SUPPLIER AUDITING (The 5 minute rule)

ATTITUDE IS EVERYTHING
There are lots of articles, how to books, directions, edicts, etc. about “HOW TO PERFORM AN
AUDIT”, but none that I have read effectively touch on an area that I consider essential to a quality
system and an audit. An article by Myron Tribus (Judging the Quality of an Organization by Direct
Observation) in the Cove helped push me to write this. It is something that I have thought about for a
long time; finally have a format in which to express it. Thank you Marc for this forum.

QS9000 and other conventional Quality systems are inadequate to quantify the most important aspect of
quality, attitude. Every quality system that I have seen tries to mandate what would be there anyway if a
supplier had a strong customer focus. They do a excellent job of talking around the issue but do not
address it directly. As with most corrective actions that we see as quality professionals, the current
quality systems deal with the symptoms, not the real root cause of the situation, ATTITUDE.

My mentor in Quality Auditing (Adam Green, 25 yrs. ago) had great instincts for a quality system that
were developed over many years and refined during hundreds of supplier audits. Before one supplier
audit, he said “I can tell within 5 minutes if the supplier is going to pass the audit.” I loudly disagreed
saying that this judgment cannot be made purely on how a receptionist greets us and by the first
handshake. The evaluation has to be based on objective evaluation of the suppliers’ conformance to the
quality requirements (at that time it was MIL-I-45208 & MIL-Q-9858). He simply said, “If you are in this
long enough you will know what I mean.” (The periodic audits were a requirement of our system and we
audited ‘good’ suppliers as often as ones with problems.)

I came upon a dilemma that helped me to more clearly define this problem. On subsequent days I did two
local MIL-I audits. The first was at a medium sized supplier that had some product quality problems.
They passed the audit easily, provided what appeared to be adequate corrective actions, but continued
having problems with product quality and had little concern about on-going improvement of the quality of
product. We eventually pulled out of the supplier due to on-going, unresolved problems. Modern shop,
good instructions, but the owner’s son (taking over the business) would make decisions to override
quality and workers’ concerns. The workers got to the point that their attitude changed (for the worse) in
response to the new owner.

The next day I went to another supplier; located the tiny shop down an alley (3 men in a garage behind
one of the owner’s homes). This supplier had never shipped us nonconforming product, we never had a
question as to the quality of product or service received. However, they did not have a documented
inspection or quality system. (Prescribed that they develop an inspection system to comply with MIL-I
requirements.) They agreed wholeheartedly but needed help. They were local so I was able to work with
them. Within two months, they had a compliant system. They went on to capture more business and the
last I heard they had a thriving medium sized shop going. Had I only graded them on their lack of
documentation (as required by any respectable auditing organization) they would not have remained a
supplier. But I was impressed with their attitude. They expressed a sincere desire to do a better job for
their customers. I held off issuing my report until there was progress to report, purely on the positive
attitude of the people.

The point here is the difference in attitude. One shop had already captured the business but failed to
maintain an attitude of customer service. The other ended up capturing more business because of their
positive attitude towards customer service. Positive Attitude is the ‘root cause’ of excellence
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in a quality system. No matters how well written the manual or procedures are, if the attitude of
excellence is not behind every word, then the quality system will be of little value. This attitude must
flow from the top down.

Over the course of hundreds of supplier visits, Adam’s ‘5-minute rule’ has gone through my mind many
times and I have tried to objectively define what goes into this subjective evaluation. It is difficult to
exactly define what to look for, since it is the ‘total experience’ that creates the impression. Below are
things that I have learned to look for during supplier visits and quality audits and some of the tricks that I
use to know what questions to ask, and how I have learned to interpret the answers.

Initial phone call or contact:

Does the supplier take genuine interest in the intent of the audit or visit? If the visit is in response to a
defect or problem you will be controlling the tone of the initial contact, be constructive and positive! If
the purpose of the visit is an audit for possible new business, then the tone should be formal and
structured.

For a first time visit to a supplier I ask for them to fax directions. Often the suppliers with a stronger
‘customer attitude’ have this readily available and simply need to know which direction that you are
coming from.

I also ask for verbal directions, which I copy into my planner so that no matter what, I have what is
needed.

Arrival at supplier’s facility

Arrive early, walk in the door precisely on time and if you are in the area the evening before take a ride
by, you could learn something interesting. Example: do they run a full second shift, are a bunch of newer
cars there late (could be last minute review by management of the quality system – What should they be
concerned about if they have a strong quality system?), are trucks being loaded after hours (see below),
etc.

Upon arrival on the day of the audit/visit, I take a turn around the employee parking lot. I look for the
styles, age and condition of the cars. If there is a large number of older or poorly maintained cars one of
the questions that I ask is how many temps are used and what is the turnover for the current year (if these
are high, then they need excellent training). The older cars imply that they pay less than average for the
area and may have a high turnover because of this. I also try to cruise past the shipping area and
dumpster. Are these areas a mess? If the front office and production areas are neat and orderly it may be
a show put on for the audit, if the back of the building is a mess. Also, note any trailers sitting on the
edges of the parking area. This could be a sign of temporary holding areas to hide excess product or a
recent rejection by another customer. If trailers are present, ask to see the MRB (or reject) logs (good
idea to look at these in any case). If there is logged material that is not present then you may have just
discovered the tip of a iceberg. Are the buildings and grounds well maintained, clean, trash containers
placed strategically? This may indicate pride (or lack of) in ownership by all employees. Do any people
that you see on the lot look closely at the passing car or is it ignored? A harsh stare may imply labor
problems (since you will probably be dressed in business clothes), or it could just be a grumpy person. A
pleasant glance or wave implies self-confidence and may indicate a good work atmosphere.

Are there Visitor or Customer parking spaces? Are visitor entrances clearly marked? How are you
greeted at the lobby? Are you expected? Has the receptionist been briefed on who to expect, is there a
bulletin board that indicates a welcome (to you and your group). Is the initial greeting pleasant? These

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are all things that the management of the company can arrange to happen if they have a customer focus.
If they are not present then it implies that they haven’t taken the time to try to see things from a visitors’
point of view.

WHEN ENTERING THE COMPANY:

How is the initial greeting from the company? Does it seem genuine? Is the person a manager, owner, or
other responsible for representing the company? Is the person in sales? I personally do not like to have
first contact with sales, and I tell them so. Their job is to give the best impression of the company (so is
everyone’s) but sales often will allow a slanted view to be shown and they typically have little
responsibility to actually correct a problem.

What does the ‘guide’ show you first? (I typically ask to use the bathroom when we are well away from
the lobby. This allows a look at the ‘facilities’ that the employees have to use, not just the one up front
for visitors.) If the bathroom is a mess then it implies that management doesn’t try too hard to maintain
decent conditions for the employees. How you are ‘handled’ in the first few minutes is telling. Have they
thought this out? Do they try to put you at ease (you need to do that for them also) while the conference
room is filling? Are you greeted by most that come in? Or, do they have to make several calls trying to
get people to attend an opening meeting. I expect to be briefly introduced to the principals that I will be
working with. (I typically send an agenda indicating that this should be done first thing and schedule 15
minutes to 30 minutes for the initial introduction and review as to the purpose of the visit. Any longer cuts
into on the floor time for the audit, also it causes less disruption to the suppliers business.) If I am
presenting data or information (quality audit objectives, verification audit, rejects, review of quality &
delivery, etc.) then I typically fax or e-mail before arrival so that the company can have the data available
for everyone to see.

On the subject of putting them at ease: You will get little accomplished if the supplier feels that you are
the lead representative for the Inquisition. From the first moment try to develop a rapport and a positive,
goal directed relationship. Most people at your suppliers feel comfortable in this role. After all isn’t that
why they are your supplier, they are solving a ‘problem’ (providing product, service, expertise, etc.) that
you cannot solve yourself? Make the most of their expertise by developing a positive win-win attitude
with them.

If there is a problem to be discussed, I typically ask to have an operator and their supervisor at the
opening meeting (depending on the problem). If I sense opposition to this it implies that management
may be trying to filter information to and from employees. Makes me wonder why. (X theory
management style, incompetent operator?) If the hourly employee (operator, tool & die maker, etc., i.e.
process ‘owner’) is at the meeting, but edgy, then they may not be comfortable in the same room with
management, again I wonder why. If they are there, appear at ease, attentive and can contribute easily, it
says volumes for the participative style of management, their training methods, and willingness to share
leadership. I often ask directed (and direct) questions; politically correct questions are not part of my
forte. If a defensive attitude comes up I may be pushing too hard or it may be a warning of something
else going on. An example of this in a meeting format, especially when something doesn’t seem to ring
true is to start the why questioning method (Poka-Yoke). This can make some management very
uncomfortable as you near a root cause, especially if the root cause may be their lack of follow-up. Any
well-versed quality professional tends to keep their mouths shut since they may have already asked the
questions and they likely already know where the questions are headed. Recognizing this, I try to direct
the ‘why’ questions to management.

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Time spent observing the process and talking to operators is often the most valuable time that can be
spent while in the facility working a specific problem or performing an audit. If the purpose of the visit is
a first time quality system audit, I may take a little more time in the opening (and closing) meeting so that
they have a clear understanding the scope and results of the audit.

The supplier has already given me a strong impression of their management style, commitment and value
that they place on customers (and employees) in the first 5 minutes on their grounds. This initial
impression is seldom wrong when you know what to look for and keep an open mind in interpretation.
Don’t misunderstand, I do not base my entire evaluation on the first 5-minute impression and then work
to try to support this ‘feeling’, but experience has taught me that this first impression is seldom wrong
(Adam was right!). There have been only a few occasions where the first impression was not a good
indicator of the strength of the suppliers’ commitment to quality (seldom, but often enough to cause one
to keep an open mind).

The sum total of the visit should be to provide my company with an evaluation of the strength of the
suppliers’ current quality system, commitment to quality, and most importantly a prediction of the ability
of the company to constantly improve. The rote part of assigning numbers to indicate compliance to
specific requirements really is a minor part of the audit and these numbers can be highly misleading to
management. A high number in this case means only that they have satisfactory documentation and that
they follow it well. I can teach most any 5th grader to perform this type of fill-in-the-number audit. If this
is all that the auditor does then they are doing both the supplier and their host company a disservice.

The management attitude of the supplier is most important, but it is also the most difficult to report in
objective terms, especially to the suppliers management. Trip reports to your company should always
include this information. Your own management may need to be briefed on the meaning of the report
since it is often not presented in a way that lends itself to a quick glance. To make it as easy as possible
for my management to understand the trip, the beginning of the report, of course, states the intent of the
supplier visit. The next heading will usually be RECOMMENDATIONS (or SUMMATION) which
gives a quick distillation of the results. If I am recommending that we not do business with the supplier, I
say so straight out. Do not be afraid to state this if you feel strongly. I have felt that way a few times,
said so and the supplier was used anyhow due to other issues (sole source, best price, etc.). In every case
the supplier ended up causing many problems and we eventually got out after spending much to correct
the problems. Your company is paying you to tell the truth and to use your head. After a couple of
episodes where your recommendations are overridden or ignored your management may start paying
attention. If you don’t relate what you have seen and felt, then you are partly to blame for use of a
substandard supplier and later others have someone to pin blame on. I hope that your company has
moved beyond this but everyone relapses to finger pointing behavior at times.

The next and largest section is DETAIL where I go into the objective data supporting how the
recommendations were formed. The objective data is support for the things that have been noted whether
they be attitude and/or the specifics noted. Ex: quantity sampled, number of defects (if any), areas
sampled, people met, and any other pertinent observations. The main purpose of this area is as
background and an accurate appraisal of where the supplier is and possible recommendations for
improvement. Seldom does management read this section since it could possibly be several pages, but it
is necessary to keep as part of the suppliers file for subsequent trips by yourself and others. Also, if a
numerical rating is taken from a ‘canned’ audit sheet, this is the area that I describe the rating.

I typically send the supplier a copy of the trip report unless there is a strong recommendation for not
doing business with them. Then I will simply send a ‘thank you for your time’ note.

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