#43 – RISK MANAGEMENT IN THE ACQUISITIONS CYCLE – JULIUS HEIN

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Julius HeinIf you are a manufacturer, a supplier or a customer, your overall objective when you want to buy a product is complete satisfaction with the performance, maintenance and support. These are exactly the objectives of the International Quality Management System Standards.

The best way to explain the objectives of the Standards is by using an example and walking through the whole acquisition cycle.

  1. The customer submits his requirements (specifications) to a manufacturer and asks for a quote on cost and delivery.
  2. The manufacturer or the supplier reviews the requirements and particularly the “Special Requirements”. He determines if he can manufacture the item to the specified “Process Conformance” and “Process Performance”.
  3. He looks at the Specifications again to determine if there are any Special Requirements that he has never implemented before. If he decides that “Yes” I can produce the item, even with the “Special Requirement”, then he has to ask: “What are the Risks I am taking?” The Risks can be quite large and have an impact on his reputation, product desirability, customers, and overall business outlook.
  4. Once the manufacturer decides to take a small, medium or large Risk, he incorporates the anticipated Risk cost into his Quote.
  5. Part of the Quote evaluation is also the need to search for reliable suppliers of parts that may be needed for the required product. Is there a Risk that he may or may not receive the exact parts that he needs? This is another Risk.
  6. Inspection and testing of the specified product is another Risk factor. How many nonconforming parts and components does he anticipate to have? What is the acceptable rate of acceptance?

The Risk Management Program within an organization has many direct and supporting relationships. The Risk Management Program is not voluntary, it is and must be a business decision.

Coming back to the two desired objectives of “Process Conformance” and “Process Performance”. The manufacturer must ask himself and his advisors: “Is there a relationship between the Special Requirements, the Key Characteristics and Risk Management before giving a Quote or any delivery dates?” The answer may or may not surprise you: “Yes, there is a very clear and depending relationship to the outcome of the produced product.”

It all comes down to the decision point, where a manufacturer has to ask: “What Risks am I prepared to accept with this Quote?

Bio:

Dr Hein was a RABQSA certified Lead Auditor for ISO 9001:2004 and ISO 13485:2004 and  an Aerospace Experienced Auditor for AS901, Rev B, AS9110 and AS9120. He is RABQSA certified Instructor for AS9100, Rev B, AS9110 and AS9120. He designed and is teaching courses in ISO 9001:2008, ISO 13485:2003, Internal Auditor courses in AS9101, Rev C, AS9110,Rev A and Dietary Supplements based on 21CFR111.
Dr Hein established the Educational Concepts, Inc. (ECI) in 1996. He retired from the Federal Government as a Professor and Director  of the DOD Defense System Management College, Defense University. The vision of ECI is to teach, consult and assist private businesses, state and local Governments, Community Colleges and Universities.
Dr Hein has 54 years of experience in industry and academia.  He is helping businesses to develop effective strategic and business plans, which are based on Quality Management System in design, development, testing, marketing and lean manufacturing principles. Process Management and process auditing have become the leading management tools for Continuous Improvement. Dr. Hein presents classes and workshops at Registrars, in industries and for internal auditors anyplace USA or around the world.

 

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