/iso-api-sems-consulting/iso-9001-co consulting/iso-9001-consulting) nsulting) never called for dierentiation of suppliers, suppliers, we always always advised our Clients to distinguish the critical few versus the trivial many when evalu or reevaluating reevaluating suppliers, with with the main main goal of making this exercise exercise meaningful and value added. But h one dierentiate them?
It’s all in the main process map We all know that adopting the process approach is key to a good management system. In fact, if you rea article Do You Feel Like Your Company is Acting Like a Chicken Without a Head? (http://www.mireauxms.com/vanguard-blo (http://www.mireauxms.co m/vanguard-blog/do-you-feel-like g/do-you-feel-like-your-compan -your-company-is-acting-like-a-chicken-with y-is-acting-like-a-chicken-with head-nd-out-what-good-process-m head-nd-out-what-good-process-mapping-can-do-forapping-can-do-for-you) you) Find Out What Good Process Mapping Can You!, you will learn that I compare a company’s main process map (http://mireauxms.com/vanguard-blo (http://mireauxms.com/vanguard-blo you-sure-the-procedures-your-or you-sure-the-procedures-your-organization-is-using-repr ganization-is-using-represent-your-orga esent-your-organizations-processes-usingnizations-processes-using-proc proc mapping-concepts-to-develop-accurate-pro mapping-concepts-todevelop-accurate-procedures) cedures) to the blueprint for a building’s foundation: Without plan, no matter how fancy the house is, it will either not stand or it will eventually crumble. So we’ll assu have done your homework and have a good process map. If that is the case, you should have what you order to separate your critical suppliers from those that are non-critical. But wait, what is a “good” proce map? You’ll know if your company has a good process map if it exhibits the following traits:
1. It’s readable – You read that right. If your process map has arrows going in every direction or loo like a hieroglyph, then you certainly still have some work to do. 2. Easily recognize inputs and desired outputs – This will help to know what the right direction of the activities are. 3. Distinguish Core versus Support processes: This is critical because we understand that the core is what makes the company money. Here is a very simple representation of a Main Process Map for a company’s core processes. Let’s preten company does machining and welding:
So now that we have a good representation of a core main Process Map, then we can begin to distinguis critical versus non-critical suppliers.
Review the process map and identify critical processes Stand in front of your Process Map, review it and with the help of your management team if necessary. the processes that you considered absolutely critical to delivering top-notch quality products or services. Do not fall into the trap of thinking everything is important, ask yourself these questions: 1. If I had to do without this process, could I still deliver a good product or service? 2. If this process became deteriorated or degraded, could I still deliver a good product or service? Using the same simple Process Map from above, look at it, and ask yourself: what could I absolutely not without?
In this sample case, we came up with 3 critical processes: 1. Inspection
2. Materials Planning 3. Warehouse and Shipping
Review each critical process and identify critical suppliers: Now that we have identied our critical processes, we can review each one to see if there is a vendor inv in those processes that we deem critical to our goal. Once again, not every vendor will be critical, even if process we’re reviewing is. We evaluate vendors by going through the same two questions, but with a tw 1. If I had to do without this vendor, could I still deliver a good product or output from this process? 2. If this vendor disappeared or degraded, could I still deliver a good product or output from this process? In our case, let’s review one by one: 1. Inspection Say we use NDE Labs and X-ray labs. We would agree that without those vendors, we could pretty much not function in this department, therefore they are critical. And as a bonus, for any inspection that we do internally, we use instruments calibrated by a lab. In this case, we also believe this lab is critical because if our instruments are reading inaccurately, we could make serious mistakes, so the verdict is: a. Critical Vendor 1: NDE Labs b. Critical Vendor 2: X-Ray Labs c. Critical Vendor 3: Calibration Lab 2. Materials Planning In our sample company, we do not use any vendor to assist us with materials planning, except our good old Buyer Planner Jimmy. However, what Jimmy buys is critical: our raw materials! Our metal pipes and welding materials are indispensable to our operations. Therefore we will make these tw products critical and thus the vendors who supply them: a. Critical Vendor 4: Metal Supplier b. Critical Vendor 5: Welding supplier 3. Warehouse and Shipping In this case we use a vendor for packaging material, but we do not consider that critical because w can always improvise packaging material. However, the trucking companies are denitely key in ensuring the product reaches the customer. Local couriers are not critical because there are so many and we have our own truck. a. Critical Vendor 6: Trucking companies
Could there be more critical suppliers? So based on our simple exercise, we were able to identify 6 Critical Vendors. We have grouped them so t easy to design our entire evaluation and reevaluation program later on. These are the nal four groups, mind also we are talking about vendors in plural, so anyone that ts in the category is considered critical just one vendor out of the pack: 1. NDE, X-Ray and Calibration Labs 2. Metal Suppliers 3. Welding Suppliers
4. Trucking Companies And remember that there is no real dierence between Vendor and Supplier. To nd out more about th our blog Eective Evaluation and Reevaluation of Suppliers part 1 (http://www.mireauxms.com/vanguar blog/eective-evaluation-reevaluation-suppliers-part-1). So could there be more critical suppliers? Of course, you can always dig a bit deeper, review your suppor processes (not just the core processes as we did) and perhaps nd out if there are other areas that coul or break your products or services. If that’s the case, now you know what to ask in order to truly nd out Vendor is critical. Once you have decided who is critical and who is not, you can continue to design your chain program as per the API requirements.
About the Author Miriam Boudreaux (http://www.mireauxms.com/about-mireaux/about-ourpresident) is the CEO and Founder of Mireaux Management Solutions, a tech and consulting rm headquartered in Houston, TX. Mireaux’s products and s encompass international standards ISO and API Consulting (http://mireauxms.com/iso-api-sems-consulting), Hands-On Training (http://mireauxms.com/training-services), Auditing (http://mireauxms.com/auditing), Document Control (http://mireauxms.com/ sems-consulting/document-control) and implementation of Web QMS (http://mireauxms.com/web-qms) platform. To get in touch with Miriam Boudreaux, please contact her at
[email protected] (mailto:
[email protected]).
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