New Supplier Introduction. Risk Minimization through Supplier Quality Management using the Example of a Chinese Automotive Supplier

Diploma Thesis, 2018

79 Pages, Grade: 1.3



Table of Contents


Table of Contents

List of Abbreviations

1 List of Figures

List of Tables

1.1 Introduction
1.2 Problem Definition and Research Questions
1.3 Aims and Objectives
1.4 Thesis Outland and Structure

2 Concepts and Theoretical Framework
2.1 Supplier Quality Management
2.1.1 Need for Quality Management
2.1.2 Supplier Quality Management
2.2 New Supplier Risk Management
2.2.1 Risk Definition and Risk Management
2.2.2 Risks, uncertainties and threats by new suppliers
2.3 Chinese Supplier “<Name>”
2.3.1 Chinese Supplier “Precision Products Manufacturing”
2.3.2 Risk situation at <SUPPLIER>
2.4 Intercultural competence for China

3 Tools and Methods to manage supplier risks
3.1 Strategic measures for risk minimization
3.2 Contract Management towards suppliers
3.2.1 General Quality Agreement
3.2.2 Strategic Supplier Contract
3.2.3 Feasibility Commitment
3.3 Methodological elements
3.3.1 Project Management
3.3.2 TS 16949 Requirements
3.3.3 ISO 9001
3.3.4 Qualified Supplier Location
3.3.5 VDA 6.3 Process Audit
3.3.6 Potential Analysis
3.3.7 Maturity Evaluation
3.3.8 Supplier Component Review
3.3.9 APQP - Advanced product quality planning
3.3.10 PPAP - Production Part Approval Process
3.3.11 FMEA - Failure Mode Effects Analysis
3.3.12 Run@Rate / Capacity confirmation
3.3.13 Poka-Yoke
3.3.14 Safe Launch Concept
3.3.15 Final delivery release by customer

4 Methodology
4.1 Introduction to Research Methodology
4.2 Research Design and Process
4.2.1 Design
4.2.2 Process
4.2.3 Framework
4.3 Research Method
4.3.1 Qualitative Research Characteristics
4.3.2 Criteria of Qualitative Research
4.3.3 Data Collection Method
4.3.4 Structured Interview Section
4.3.5 Semi-Structured Interview Section
4.3.6 Interview procedure and participants
4.4 Analysis Method

5 Findings
5.1.1 Relevance of New Supplier Introduction
5.1.2 Main risks of NSI
5.1.3 Application of Tools and Methods
5.1.4 Effectiveness of methods
5.1.5 Lack of risk evaluation
5.1.6 Lack of Central SQM NSI
5.1.7 Dependencies on individual person and supplier
5.1.8 Ideas and improvement potential
5.1.9 Supplier Development
5.1.10 Purchasing and Escalation
5.1.11 Backup Strategy and Second Source
5.1.12 Proactive Risk Management before NSI
5.1.13 Summary

6 Discussion of Results
6.1 Outcome
6.2 Recommended Approach
6.3 Effort of time, money and personnel

7 Conclusion
7.1 Limitations
7.2 Suggestion for further research and Outlook




With an increasing demand, the automotive industry must deal with the reliability of vehicles and components. The success of many companies is based on the quality of their products, especially for companies operating successfully on the global market. In fact, all the car manufacturers as well as their suppliers are expanding their production capacities in the growth region China. Thereby new, innovative suppliers need to be established which are quality-capable. Of great importance is high quality, absolute delivery reliability together with unrivaled low prices. Stable partnerships are required with suppliers to rely on in the long-term. A New Supplier Introduction represents a risk for quality particularly when the supplier starts from a Greenfield. The major problem when nominating new suppliers is that there is no security in advance for the quality performance of the new supplier in series and that the companies depend on their suppliers with their quality performance. The nomination of the dedicated suppliers has to be done without field experience or quality performance key indicators.

This thesis will examine supplier risk management and provide prospects to minimize these risks. Thus, the thesis will identify latent quality risks for automotive companies by introducing unknown suppliers and discloses methodological measures to minimize proactively such risks through the systematic of supplier quality management. The research is going to contribute a solution approach on this research problem that can be applied as a guideline to minimize supplier quality risks. Consequently, the theoretical framework for quality management and risk management will be examined by this thesis and existing tools and methods are compiled. A research study will be elaborated with findings and analysis from expert’s knowledge. These research findings will be combined subsequently with the theoretical framework and will culminate in a recommended approach to achieve supplier risk minimization.

Key words: Supplier Quality Management, New Supplier Introduction, Risk Minimization, Risk Management, Quality, China Sourcing

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 List of Figures

Figure 1: Overview of <SUPPLIER> product portfolio for automotive applications

Figure 2: Exploded view of the EPB Piston within the brake application

Figure 3: Top ten nations in terms of quantity of ISO/TS-16949 certificates

Figure 4: Chronological Sequence of new supplier introduction

Figure 5: Release Sequence for a new component

List of Tables

Table 1: SQM Roles and responsibilities

Table 2: Evaluated potential risks at supplier, Source: Author’s own illustration

Table 3: Key Points of effective Project Management

Table 4: Structure of DIN EN ISO 9001: 2008 and DIN EN ISO 9001: 2015

Table 5: <company>’s requirements on release of supplier locations

Table 6: Process elements according to VDA

Table 7: Assessment of VDA 6.3 Process Audit questionnaire

Table 8: Total fulfillment degree of VDA 6.3 Process Audit

Table 9: Traffic Light Classification for Potential Analyses

Table 10: Maturity Evaluation assessment sections

Table 11: Outcome of Maturity Evaluation

Table 12: Overall Risk for <SUPPLIER> by Maturity Evaluation

Table 13: Design-FMEA for EPB Piston

Table 14: Sequence of Qualitative Research

Table 15: Methodological research framework with preconditions

Table 16: Standardized interview inquiry effectiveness of SQM Methods

Table 17: Outline of Interview Partners

Table 18: Overview of NSI Relevance

Table 19: Overview chart of application of tools and methods of interviewees..

Table 20: Assessment of the stated ineffective methods

Table 21: Assessment of the stated effective methods

Table 22: Findings for Main Risks

Table 23: Findings for potential methods for risk minimization

Table 24: Resulting Key Statements of the interviews

Table 25: Systematic approach for supplier risk minimization

Table 26: Applied Research Interview Template XIII

1.1 Introduction

The success of many automotive companies is based on the quality of their products.[1] Simultaneously, those companies depend on their suppliers and their quality performance. In recent years there has been an increasing shift of adding value to external suppliers.[2] Over 60% of the purchasing volume is placed to suppliers for the manufacturing of parts.[3] Due to the fact that this procurement management is driven by prices in the automotive industry, potential cost savings and thus new suppliers are continuously sought. These new suppliers must be handled from initial discussions to the successful production release for series deliveries.

1.2 Problem Definition and Research Questions

The major problem when nominating new suppliers is that the recipient of the parts has no security in advance for the quality performance of the new supplier in series. The nomination of the dedicated suppliers has to be done without field experience or quality performance key indicators like a valid failure rate. The relevance is on those suppliers whose products consist of customer specific parts and where a simple construction drawing for their manufacturing is not sufficient. Here, custom resources like devices and models together with specific knowledge and experience must be present. Those vendor specific goods do not meet an industry standard and are tailored on the final end-product, for example aggregates, and on the operating procedure of the customer.[4]

In equal measure, a new supplier does not know in most cases the product with its requirements. Suppliers underestimate the customer’s product specifications and quality approach. On top of that, the supplier is not familiar with the production process or starts to introduce a new process strategy to save cycle time and money. Consequently, combined with ever shorter development times with suppliers globally, there is a high risk for not reaching the requirements and that the supplier will not accomplish the supplier release. One of the most striking features of this problem is that the parts-receiving customer gets under time pressure towards its start of production (SOP) and depends on that insufficient supplier due to the project progress. The relevance of this topic extends to each new supplier introduction in automotive industries and even other industries where production parts are received by external suppliers.

This thesis will answer the following research questions:

- Which quality risks exist within New Supplier Introductions?
- How can these risks be minimized methodically by Supplier Quality Management using the example of a <company> Automotive Supplier?

1.3 Aims and Objectives

The aim of the research is to identify the potential quality risks for automotive companies by introducing unknown suppliers. The objective is to formulate methodological measures how companies like <company> are able to minimize such risks through systematic Supplier Quality Management (SQM). This thesis will be based on the practical example of introducing a new brake piston supplier from China to <company>. As a result, a recommended approach will be presented how to introduce this unknown brake piston supplier. An acceptable and constructive approach has to be found to ensure the specific Chinese supplier introduction with its benefits for <company> without compromising automotive regulations or endangering the product quality. For that matter, this thesis intends to provide a qualitative analysis of potential measures for risk minimization. The scope of this thesis will be limited to the field of Supplier Quality Management and will therefore treat commercial aspects referring to suppliers at a minimum. In addition, this thesis is about to provide an investigation on the estimated effort of time, money and personnel for <company>’s Supplier Quality Management for launching this new supplier for brake pistons.

1.4 Thesis Outland and Structure

It is worth stating at this point that general quality methods are given by Verband der Automobilindustrie e.V. (VDA). These methods are formulated commonly for the automotive industry and therefore do not offer explicitly solutions on the specific supplier case. An ideal world is preconditioned by these methods of VDA. Potential supplier deviations on the specific product and process of manufacturing the brake piston must be identified early enough in order to avoid project and quality risks. In particular, this thesis will use the example of a Chinese Automotive Supplier for <company>. <company>’s affected business unit is providing hydraulic brake systems to nearly every car manufacturer worldwide. Due to that reason, feasible suppliers of brake pistons for the electrical parking brake (EPB) are required. The special feature in this case is that the product specifications are sharper compared to traditional front axle brake pistons. In fact, a corporation-wide procedure for New Supplier Introduction (NSI) exists at <company>. This NSI is made when the final product and manufacturing process is not yet in place. Standard chapters are evaluated by a central function, but the specific issues and feasibility for the designated part are not treated. At any rate, the challenges arise when so-called “Greenfield” suppliers and locations are to be introduced. Due to the missing production in the new supplier location, a process audit or quality certification cannot be given. The supplier facility is starting from Greenfield and as a result no location release without production is possible, but there will be in parallel no series production without a customer release. The series process for the specific product is in this project phase not in a running series production which leads to the potential risks that the supplier will not manage to manufacture according to customer-needs and the final supplier release is unsafe. Furthermore, the cultural issues and language barriers in regards to a Chinese supplier project are not considered by VDA. The outland of the thesis can be stated at a glance:

- No concentration by VDA on the specific supplier part and potential practical risks
- Challenge of Greenfield supplier introduction without production
- Standard NSI by <company> is too general
- Intercultural issues not considered

The structure is firstly composed of the theoretical framework for Quality Management and Risk Management. The risk situation at supplier <name> and the general intercultural aspects of China will be debated. In a second step, the existing tools and methods to manage supplier risks are treated. Thereafter, the methodology of the research study with its research characteristics is described. Subsequently, the findings resulting from the research are elaborated in a structured form. Afterwards, the research findings will be brought together with the theoretical framework and will lead to a recommended approach on the research problem. In the final step, the entire research will be finalized in a conclusion.

2 Concepts and Theoretical Framework

2.1 Supplier Quality Management

2.1.1 Need for Quality Management

The success of many companies is based on the quality of their products and services, especially for companies that operate successfully in the global market.[5] As stated by Brüggemann, the experience shows that these companies give a high priority to quality within their corporate goals, principles and strategies and that these principles guide their staff and management.[6] The idea of quality is nowadays inevitable used within a company. The reasons for the high importance of quality are:[7]

- Rising customer expectations
- Global competition
- Increased complexity

With an increasing demand, the automotive industry must deal with the reliability of vehicles and components. Almost all of the car manufacturers and large suppliers are working in the field of reliability with high financial and human costs.[8] This brings us to the need for Quality Management (QM). Quality Management represents the totality of all measures for achievement of the required quality and is nowadays an integrated element of any company policy. Consequently, Quality Management is regarded as a matter of course.[9] The term ‘quality' means the entirety of properties, requirements and characteristics of a product or activity that must be met so that the product is suitable for the intended purpose. The requirements normally include safety, life-time, appearance, environmental protection and appropriate resources to use.[10] According to Brüggemann, 90% of customers who are dissatisfied with the quality of a product will avoid the product in the future.[11] Quality has consequently long-term effects after the purchase, remaining while using the product.

2.1.2 Supplier Quality Management

„Anything that can go wrong, will go wrong.“[12]

Edward A. Murphy jr.’s quotation is known as “Murphy’s Law” and that provides a statement about the probability of human errors and defects in complex systems. What does this mindset now mean for the quality of supplier components? Ultimately, all possible defects and errors on the supplier component are potential and can happen anytime. Due to that reason, it is the task of Supplier Quality Management (SQM) to consider the potential risks and to sustain risk management. The early involvement of preventive supplier quality methods is particularly significant, because the later an error on the product or supplier production is detected the higher the effort for troubleshooting.[13] Consequently, the philosophy of SQM is only to allow zero tolerance to defects. Also within series supplier deliveries, SQM generate value for the company by a pro-active management of the global supplier base and by continuously improving the supplier’s quality performance. Efficiency of the supplier processes must be secured and customer needs must be satisfied.[14] Basically, different roles within SQM can be distinguished. The organizational structure with responsibilities of SQM roles at <company> Automotive is fundamentally portrayed by Table 1.

Abbildung in dieser Leseprobe nicht enthalten

Table 1: SQM Roles and responsibilities[15]

2.2 New Supplier Risk Management

The following chapter examines in the first step the special features by nominating new suppliers generally and as a second step the explicit risk situation at the Chinese Piston Supplier “Precision Products Manufacturing Limited”.

2.2.1 Risk Definition and Risk Management

The amount of different definitions of the term ‘risk’ is extensive and focuses colloquially mostly on the negative factor of the non-fulfillment of an expected target state. A risk can be defined as the description of an event with the possibility of negative effects.[16] In fact, risk must not always be the synonym for negative events. There also exist etymological roots for the concept of risk that emphasize a negative as well a positive component by the Chinese character for risk 'Wei-ji'.[17] That Chinese character contains the two signs for chance and danger, thus the positive deviation of an expected target is originally covered by ‘risk’.[18] In the analogical way, the decision-theoretical risk definition is constituted by the construct of the standard deviation which means the positive and negative target deviations from an expected value. This risk concept also takes into consideration that all human activities are based on decisions that are often taken under imperfect information about the impact in the future. Thereby, information deficits increase the risk and can lead to unfavorable deviations between plan and realization.[19] Risks are the possibilities to deviate from the planned target values caused by the unpredictability of the future and resulting from accidental disturbances. Therefore, risks can be considered as a variance to an expected target value.[20]

It is the responsibility of Risk Management to reduce the variance and the fluctuation margin to increase the predictability. Risk Management (RM) is generally based on “ISO 31000” and includes all measures for systematic identification, analysis, evaluation, monitoring and controlling of risks.[21] Risk Management is to be established over the entire organization and to create thereby a culture of risk control within this organization. RM can also be considered as an ongoing process where planning, implementation, monitoring and improvement continuously take place like a circle of "Plan-Do-Check-Act". The RM principles and procedures, described by ISO 31000, are formulated generally and therefore can be applied to all areas where risks do exist, but they are not tailored to a specific industry.[22] Ultimately, then, the target of this thesis research will be to elaborate the risk variance and to detect potential quality risks by introducing new suppliers within the automotive industry.

2.2.2 Risks, uncertainties and threats by new suppliers

When a new supplier is designated for the series delivery of an automotive part, several uncertainties and risks can appear. The ultimate target is that the supplier is able to manufacture the product quality with efficient concepts and qualitative-controlled manufacturing processes. Here, the focus is on suppliers of vendor specific parts that do not meet an industry standard and the final product or operations are customer-specific.[23] The present research problem deals with such a customer-specific product represented by the example of a piston for braking systems. Therefore, a production with simple construction drawing is insufficient, but resources such as devices, tools and specific expert knowledge must be existent at the supplier. As a consequence, it is significant that this supplier deals with the product and its further applicable documents. The uncertainties and threats for accessing the new supplier for this piston component can be mainly constituted by the following eight key points:

- Products out of specifications
- Insufficient production location
- Manufacturing process insufficient
- Sample parts for Supplier Release faulty
- Timing not reached
- Communication and response to complaints
- Production launch with defective parts
- Capacitive uncertainty

A number of key issues arise from the possibility that the supplier will deliver parts which do not meet the specifications. This affects all project phases from prototype-testing, the production part approval process as well as the series deliveries. Another uncertainty is given by unknown supplier location which can be insufficient in regards to the general quality system and is consequently failing the release audit. Due to cost pressure on suppliers, in most cases a new supplier tries to establish a different manufacturing strategy or is even not familiar to operate the manufacturing process in the required manner. Major project problems also arise from countermeasures that show faulty sample parts which were designed to release the supplier for series deliveries. All in all, these threats lead to the risk of not reaching the project timing. As a result, the customer as well as the supplier is getting into insecurity of supply which will also have commercial consequences. Continuously through the entire project, communication can turn out as an element of uncertainty, especially when different mother languages exist. Here, the capability of valuable communication of information in dialogues together with a powerful response to complaints is decisive. Furthermore, the threat of receiving defective parts within the production ramp-up of the supplier is potential. In addition, the uncertainty of capacity shortage at the supplier is coherent that needs to be controlled when using a new supplier.[24]

It is worth stating at this point that risks and uncertainties as well exist from the new supplier’s point of view because the range and extent of the customer’s requirements can be underestimated. Even the complexity of the product manufacturing process is not easy to foresee exactly by the supplier due to the fact that the supplier has not installed the machines and its processes within the early project phases. Besides the technical issues, there are also financial risks such as that the supplier will be insolvent and will not be able to deliver parts anyhow. For that matter, those commercial issues will be excluded of this thesis in order to focus the risk assessment on the quality risks of this supplier introduction.

2.3 Chinese Supplier “<Name>”

2.3.1 Chinese Supplier “Precision Products Manufacturing”

This chapter is going to examine the supplier <name> and debating the risk situation for selecting him as a new brake piston supplier for <company>. The Chinese company was founded 1995 and still has its headquarter in China (Shenzhen). <SUPPLIER> is a privately owned company, which is dedicated to automotive components and assemblies for passenger vehicles and mid/heavy duty trucks. The product focus of <SUPPLIER> is assembly components for engine, transmission and electronic braking systems.

The Chinese production plants are located in Shenzhen and Wuhan. Furthermore, a completely new facility was established in San Luis Potosi (Mexico) in 2015. Currently, only the location Wuhan is certified with ISO 9000, ISO 14000 and TS 16949. The reason for not having the Shenzhen-Plant certified is that this facility was built up new and primly started in 2016 with its production. In total, the company has about 960 employees including 150 engineers and technicians (Status: June 2016). Some employees have foreign experience, but only for automotive powertrain systems. The management team on a higher level indicates itself with a broad engineering and MBA education background. According to supplier’s own declaration its main customers are Audi, Bosch, BorgWarner, Chrysler, <company>, Daimler, Fiat, GM, Mahle, PSA, TRW.

The main communication languages of <SUPPLIER>’s employees are Chinese as the mother tongue as well as partially English. English conversation is possible with the direct contact persons like sales department, but mostly not applicable with process engineers and production staff. <SUPPLIER>’s main technologies are cold and hot-forging, machining, stamping, injection molding and assembly. In fact, these process technologies cover the manufacturing of the designated <company> product. In <SUPPLIER>’s Chinese headquarter in Shenzhen the technologies of cold-forming and machining as well as stamping and injection molding for products like thermostat and valve assemblies are applied in series production for the automotive industry. In addition, <SUPPLIER>’s second location in Wuhan produces the key products of throttle shafts, transmission components and fuel system components.

Beyond that, the company discloses the plan to establish the product portfolio of braking system components, cold-forming flanges, throttle shafts and assembly products in the Mexican location. Effectively <SUPPLIER> could not demonstrate a series production in this designated location (Status: June 2016).[25] The overview of <SUPPLIER>’s product portfolio for automotive applications is provided by Figure 1 according to the company’s own announcement.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Overview of <SUPPLIER> product portfolio for automotive applications[26]

2.3.2 Risk situation at <SUPPLIER>

In the following chapter, the debating of the risk situation at <SUPPLIER> for production of brake pistons is carried out. One of the most striking features of this issue is that <SUPPLIER> does not have any experience with the product “EPB Piston” and its specifications. The special feature of the EPB piston is that the product requirements are sharper compared to traditional front axle brake pistons. Diverse form and positional tolerances must be met, which are, besides manufacturing, hard to measure correctly. Experienced employees in measurement laboratory are needed as well as for manufacturing processes of cold-forging and machining. It is a basic requirement that <SUPPLIER> has to research the product specifications and <company> ’s further applicable documents. Potential failures on the product and within the manufacturing process must necessarily be detected, analyzed and solved upfront before the series production begins. The exploded view of the EPB Piston within the brake application is shown by Figure 3:

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Exploded view of the EPB Piston within the brake application[27]

In addition to chapter 2.2.2., the general risks, uncertainties and threats for introducing <SUPPLIER> as a new supplier are refined and evaluated by the author. The universal arguments are broken down to practical and measurable items that can be considered as risks within the supplier introduction phase. In a second step, these potential threats are evaluated by the author on their occurrence probability shown by Table 2.

Abbildung in dieser Leseprobe nicht enthalten

Table 2: Evaluated potential risks at <SUPPLIER>, Source: Author’s own illustration

As main threats it was rated by the author that the supplier <SUPPLIER> has no experience with the specific Brake Piston and that the Chinese company just opened a new production facility in Mexico. Consequently, new workforce with thorough experience is required at supplier location. In the final result, there is the potential risk of an insufficient manufacturing process that leads to the circumstance of products out of specifications and finally to the rejection for series delivery. Furthermore, uncertainties such as communication, new machines, new process approach, capacity, production ramp-up and time shift to Europe and China could arise and were rated medium. These risks will mainly lead to a critical timing within the project. Only from the motivational side there was identified a low risk due to the fact that the <SUPPLIER> showed currently its activeness within prototype phase and is interested in getting a new business.

The first indication of the potential risk situation within the new supplier introduction will be successively used in the subsequent steps of the research. With the support of literature, it will be considered which methodological and strategical elements can be used to manage supplier risks. Contingent instruments to manage supplier risks will be subsequently taken into survey and reviewed by the experts’ interviews. In the final run of the research, an appropriate theory for risk minimization within NSI with associated measures and recommendations will be the target.

2.4 Intercultural competence for China

For a Chinese supplier sourcing the intercultural aspects should not be underestimated and may pose a hurdle. In regards to international relationships to Chinese suppliers, intercultural competences are essential. A high level of personal relationships and contacts needs to be established. In the end, the business relationship depends on the people involved and not exclusively on databases, platforms or systems.[28] The use of the word "Yes" from a Chinese colleague in response to relatively simple questions in project status meetings can lead to confusion when the questioner takes the answer too literally. It has to be stated at this point that Chinese contact persons do not tend to say “No” to a customer.[29] Here, the context of the question and the situation must be considered reasonably. These cultural characteristics in China are rooted in traditions, distinct family background, the relationship between people and the State, in Confucian values and a dense network of personal relationships.[30] As a consequence, it is also important to know how to refuse something without really saying “No” to it. English should be used as the standard communication language and good language skills from all contacts are beneficial. In several cases an interpreter for Chinese is required. Thereby it must be considered that content, especially technical details, can be distorted and misunderstood through translation.

Personal contacts and relationships are very important. As a matter of course, the same importance for the selection of suppliers is valid. Apart from the purely technical and commercial standard criteria, high priority must be placed on relationship building. Face-to-face meetings of the key persons within the project are fundamental. As part of supplier visits and supplier audits, Chinese suppliers commonly constitute as hosts and this time have to be invested to give the chance to develop or maintain relationships.[31] The successful integration of Chinese locations in the supplier base depends, above all, to generate and to live an open corporate culture on both sides, which is characterized by mutual respect. Intercultural teams with high social and intercultural competence represent even more than in the past a decisive success factor in the global competition.[32]

3 Tools and Methods to manage supplier risks

This chapter examines the instruments and measures that assist to manage supplier quality risks. In the first place, strategical steps are covered that can be a basis to avoid the dependency on an incapable new supplier. In the second place, the common and powerful methodological elements are carved out. The scope of SQM activities will be exemplified and investigated. This outline builds the groundwork for the survey and for the concluding recommended approach for the supplier introduction of <SUPPLIER>.

3.1 Strategic measures for risk minimization

A number of key issues for Risk Management arise from the strategy. A far-seeing strategy with focus on supplier quality is able to power potential risks down. As the resulting benefit, it will be avoided that the company gets into the situation of being dependent on an incompetent or non-released supplier. First of all, by re-nominating only released and well-experienced suppliers for new businesses, the great risk portion of the insecurity of an unknown, new supplier is eliminated. This strategical measure is certainly not always applicable in each supplier case. Secondly, it is reasonable to have at minimum one released and feasible supplier for each component as a backup-solution, if possible. From a strategical point of view, when introducing a new supplier, a close supplier assistance and supervision within the time before SOP is required and will be treated subsequently. In doing so, rotative “Supplier-Customer-Meetings” with status reports are supportive. Also there, a final approval of the maturity level of the supplier production and its product must be given by the customer. The “A/B/C”-Classification of all components is a support when focusing and prioritizing according to the complexity of parts. Moreover, the installation of a „Dual” or “Multi-Supplier-Base” represents a powerful strategical measure for supplier risk minimization.

1. Nomination of existing, experienced suppliers
2. At minimum one released Back-Up-Supplier for each part number
3. Close supplier assistance and supervision 2-3 years before SOP
4. Rotative Supplier-Customer-Meetings with Status Reports
5. Approve production and product maturity level
6. A/B/C Classification of all components
7. Installation of a „Dual/Multi“-Supplier Base

In fact, these strategic approaches are not always applicable in each supplier case. However, this chapter describes these strategical measures and following the subsequent chapters will treat specifically the methods for Risk Minimization within New Supplier Introductions.

3.2 Contract Management towards suppliers

The definition of common rules for quality assurance measures between supplier and customer should take place in a Quality Assurance Agreement (QAA). The implementation of a Quality Assurance Agreement has the target to ensure the supplier product quality as requested by the customer already from the planning of the product to the series deliveries. In particular, the QAA is defining interfaces and promotes the intensive and smooth cooperation.[33] If there should occur a deviation in regards to quality, appropriate measures are contractually defined and accepted by the vendor. Provisions in a Quality Assurance Agreement should contain and regulate the following points:[34]

- Requirements on Management Systems of suppliers
- Agreement on the documentation and information duty
- Agreement for delivery quality
- Definition of quality related responsibilities
- Coordination of control and control methods
- Specifications for Complaint Handling and Problem Solving
- Arrangement of confidentiality

The following three contracts are applied betweens <company> and its suppliers to safeguard quality in a contractually guaranteed form. While the “General Quality Agreement” and the “Strategic Supplier Contract” are fundamentally contracted once for the entire company, the “Feasibility Commitment” refers explicitly to one dedicated part number and therefore has to be concluded for each single component that is sourced from a supplier.

3.2.1 General Quality Agreement

Purpose of a General Quality Agreement (GQA) is to communicate the quality requirements of <company> towards the supplier. The expectations of zero defects and 100% on-time delivery are indicated to the supplier. By signing the GQA, the supplier acknowledges that the GQA must be applied to all components and services that are supplied to any <company> location worldwide.[35] The GQA has to be signed between the supplier and <company>’s appropriate Category-SQM. The committed content of a General Quality Agreement is structured in four chapters and is portrayed by the following[36]:

Abbildung in dieser Leseprobe nicht enthalten

3.2.2 Strategic Supplier Contract

Target of a Strategic Supplier Contract (SSC) is to constitute the terms and conditions under which the supplier has to provide the contracted products. This is a mandatory precondition for any business relationship between a strategic supplier and <company>’s purchasing.[37] The frame business conditions of payment, logistics projects, tooling, quality, warranty, confidentiality, environmental safety and health are regulated and accepted by the supplier with signatures. When the basic requirements to become a Strategic Supplier for <company> are given and the contract is completed by both sides, the supplier is introduced to the Strategic Supplier List (SSL). The SSL status is always allocated to a specific technology category. The basic requirements to become a Strategic Supplier for <company> Automotive are illustrated by following frame conditions:[38]

Abbildung in dieser Leseprobe nicht enthalten

All things considered, it can be stated that the fundamental potential risk with a new supplier is reduced when the basic requirements according to the above-mentioned framework are fully achieved. In addition, all of <company>’s SSL-suppliers are evaluated annually based on the criteria of Company, Technology, Logistics, Quality and Costs. The Quality performance of an existing supplier is rated by its failure rate in series deliveries within a six months’ average, the number of quality incidents and the average time for handling of a complaint.[39] If the evaluated performance is not satisfactory, the supplier can be critical or blocked for new business awards.[40] In conclusion, the contract management towards a new supplier represents a solid framework for the business relationship and minimizes risks in case of quality complaints, but it does not secure automatically that the new supplier will be able to fulfill the required product specifications and will be released for series production.

3.2.3 Feasibility Commitment

The Feasibility Commitment (FC) is a key document where the supplier confirms the technical producibility of the specific part to the customer. The FC is supposed to be completed by the supplier’s department of at least production, engineering and quality management through the Request for Quote (RFQ) phase of the product. Consequently, a feasibility study at supplier side has to be conducted internally and as a result the supplier confirms its producibility with signature to the customer. A completed FC is a requirement for the sourcing completion of a new component or a new supplier. The intention of the FC is that a detailed review and conversation is carried out to ensure that the specific product design and the quality requirements are understood and that the supplier has the capabilities for a series business relationship for that. Moreover, the FC review provides an early supplier feedback to the customer in regards to the manufacturing and supply feasibility issues that are related to the specific part design. The relevant component drawing and its specification must be inevitably referenced on the FC. The uniform structure of a Feasibility Commitment of <company> Automotive is placed to the Appendices.


[1] Cf. Brüggemann, p. 1.

[2] Cf. Arnold, p. 1.

[3] Cf. Large, p. 2f.

[4] Cf. Ibid, p. 169.

[5] Cf. Brüggemann, p. 1.

[6] Cf. Ibid.

[7] Cf. Brüggemann, p. 1ff.

[8] Cf. VDA Band 3, p.3.

[9] Cf. VDA Band 5, p.7.

[10] Cf. Ibid, p.10.

[11] Cf. Brüggemann, p. 2.

[12] Götz, p. 2.

[13] Cf. Brüggemann, p. 29.

[14] Cf. <company> Supplier Competence Training, p. 9.

[15] Cf. <company> Supplier Competence Training, p. 12.

[16] Cf. Vorerst, p. 1.

[17] Cf. Meder, p. 2.

[18] Cf. Holzheu, p. 7.

[19] Cf. Meder, p. 2.

[20] Cf. Meder, p. 3.

[21] Cf. Vorerst, p.1-3.

[22] Cf. Ibid.

[23] Cf. Large, p. 169.

[24] Cf. Large, p. 169ff.

[25] Cf. <SUPPLIER>, p. 5ff.

[26] Cf. <SUPPLIER>, p. 10.

[27] Cf. <company> internal confidential source

[28] Cf. Faust, p. 148.

[29] Faust, p. 140.

[30] Böttcher, p. 1f.

[31] Faust, p. 140ff.

[32] Ibid, p. 238.

[33] Cf. Brüggemann, p. 153.

[34] Cf. VDA Band 2, p.24ff.

[35] Cf. <company> Supplier Competence Training, p. 30.

[36] Cf. <company> General Quality Agreement, p. 2.

[37] Cf. Ibid, p. 28.

[38] Cf. <company> Supplier Competence Training, p. 16ff.

[39] Cf. <company> Supplier Competence Training, p. 20.

[40] Ibid.

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New Supplier Introduction. Risk Minimization through Supplier Quality Management using the Example of a Chinese Automotive Supplier
University of applied sciences Frankfurt a. M.
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Supplier Quality Management, New Supplier Introduction, Automotive, Risk Minimization, Supplier, Management, Chinese Automotive Supplier, New Supplier, Risk, risks, purchasing, buy, APQP, PPAP, VDA, AIAG, SQA, SQE, China, Chinese, Supplier Introduction, Suppliers, Introduction, Automotive Supplier, SQM, Quality Management, Quality, Engineering, Mechanical engineering, Maschinenbau, Einkauf, Master Thesis, Master, Diplomarbeit, car, Lieferanten, Lieferantenqualität, Sourcing, nomination, source
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Anonymous, 2018, New Supplier Introduction. Risk Minimization through Supplier Quality Management using the Example of a Chinese Automotive Supplier, Munich, GRIN Verlag,


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