Supplier Quality and Bottom-10 Supplier Development

SEF Reference Guide G09 | Manufacturing OpEx Maturity Assessment

Supports criteria: QS-4 Incoming (Supplier) Quality

Glossary terms covered: Supplier Quality Process, Bottom-10 Supplier Development

How to use this guide. This is SEF's standard method and the numbers we start from. Every operation is different, so treat the targets, timings, weightings, and templates here as a starting point and adjust them to your products, customers, and risk. Write your version down before you measure against it. Do not apply a tool just to apply a tool. Every method here carries a cost in time, attention, and discipline, and the benefit has to justify that cost in your operation. If it does not, leave it out and say why. A lower score on a criterion you have deliberately chosen not to pursue is an honest score, not a failure. One thing should not change: the maturity level definitions, because they are the scoring basis for the assessment.

What it is

Incoming inspection finds bad parts after you have paid for them, stored them, and sometimes built them into product. A supplier quality process moves the effort upstream: you state your requirements in the agreement, measure every supplier against them, and work directly with the worst performers to fix the causes at their end.

This is SEF’s standard method. It has four parts:

A Supplier Quality Agreement (SQA) that puts quality requirements in writing.
A supplier scorecard that measures quality, delivery, and responsiveness the same way for every supplier, every month.
A Bottom-10 selection that ranks suppliers and picks the ones doing the most damage.
Joint improvement teams of your people and theirs, working to a set cadence until the supplier meets clear exit criteria.

The approach is consistent with what quality system standards expect. ISO 9001 (clause 8.4) requires control of external providers, and IATF 16949 goes further with required supplier monitoring (8.4.2.4) and prioritized supplier development (8.4.2.5).

Why it matters

Quality: In many plants, purchased parts make up most of what goes into the product, so many defects start at a supplier. Fixing them at the source removes them for good.
Cost: Incoming inspection, sorting, rework, premium freight, and line stoppages all fall as supplier quality improves.
Delivery: Rejected lots create shortages. Reliable suppliers mean reliable schedules.
Cash: Less safety stock is needed when incoming material can be trusted.
Better sourcing decisions: Hard data makes renewal, resourcing, and award decisions fact-based rather than based on relationships.

Key terms

Term	Meaning
Supplier Quality Process	The documented process for selecting, qualifying, monitoring, and developing suppliers, including quality requirements written into supplier agreements.
Bottom-10 Supplier Development	A focused program that ranks suppliers by quality performance and works jointly with the lowest performers (typically about 10) to fix root causes and raise their performance.
Supplier Quality Agreement (SQA)	The contract document (or contract section) that sets out quality requirements, responsibilities, and consequences.
PPM	Parts per million defective: rejected parts divided by parts received, times 1,000,000.
Supplier OTD	Deliveries (or lines) received on time and in full, divided by deliveries due, as a percent. Set the on-time window in the SQA.
Responsiveness	How fast and how well a supplier answers a quality problem: containment time, corrective action response time, and on-time closure.
SCAR	Supplier Corrective Action Request. A formal request for root cause and corrective action, usually in 8D format (see G21).
Containment	Immediate action to protect your plant: sorting stock at your site, in transit, and at the supplier.
Controlled shipping	An escalation where the supplier must add inspection before shipping, and report results, until the problem is fixed.
PPAP / first article	Formal approval of a new or changed part and process before regular supply starts.
Approved supplier list (ASL)	The list of suppliers qualified to supply each part or category.

How to do it

Step 1: Write the Supplier Quality Agreement

Every production supplier signs an SQA before receiving orders. SEF’s minimum contents:

Section	What it covers
Scope	Parts, sites, and duration covered
Quality system	Required certification (for example ISO 9001, IATF 16949) and notice if it lapses
Product requirements	Drawings, specifications, special characteristics, packaging and labeling
Approval	PPAP or first article requirements, and what counts as a change
Change notification	Advance written approval for any change to material, process, site, or sub-supplier
Performance targets	PPM, OTD, and responsiveness targets, and how they are measured
Nonconformance handling	Containment within 24 hours, 8D response times, sorting and cost recovery
Escalation	Steps from SCAR to controlled shipping, business hold, and resourcing
Records and traceability	Retention periods, lot traceability, certificates of conformance
Audit rights	Your right to audit the supplier and its sub-suppliers
Review and renewal	Annual performance review before renewal

Step 2: Run a monthly supplier scorecard

Score every active supplier each month on a 100-point scale. SEF’s default weighting:

Measure	Weight	Formula	Full points	Zero points
Quality (PPM)	50	Rejected parts / parts received x 1,000,000	At or below target	5x target or worse
Delivery (OTD)	30	On-time, in-full deliveries / deliveries due	98% or better	Below 80%
Responsiveness	20	Average of: containment within 24 hours, 8D D3 within 48 hours, 8D closed within 60 days (see G21)	100% of cases on time	Below 50% on time

Scale points in a straight line between the full and zero points. Adjust weights and targets to your business, but keep them the same for all suppliers so the ranking is fair.

Step 3: Select the Bottom-10

Once a quarter, the supplier quality engineer and purchasing lead:

Filter. Include only suppliers with enough activity to be meaningful (for example, at least three receipts in the quarter).
Rank by score. Use the average scorecard result for the last three months.
Weight by impact. For the lowest 20 or so, add the cost they caused: sorting, scrap, line stops, premium freight, and customer complaints traced to their parts.
Pick about 10. Choose the suppliers with low scores and high impact. A low-scoring supplier of cheap, non-critical parts may be better handled by resourcing than development.
Confirm with leadership and notify each supplier in writing, with their data.

Step 4: Form joint improvement teams

Each Bottom-10 supplier gets a team: your supplier quality engineer (lead), a buyer, and a process or quality engineer from your plant, plus the supplier’s quality manager and the process owner for the failing part. Senior leaders on both sides sponsor it.

Timing	Activity
Within 2 weeks of selection	Kickoff at the supplier’s site: review data, walk the process, agree targets
Weeks 1 to 6	Weekly team meeting (in person or video). Root cause work on the top two or three defect types using 8D or A3 (see G05)
Weeks 7 to 12	Every two weeks: verify actions, update the supplier’s PFMEA and control plan
Monthly	Sponsor review of scorecard trend and open actions
Quarterly	Formal review: stay in, exit, or escalate

Step 5: Apply exit criteria

A supplier exits the Bottom-10 program when all of these are true:

Scorecard at or above target for three consecutive months.
All corrective actions closed and verified effective at the supplier’s site.
Supplier PFMEA and control plan updated for the fixed failure modes.
No repeat of the targeted defect types during the verification period.

A supplier that shows no real progress after two quarters moves to escalation: controlled shipping, new-business hold, and a resourcing plan approved by leadership.

Step 6: Feed the renewal decision

Before any supplier agreement is renewed, review 12 months of scorecard data, SCAR history, and Bottom-10 status. Record the decision.

What each maturity level looks like

QS-4 Incoming (Supplier) Quality

Level	Assessment wording	What it looks like on the floor	How to move up
1	Incoming inspection only.	Receiving inspects and rejects. Suppliers hear about problems through purchasing, if at all.	Write the SQA template and supplier quality procedure. Get SQAs signed by top suppliers by spend.
2	A documented supplier quality process is in place, with quality requirements written into supplier agreements.	Signed SQAs exist. SCARs are issued for rejects.	Launch the monthly scorecard and add a performance review to the renewal process.
3	As Level 2, plus supplier quality performance is measured and reviewed before agreements are renewed.	Scorecards are published monthly. Renewal files include performance data.	Run the first Bottom-10 ranking and assign a supplier quality engineer to each.
4	As Level 3, plus a Bottom-10 supplier development process is in use.	A current Bottom-10 list exists with named owners and action plans.	Form joint teams with supplier staff and set the meeting cadence.
5	As Level 4, plus joint customer and supplier improvement teams are working on the targeted Bottom-10 suppliers.	Joint teams meet on schedule. Suppliers exit the list on data, and new ones enter each quarter.	Sustain: raise targets as the base improves and share methods with the wider supply base.

Evidence to look for

Document

Supplier quality procedure and SQA template. Signed SQAs for a sample of suppliers.
Monthly scorecards with formulas and targets.
Current Bottom-10 list, selection data, and team rosters.
Joint team meeting minutes, action logs, and 8D reports.
Renewal files showing performance review.

Observation

Receiving area: how are rejects tagged, segregated, and reported?
Is incoming inspection effort shrinking for suppliers with good history?
Visit a Bottom-10 supplier: is their PFMEA and control plan updated for the fixed problems?

Statement (questions to ask and who to ask)

Supplier quality engineer: “Who is on your Bottom-10 list and why? Who left it last quarter?”
Buyer: “What performance data did you review before the last renewal?”
Supplier quality manager: “What did the joint team change in your process?”

Management report

Total supplier PPM and OTD trend.
Bottom-10 scorecard trends, entries, and exits.
Supplier-caused cost (sorting, scrap, freight, line stops).
SCAR response and closure times.

Common pitfalls

Scorecards nobody acts on. Publishing a ranking without a development program teaches suppliers the scorecard does not matter.
Ranking without impact. Ranking by PPM alone may target a supplier of washers while ignoring a lower-PPM supplier whose defects stop the line.
Letters instead of visits. SCARs by email rarely reach root cause. Go to the supplier’s process.
Your own share of the problem. Unclear drawings, late changes, and poor forecasts create supplier failures. Look at your side first.
No exit. A list where no one ever leaves loses credibility. Use the exit criteria and celebrate exits.

Template

Bottom-10 Tracking Sheet

Rank	Supplier	Parts / category	3-month score	PPM	OTD	Responsiveness	Impact cost (quarter)	Top defect types	Team lead	Supplier lead	Kickoff date	Months at target	Status (active / exit / escalate)
1
2

Exit Checklist

[ ] Scorecard at or above target for three consecutive months
[ ] All corrective actions closed and verified at the supplier
[ ] Supplier PFMEA and control plan updated
[ ] No repeat of targeted defects during verification
[ ] Sponsor sign-off from both companies

First 30 days

Week 1: Collect 12 months of receiving rejects, delivery data, and SCARs. Check which suppliers have signed SQAs.

Week 2: Build the scorecard and run it for the last three months. Share the method with purchasing and leadership.

Week 3: Add impact cost and select the first Bottom-10. Assign a supplier quality engineer to each and send notification letters.

Week 4: Hold the first two kickoffs at supplier sites. Schedule the rest within four weeks and update the SQA template with SEF’s minimum contents.