The quality cost in purchasing means the relative loss caused by any risk (delivery risk, financial risk, etc.) in the purchasing process, and the initial investment to avoid these risks.
Quality cost has become an important evaluation index for more and more enterprises in supplier management. In practice, there is a contradiction between quality and cost: the buyer hopes to reduce the purchase price as much as possible while meeting the quality requirements. However, the constant reduction of purchasing cost leads to the supplier choosing inferior raw materials with frequent quality problems and increased costs. On the other hand, when the buyer asks to improve the quality of the product, he is confronted with the demand of the supplier to increase the price. How to balance the relationship between cost and quality in procurement and how to manage the quality cost in procurement has become a challenge for purchasing managers.
The quality problems in the procurement process mainly come from two aspects: raw material quality problems and supplier quality problems. The quality of raw materials is mainly reflected in the quality and delivery of products.
- Quality of raw materials
The purchased raw materials are of inferior quality and some performance indicators cannot meet the buyer’s specifications. The existing components cannot meet the new quality standard because customers or purchasers change their purchasing requirements.
- Quality problem in product delivery
Product damage, damage to incoming packaging, damage or loss of incoming material marks, wrong delivery of goods and mixed loading of incoming materials caused during transportation.
Supplier quality problems mainly include three aspects:
The supplier operates badly, which leads to unstable supply quality and delivery time.
The investor or partner of the supplier changes the investment direction, leading to the transfer or withdrawal of raw materials required by the purchaser;
The financial problems of the supplier led to bankruptcy.
Above, all kinds of problems in the event of purchasing parties must take immediate action to process and remedy, the resulting fees, such as the analysis of the unqualified products inspection cost and return of transportation cost, or alternative suppliers to switch to other alternative products caused by spending, contact suppliers consultation or sent to vendor production scene investigation supervision cost, and production of the bad quality of damages, etc. All belong to the quality cost.