Opinion: Quality at the Supplier’s end – the crux of the Coconut Oil Crisis

By Alahendra Amaradasa

Today, more than ever before, there has come to the fore the pressing need for ensuring quality of supplies at the supplier’s end to avert many national disasters. The country is facing crisis after crisis plunging itself and the economy into unprecedented depths due to this monumental quality blunder – not being bothered about what the supplier is going to ship at the supplier’s end.

The most recent crisis plaguing the country has been the ‘coconut oil crisis’ which may rightly be termed as the ‘aflatoxin catastrophe’. Another burning national issue that has come to the fore is the crisis related to skyrocketing prices of rice which has to be tackled separately.

Supplier quality – the root cause

These and other such disparaging problems would never be solved if we fail to attack the root cause of these problems. On careful examination it will become apparent that all these problems do originate at the supplier’s end – the very source – causing much consternation to everyone. The whole country seems to have been oblivious to the axiom which says “If the beginning is bad, the end can never be good”. Considering the coconut oil issue, too, one can say going by the same truism that one will never be able to produce good quality coconut oil using improperly dried,  mould-infested copra.  Poor supplier performance  is at the root  of many quality problems and involves shoddy physical quality, inadequate quantity as well as late delivery issues. Therefore, there exists a dire need for paying special attention to this vexed issue of supplier quality.

Purchasing

How can we pay extraordinary attention to this very important entity – the supplier that can be either an individual or an organization. The only way available is to involve the supplier actively in the transaction of delivering the product of the right quality, in the right quantity, at the right time. He must be made part of the team. This activity of obtaining material supplies or services from the supplier is popularly known as purchasing or procurement. The quality chain, in reality, starts with the supplier and ends up with the customer. It has to be re-emphasized here that the end can never be good if the beginning is bad. It is as simple as that. So purchasing organizations must actively and meaningfully involve their suppliers in their lifelong transactions as part of the team because purchasing has to be done as long as the business exists.

Active supplier involvement

Active involvement of the supplier in the purchasing process should start with proper supplier selection. Purchasers should select competent and reliable suppliers after conducting a supplier survey. It should not be over-emphasized that  the most important decision an organization makes is proper supplier selection. Until recently, supplier selection was done solely by the Purchasing Department whose main functions were regarded as strictly clerical and the supplier selection activity was treated very lightly.

Today, it has become extremely important to involve all suppliers in quality, productivity, cost and delivery. The scope of Purchasing has expanded considerably.  Today, supplier companies that are unable to meet the demands of consistent quality, anticipated quantity and on-time delivery are chopped off mercilessly by the purchaser.

Now, let’s take a look back at our own coconut oil purchasing process. Were the purchasing companies and government agencies aware that purchasing or procurement entailed quality, quantity, cost and on-time delivery? None of these issues appear to have come seriously under their microscope. Even the national standards institution- the Sri Lanka Standards Institution (SLSI) whose primary responsibility is safeguarding and promoting standards and quality –has not bothered much to see what was happening under their nose. SLSI’s role appears to have been a passive one – engaging in extensive product testing but not taking positive action on the outcome of the testing in order to protect the consumer public at large. The public were blissfully unaware of the quality of coconut oil they were consuming until the bubble exploded as a result of the revelation made by the All Ceylon Traditional Coconut Oil Producers Association to the effect that 13 bowsers containing contaminated coconut oil had arrived at the Colombo port. SLSI should have worked in close liaison with other government agencies such as the Consumer Protection Authority, Customs Department, Coconut Development Authority and Industrial Technology Institute (ITI) to bring about a solution to this vexed problem .SLSI should also have alerted the purchasing companies about the dire need for insisting on their suppliers the criticality of using good quality raw material copra during the processing of coconut oil to be supplied by them.

Not only the importers of coconut oil but a considerable section of the wholesale trade, too, were quite unaware of the quality of coconut oil they got from the local and overseas suppliers. This has deepened the coconut oil crisis. It is quite obvious that poor selection of suppliers has been the main reason behind the debacle in the first place. Coupled with this is the total lack of communication with the chosen suppliers regarding the quality of coconut oil being processed and supplied.

Full scope of supplier involvement

Proper selection of suppliers is only the beginning. This is extremely important to ensure quality, quantity and on-time delivery. Following this step, the selected suppliers need to be informed about the things the purchaser is concerned about, namely critical product specifications such as the maximum permissible level of aflatoxin in coconut oil. The supplier should be very clearly informed about other specifications to be met as given in the Sri Lanka standard for coconut oil. Purchasers should not expect the supplier to know all these things unless they communicate with him effectively. This communication should be carried out extensively using all available means such as writing, telephoning and emailing until the message becomes very clear to the supplier. Otherwise it will be too late and non-conforming and dangerous material will arrive at the purchaser’s doorstep. Merely opening a letter of credit for the despatch of goods as it is happening now will not help.

The purchaser should also advise the supplier to maintain daily records pertaining to quality performance during processing and to take appropriate corrective action whenever needed to rectify quality deficiencies before the despatch of the processed product.  The purchaser should also clearly specify the delivery deadlines and insist the supplier on meeting these. This is true involvement of the supplier in quality, quantity and delivery matters. True supplier involvement implies getting the supplier to supply goods of the right quality, in the right quantity, at the right time. This is tackling the quality problem at the source.

Supplier certification

One of the most significant innovations in the customer/supplier relationship in recent times has been supplier certification. A certified supplier is one who through prior experience and qualification can provide material of such quality that it needs very little or no receiving inspection or test before going to approved stock, or into the manufacturing process. Certification of suppliers seems to be an answer to many supplier/customer problems. A certified supplier ranks very high on the customer’s supplier rating system, usually at a 95% or 100% performance. So supplier certification would be the best way to get continuous, trouble-free supplies. Bulk- buying customers engaged in continual buying of not only coconut oil, but all products should take serious notice of this mode of supplier involvement if they are to do business in peace and slash staggering inspection and testing costs, demurrage costs and warranty and litigation costs. Supplier certification may be the only solution to their nagging problem. Supplier certification may be a little time-consuming and expensive, but it is well worth in the long haul in terms of cost reduction, quality improvement and crisis prevention.

Post mortem- too late

Checking quality at the Customs department after receiving the goods is not quality assurance. The whole country knows that lack of quality assurance at the source – the supplier, has been the miscreant that caused the present coconut oil crisis. No amount of testing of the product at the Customs point or at the laboratories of the SLSI, ITI, Coconut Development Authority or the Universities is going to help as these are just post mortem examinations. A large number of such test reports revealed that the coconut oil supplies failed to conform to the stipulated standards. In fact, SLSI had drawn random samples from a consignment of 1.8 million kilograms of suspect coconut oil that had arrived in 13 bowsers and found unacceptable aflatoxin levels in all these. Purchasers were directed by the Consumer Protection Authority to desist from distributing this material locally and to effect re-shipment of the 13 containers.  That failing led to a national level disaster as every single household in Sri Lanka is disposed to using coconut oil, day in and day out, in their food preparations and coconut oil was hard to find during the most needed time, the festive New Year season.

Averting the crisis

It should be pretty clear by now that there is only one way left if we are to overcome the present crisis and  avert future crises of a similar nature crashing on us. That only way is correcting quality at the source – the supplier, long before we test the product after receiving at our doorstep. This applies not only to coconut oil, but everything we consume in the form of products and services. The buyers  as well as the government agencies should, at least starting from now, take serious notice of the situation and promote building quality at the source. This is true supplier involvement, the primary step to be taken in assuring quality of any product or service. Without putting into action this philosophy, no one wil be able to avert crisis situations we are going to face in the future. National level disasters such as the present coconut oil crisis will keep haunting the nation eternally if we ignore the dictum “quality starts at the source- the supplier”.  

Cost implications

The real magnitude of the problem will not be grasped until the cost implications involved with the problem receive consideration. 

(- Alahendra Amaradasa is a Quality Management Consultant and a former Director of the Sri Lanka Standards Institute -)