At Cisco Systems, there is more to quality than measuring and improving defect levels of components.
While Cisco sets parts per million (ppm) defect-level targets that suppliers are expected to achieve, it also measures how well suppliers develop and deliver new technology, respond to new Cisco requirements and reduce total cost.
Cisco rates supplier performance on this criteria quarterly using a quality performance index methodology, says David Ashley, vice president of technology and quality for the San Jose, Calif.-based company. A supplier’s index score can range from 0 to 100, although no supplier has ever achieved 100, he says.
The score is based on various “inputs we see in the factory and in the field, and we measure what the business impact of those inputs are,” he says. So a part that fails on a production line or in the field would have a negative impact on business and would lower the supplier’s quality performance score for the quarter. Similarly, a late delivery of needed parts would result in a lower score. However, if a supplier delivers products that meet Cisco's quality targets, and shipments are delivered on time, the score increases.
“We also share with them how they're doing relative to other suppliers in that same commodity," says Ashley.
He adds that a supplier’s score is important because it affects how much business Cisco awards the supplier.
“We have a multisource strategy so we have choices," says Ashley. “We like to split the business and use the quality performance score in how we allocate that split.”
The higher the score, the higher the likelihood a supplier will get more business from Cisco.
“If a supplier’s score is in the red zone—an extremely low score—we put them on an improvement plan and work with them,” he says. However, if the supplier does not improve, "we will move on to a different supplier.”
PPM defects drop
Cisco’s efforts have paid off. Over the past six years, the average ppm defect level for semiconductors, passives, connectors and other materials that Cisco purchased from suppliers has dropped from more than 400 parts per million (ppm) to 75 ppm, and 95% of Cisco’s suppliers meet or exceed its quality requirements, says Ashley.
Cisco changed how it approached supplier quality about six years ago, implementing Six Sigma processes to analyze quality and reliability issues.
Under Six Sigma methodology, quality is improved by identifying and removing the causes of defects and minimizing variability in manufacturing. Statistical and quality management methods are used to measure, analyze, control and eliminate quality problems.
Ashley says Cisco looked to identify the causes of quality issues from the design stage through manufacturing.
“We are looking for quality improvements through robust processes, metrics, governance, and we use those business awards” to drive quality improvement by suppliers, says David Ashley, vice president of quality for Cisco Systems.He adds that Cisco restructured its supply chain organization to focus on supplier quality. The idea was to "drive supplier quality proactively and move from being reactive to much more proactive. We are looking for quality improvements through robust processes, metrics, governance, and we use those business awards” to drive quality improvement by suppliers, he says.
Ashley adds that how well a supplier provides new technology is important their performance score as well.
“Technology is key because of what we design and the solutions that we provide to our customers,” he says. Cisco makes a variety of equipment including hubs, routers, switches, mass storage and teleconference systems. Many of those systems are leading-edge and need the latest and greatest technology.
Cisco's suppliers are measured on how well their technology roadmaps align with Cisco's future technology plans.
“We work with them on their roadmaps,” explains Ashley. “We have joint agreements on what we expect from them and what they can expect from us.”
Technology roadmaps vary depending on the commodity.
“With some commodities, we look for partners who bring us the advancements that we need in a technology,” he explains. “If a supplier says it will have a certain technology at a certain time, we count on them” to deliver the technology at the time.
One example is application-specific integrated circuits (ASICs).
“Our ASIC technology is critical to what Cisco does and it is a differentiation for our products. We work with suppliers on different geometries of ASICs and on advance processes for qualification and packaging technologies," Ashley says.
The idea is to ensure that when an ASIC is designed, the supplier can build it and have the highest quality, reliability and yield when the chip is fabricated.
“Cisco’s sustainable differentiation is around innovation, and it is important for our suppliers to enable that,” says Ashley. “It helps us bring innovation to the mainstream quicker.”