Quality in the age of commodity Purchasing
In this installment of Dimensional Gaging Forum, Rob discusses how quality does – or does not – come into play in two current purchasing trends.
By: Robert Edmunds III
Over the past few years, I've noticed certain trends in the manner in which companies procure goods and services necessary to their particular production needs. Though not always a black-and-white scenario, I believe that two distinct purchasing or sourcing philosophies have emerged as the predominant means by which large corporations approach capital and non-capital acquisitions – including gaging.
One school of thought considers vendor relationships transaction by transaction. With this purchasing philosophy, each capital acquisition or purchasing decision is viewed as a separate opportunity for the company to select the best product or service at that time. Quite often, this transactional approach is coupled with a formal and competitive bid process where multiple rounds of bidding encourage substantial sale price reductions from vendors. In this type of approach, purchasing decisions tend to be made more on price and delivery rather than quality. The transaction-based method groups goods and services into standard commodity classifications, and is common with many large stock corporations who seek to reduce identifiable operating expenses in favor of quarterly stock valuations.
The second, very different, purchasing – or more appropriately – sourcing philosophy entails a more collaborative, long-term approach to corporate acquisitions and expenditures. The partnering approach, unlike the transactional approach, identifies areas of key importance and develops long-term relationships with vendors in those areas. Price and delivery are factors, but not nearly as critical as with the transactional approach. Because of its broader approach to cost/benefit justification in quality outsourcing, I favor the partnering concept. Partnering is based on the premise that the true cost of quality, especially in areas of fundamental and primary importance to an organization, goes well beyond the initial sales price. Don't misunderstand me. The partnering approach is also concerned with costs (which include initial sales costs), but advocates of this method define the term "cost" in a much broader sense.
With the partnering approach, the initial sales cost is a very small piece of the puzzle when considering the true cost of a key good or service. Long-term costs of quality – admittedly a much more difficult cost to pin down – are considered crucial factors to the decision-making process. What's defined as a "key requirement" is a question usually answered by a cross-functional team rather than simply a purchasing agent or top management executive.
A Real-World Example
Consider, if you will, a steel 1-in. class xx ring gage. At first blush, one could see how it could be viewed as a commodity or "non-key" item. It has certain standard specs (size, class, tolerance direction, and material) and appears to be relatively simple to make. Moreover, a number of companies manufacture ring gages today and shopping for price wouldn't be difficult or time-consuming.
The transactional school of thought would typically focus on two things relative to this purchase: price and delivery. Each ring gage purchase would be considered a discrete sourcing opportunity with price and delivery occupying the fore when attempting to meet a particular short-term quality need.
By contrast, the partnering philosophy takes a much different approach. First, the cross-functional aspect of the partnering company would have probably come to the conclusion that a ring gage isn't a commodity at all. Someone with specific knowledge of the process and usage requirements for a ring gage surely would realize that a ring gage is a vital and key component to any manufacturing process. This same team also might bring up the fact that size range inconsistencies brought about by multiple vendors – each with varying quality standards – could wreak havoc on a company's quality system and lead to increased scrap rates. Here, the cross-functional aspect to this decision shows its value.
Following is a list of "must" questions to ask to make sure you're buying the right ring gage.
- What material is used to manufacture the ring gage? (Type 8620 and 06 tool steels are appropriate.)
- Is the ring gage heat-treated to an appropriate Rc? (Min Rc recommendation: 62)
- Is the ring gage stabilized after heat-treating? (Temperature extreme cycling 130 to 300 F will prevent unwanted dimensional shifting over time.)
- Is the ring gage within roundness tolerances?
- Will the ring gage be inspected in a temperature-controlled lab traceable to an accepted national standard?
- Does the relevant lab have a statement of uncertainty?
- Does the lab certify both size and class?
- Will this manufacturer be able to produce consistent and accurate readings over time for all relevant size ranges?
- Finally, what is price and delivery?
It's not hard to see how a transactional approach to gage acquisition could fall short very quickly. A partnering approach would, at the very least, ask these questions of the proposed vendor and manufacturing people (usually in cross-functional team format) so that the item to be acquired could be completely understood. With the ring gage scenario, having multiple vendors selected on a transactional criteria could create a huge and costly problem with quality by creating size-by-size inconsistencies. As the questions above should make clear, the long- and short-term accuracy of a ring gage – a critical factor in any quality system – is dependent upon a number of factors.
Be sure to consider all of them for whatever gaging needs you have – before you make a decision that may be penny wise and pound foolish.
Questions to ask before you make a quality purchase:
- Will this vendor be here in 10 years?
- Does this vendor understand my process?
- Is this vendor willing to enter into specific supply/demand contracts with my organization?
- Will this vendor enter into confidentiality agreements with my organization?
- Do I have confidence in this vendor's ability to produce accurate and repeatable results over time?
- Will this vendor work with my organization to develop, improve, and correlate measurement techniques?
- Finally, is this quality vendor's price and delivery competitive?
About the Author
Rob Edmunds III has a Bachelor of Science degree in Mathematics and Business from Villanova University. Involved with many facets of the gaging industry, he also participates in national and regional industry associations. Currently vice president of Edmunds Gages, he can be reached during normal business hours at Edmunds Gages or via email at REdmundsIII@edmundsgages.com.
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