Quality plays a key role in customer satisfaction, competitiveness, and business development and growth. Because buyers are responsible for the management of the supplier relationship, they are also guarantors of these suppliers’ commitment to quality. Therefore, they must ensure the ability of suppliers to meet the expectations of their company in this area. While long tail spend often suffers from unstructured management, it is essential to optimise these processes through tangible corporate quality management systems to improve overall performance.
The different aspects of quality
The ISO 90001 standard for quality management defines quality as ‘the ability of a set of intrinsic characteristics to satisfy requirements. On the procurement front, this concept of quality appears in two major aspects:
- The quality of the products and services procured (reliability, service life, standards, performance, etc.);
- The process quality (costs, delivery times, company management, etc.).
These two complementary elements, alongside others, of course, play a key role in assessing supplier performance. This means you have to measure, monitor and manage these quality levels through continuous improvement supported by effective quality management tools.
Long tail spend: the issue of process quality
With long tail spend, the major challenge lies in the quality of the processes. Very often, procurement departments lack the resources to gain control over this spend or mistakenly consider that it can’t be strategic. The result is that the processes are broken. In the language of the Lean approach, this is called ‘waste’. These include all the activities that consume resources, but do not add any value to the final product.
This phenomenon of non-quality, as insidious as it is, has major consequences on the performance of procurement departments, including loss of time and efficiency, hidden costs, environmental impacts, stakeholder dissatisfaction, and so on. This is why, for the sake of quality, it is essential to optimise all of your long tail spend processes.
The complaint rate, a key quality performance indicator
There are various key performance indicators for assessing the quality of a supplier’s service. These include late delivery rate, the internal customer satisfaction rate, the number of non-compliant parts per million parts produced (PPM value), the supplier’s order processing time, etc.
However, there is a performance indicator for quality that stands out above all the others, mainly because it is relevant, easy to understand and actionable, and this is the complaint rate, also often called the service rate. Put simply, this means the percentage of complaints received out of the total number of orders placed. Because this data indicator covers a wide range of issues, partners can analyse the root cause of the malfunction and sustainably resolve the non-quality event.
So, a complaint can relate to any type of non-quality issue:
- Product: the product delivered does not match what was ordered;
- Delivery: the delivery date wasn’t complied with;
- Billing: the invoice contains an error;
- Transport: the goods were damaged during transport;
- Contract: the contractual conditions were not complied with.
How do you improve your processes through quality management?
To improve your long tail spend processes, you need to use a Lean Management policy. Each element of waste, identified using key performance indicators and special tools, must be analysed in depth collaboration with your suppliers. From then on, companies can initiate the necessary corrective actions, by mobilising their resources.
Christophe Surena, Customer Procurement Excellence Manager for the Manutan group, explains further: ‘With Key Account customers, non-quality often arises from invoicing errors, mostly through erroneous postal addresses. This problem, which leads to major dissatisfaction, can be solved with a simple scope review. In other words, we check the sites where the contract and the billing charter are applied. This meticulous analysis is undertaken jointly with the procurement manager or director’.
As well as one-off corrective action, procurement departments will find it beneficial to implement a genuine global optimisation strategy. Using a special method, companies can assess their maturity in terms of their long tail spend management system so they can identify the key optimisation levers. This can include supplier rationalisation, the digitalisation of transactions, deployment of framework agreements, etc.
For example, digitalising transactions via e-procurement tools is a tremendous quality lever. As procurement departments undergo their digital transformation, they soon notice that this change automates certain non-value-added tasks and, thus, helps reduce errors, streamlines communications, and speeds up processes inside the company.
A corporate quality management system is essential for monitoring and managing supplier performance. When it comes to long tail spend, it is particularly important to focus on improving processes by adopting the methods and practices from the Lean philosophy.
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