Strategic Purchasing

Supplier quality is a continuous journey

It is often said that quality is a given in the electronics industry. That statement implies that quality is at such a high level that electronics purchasers don’t have to be concerned about the quality of the semiconductors, passives, connectors and other parts and materials they buy.

But if that’s the case, why do most OEMs and electronics manufacturing services (EMS) providers rate their suppliers monthly or quarterly on the quality of parts and issue scorecards to them? Many electronics companies award business to suppliers based on scorecard performance. Suppliers with higher scores are rewarded with new business—or at least keep the business they have. Suppliers whose scores fall over a period of time and don’t improve will lose business and not be considered for future business.

Quality isn’t a given, but rather the price of entry for a supplier. If a supplier expects to win business with a major electronics manufacturer, it needs to have robust quality processes in place and be able to consistently deliver high quality parts. Perhaps more importantly, it needs to show quality improvement because many electronics manufacturers reset quality targets, such as parts per million (ppm) defect rates, as previous targets are reached.

For instance, Erick Prause, senior director supplier quality for EMS provider Jabil Circuit in St. Petersburg, Fla., recently told me that the average parts per million (ppm) defect level of semiconductors that Jabil receives from suppliers is less than 20 parts per million.

“Ten years ago that figure would have been two or three times higher,” he says. In addition, only about 20% of Jabil’s supply base has problems with parts. Ten years ago that percentage was in the 40% to 50% range, he says.

Although improvement in product quality is important, suppliers are rated on other criteria besides ppm defects. Most major electronics OEMs also measure suppliers on technology, delivery and total cost of ownership. Some companies also factor adherence to social responsibility codes of conduct and compliance to environmental and governmental regulations into quality scorecards.

Increasingly, a supplier’s ability to provide new technology has become more important. That could be because OEMs outsource more and generally rely on their suppliers more to develop the technology that the OEM needs for its new products. OEMs want their suppliers’ technology roadmaps to dovetail with their future technology plans. As a result, a supplier’s performance in developing new technology is sometimes weighted higher than other criteria.

Developing new technology is so important for some OEMs that often a startup company can become a supplier to a major OEM, even if the new supplier lacks manufacturing savvy and the necessary quality processes and know-how. Some OEMs will work with a startup to improve the supplier’s manufacturing and quality processes if the technology is compelling, innovative and useful.

Equally important for many OEMs is that the supplier not only develops parts based on new technology—whether it is an application-specific integrated circuit or high-density low-power memory chip—but also that they are able to fabricate the parts with high yields, high quality and high reliability right from the get-go.

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