[The following news item appears in the August 1994 edition of
_Quality_Progress, pages 20 and 22.]

                    TIMES ARE CHANGING FOR SUPPLIERS

     While U.S. companies have traditionally had uneasy
relationships even with their best suppliers, a new report from
The Conference Board shows that things are improving. The report,
"TQM and Supplier Relationships," stated that in an era of
increasingly complex global competition, adversarial supplier
relationships often work against companies' best interests,
especially when they do not eliminate defects in goods and
services.

     The report found that companies with a commitment to total
quality management (TQM) are looking beyond short-range price
considerations when choosing suppliers and are viewing
relationships with their suppliers as important to their own
financial and operational success. TQM companies are forming
partnerships with their key suppliers--particularly those that
offer goods and services deemed critical to the company's core
business. The report is based on interviews with 31 executives in
quality and/or supplier and materials management positions from
various industries.

     "Partnerships are a part of the new way of doing business,"
said Anna Powell, Conference Board research associate and author
of the report. "The effort needed to properly address the
partnering requirement requires additional time and resources of
both customers and suppliers." Powell added that one of the most
exciting changes occurring in companies with innovative supplier
partnerships is in product development, primarily through the use
of cross-functional teams. Suppliers are, in many cases, included
in new product design and development.

     Highlights from the interviews include:

-- Fewer suppliers. A reduction in the number of key suppliers
allows an organization to devote more time to the most important
ones. About half of the survey participants have reduced their
primary supplier base by as much as 30%, while the other half
reduced it by 50% or more. 

-- The bottom line. Financial results and productivity are
important to the continued success of supplier partnership
programs. At many companies, early phases of several programs
have yielded millions in savings and cost reductions.  

-- Long-term partnerships. When respondents were asked what the
most important factor should be in selecting suppliers, the most
frequent answers were the ability to establish a long-term
relationship and the commitment to using quality processes. In
actual practices, though, purchase price still appeared to be
weighted in supplier selection. Total or lifetime cost
consideration, however, has become more prevalent. Total cost
more accurately captures the cost of rework, returns, and other
defects, as well as servicing and other after-market costs,
showing the true cost of quality.

-- Supplier management in service companies. Traditionally,
strong supplier relationships have not developed in service
companies. These programs pose special problems in this sector,
especially when purchases are made to meet critical business
needs. Some service companies, such as Metropolitan Life
Insurance Co. and the Tennessee Valley Authority, are using the
Malcolm Baldrige National Quality Award criteria to develop
quality-driven supplier relationships. One respondent noted, "We
wouldn't have been able to develop a program without using the
Baldrige Award criteria pertaining to supplier management. In
areas in which we did not have a lot of expertise, we are
following accepted principles for managing supplier quality. We
know that by following the criteria, our actions in these areas
will be aligned with the goals and strategies of our business."

-- Supplier certification on the rise. Certification of
suppliers' processes and products is increasing. In the past five
years, there have been substantial increases in the number of
certified suppliers and in the dollar amount of purchased goods
and services from certified suppliers. Companies with
certification processes plan to expand them, although there is no
universal belief in 100% certification. Of companies that require
some form of assessment, their supplier management executives
said they have seen evidence that this participation,
particularly in self-assessment, promotes quality management in
supplier companies.

-- Some suppliers have been dropped. Virtually all survey
participants said they have dropped long-time, key, or first-tier
suppliers when they were unable or unwilling to participate in a
quality-driven supplier program. More training is being offered
to develop those suppliers eager to embrace quality principles
and practices. As one example of supplier reward, some companies
share cost savings generated through their supplier partnerships.

     The cost of "TQM and Supplier Relationships" is $15 for The
Conference Board members and $60 for nonmembers. To order, call
800-872-6273; in New York, call (212) 339-0231.