The management of quality in your supply chain used to be a relatively simple task. Unfortunately, it has become more complicated in businesses with the advent of multi-tier supply chains. The traditional one-for-one relationship, supplier to customer, has now morphed into a one-for-many. Many of the lower tier suppliers are completely unknown to the OEM (Original Equipment Manufacturer). Not only are they unknown, but the OEM in many cases has no idea of where they are located. Not knowing where your sub-tier suppliers are located significantly increases risk for supply chain disruption caused by weather, political events and any other outside source that can impact the relationship between countries.

The more complicated the product, the greater the risk a company has by not knowing who is actually in your supply chain. Your primary suppliers are carefully vetted and chosen based on financial strength, delivery, performance and quality. This is not the case for the sub-tiers. Since cost is such a strong driver, whenever an OEM requests a price concession, the automatic response is to create new low cost sub-tiers to the supply chain. These new sub-tiers created by the price concessions may consist of the very companies that were rejected by the OEM from being selected to be a first tier supplier.

To be a high quality first-tier supplier, there are many overhead expenses such as a robust quality system that need to be included in the sales price. When price concessions are demanded, the easiest alternative is to find someone less expensive to subcontract the components to. Every additional level that is below the sub-tier creates a proportionately greater risk of serious quality issues occurs because the quality systems become less robust (i.e. less expensive) and more difficult to manage. This is even more difficult if those sub-tiers are unknown and the OEM is unaware of their location. There can be strict quality requirements at the top of the supply chain, but these frequently disappear by the time you have reached three or four levels down the supply chain.

What is even more alarming is the lack of rigor of the inspection process in this intricate chain. There are normally no uniform inspection plans, no identification of key features, no way of identifying the inspection tools (or whether they are probably calibrated), and no recording of measurements that can be audited by a third party. In other words, the tough quality standards required by ISO 9000, or in the aerospace business - AS/EN 9100, all but disappear in the lower levels of the sub-tiers. Many of the defects that get embedded in these details are completely hidden as the sub-assemblies get put together. It is not possible to check the details unless you completely disassemble the product, which is obviously not a practical solution. Instead, you have to rely on a paper based assurance system with thousands of quality stamps that claim that everything was checked and within specification. This may have been a satisfactory process when the supplier had gone through a rigorous quality audit by the OEM, but now it is woefully inadequate for the global multi-tier environment.

If there is any doubt that small items can have a big impact, look at the Qantas A 380 incident with Rolls-Royce engines. Three world class brand names nearly destroyed by a misaligned counter bore within a stub oil pipe leading to a fatigue fracture that caused a massive uncontained engine explosion nearly bringing down the aircraft.

QantasA380Incident

Source: ATSB

It probably looked just fine to the inspection department, but the consequences of this small lapse could have been disastrous.

With a rapid increase in aerospace production over the next twenty years, how can a company’s risks be mitigated and still meet the demands of being price competitive? How can quality systems be automated to reduce the cost overhead burden and still meet all the requirements necessary to ensure no defects get embedded into complex assemblies?

1. Identify everyone who is on the team. Take a product and determine who makes every detail of every part. It is only with this level of granularity that the risks can at least be quantified.

2. Determine the location of all suppliers and sub-tiers. If there is a problem with a specific country for any reason, political, weather, or natural disasters, it is important to know where they are located immediately. This will allow you to determine what mitigating steps need to be made before the issue puts the entire supply chain at risk. Another important reason a company needs to know who all their suppliers are is conformity to ITAR (International Traffic and Arms Regulations) and EAR (Export Administration Requirements). These requirements can restrict who has access to certain information related to part manufacturing based on whether they are a US person or not.

3. Require that all participants in the supply chain adhere to the same quality standards and procedures. It is not acceptable for any first tier or sub-tier supplier to subcontract key components without having that company provide auditable proof that they have the same robust quality system as that tier one suppliers have. Lower cost and lower overhead should not also mean lower quality standards.

4. Create uniform inspection standards that are applicable at all levels of the supply chain. This should include a process of identifying features and attributes that need to be measured for every part that goes into an assembly. Measurement technique and tools used can produce dramatically different results so auditing of the tools and techniques for effectiveness is a vital part of ensuring an accurate assessment of quality.

5. Require notification of any change of supplier at any level in the supply chain. Remember, products are certified using a specific team (during the first article process). If a sub-tier manufacturer is changed or replaced after the product goes into production, this should prompt a new first article to confirm same capability that was shown when the original first article was approved.

6. Develop audit capability at every level including the OEM level to insure that all quality standards are being met, every time by all members of the team. This is where uniformity is vital. Otherwise, there are no reliable standards to audit against.

7. The OEM needs to flow down a process of standardized root causes and corrective actions to all levels of the supply chain. This enables the OEM to have a complete analysis of defects across a product group. To ensure root causes are specific and not generalized, this standardization should be organized by commodity groups. When this is implemented, defect analysis is not only meaningful, but it can create a process for significant quality improvements across the entire supply chain.

See for yourself how you can use Net-Inspect's Quality Improvement Software to geographically identify and map all suppliers and sub-tier suppliers. Contact our sales team for a live demonstration today!

Contact Us