Processing Supplier Non-conformance Reports: Are You Leaving Money on the Table?

A supplier non-conformance report (NCR) is often a bain (a thing that ruins or spoils) that causes chronic headaches and drains money and time from capital projects in energy and other sectors. But inefficient work processes and a lack of analysis leave a boon (something extremely beneficial, helpful, or useful) of lessons unlearned, which is tantamount to leaving money on the table! Are you leaving money on the table?

1 Introduction

Project personnel focus on activities that lead to a project’s successful completion … and rightly so. They work hard to ensure documents, equipment, and materials (products) are delivered complete, correct, and on time. However, no project is perfect; challenges and problems are inevitable. Seemingly omnipresent, Murphy’s Law states: anything that can go wrong will go wrong.[1]

Supplier non conformances may be addressed using an NCR, which is a quality management system (QMS) process used to accept a non conforming product. Non conformance and NCR are defined in adjacent insets.

NCRs are a bain for most projects because they burn money and time. For most personnel, NCRs are challenges that become chronic headaches because project work processes are:

Challenged by a lack of knowledge and resources;
Complicated by supply chain complexity;
Stressed by occurrence during production (which could affect delivery); and,
Frustrated by the project’s singular focus on close-out.

Challenges, complications, and stressors all contribute to additional time and increased costs needed to process NCRs. Improving the efficiency of NCR processes by providing personnel with go to resources saves money and time, every day.

Because NCRs are often such chronic headaches for project personnel, they may be deferred, procrastinated about, and even ignored. This is not surprising given that most do not want to manage another headache. But avoidance and ineffective work processes leave money on the table.

The real lost opportunity cost, however, is not gleaning business intelligence (BI) from NCR outcomes. BI is defined in the adjacent inset. It is frustrating when problems re‑occur unnecessarily. This is haunting proof that lessons have not been learned from previous projects. The inability to continually improve leaves even more money on the table.

Most projects make NCRs a bain because they fail to recognize that NCRs can and will happen. Hence, because they are not anticipated or planned-for, NCRs are a surprise that are handled as a one off nuisance that must be papered over and closed-out so the headache goes away. By contrast, a smart project makes NCRs a boon by analyzing what fails and succeeds. Then, uses this information to a competitive advantage, for continuous improvement, and to win future work. Improving the understanding of NCR outcomes and applying lessons learned earns money, generates success every day. This is how to leave no money on the table.

Section 2 summarizes eight common challenges and associated solutions for processing NCRs:

Typical Projects (Section 2.1);
Hidden Knowledge Gaps (Section 2.2);
Tribal Knowledge (Section 2.3);
Email and Electronic Infrastructure (Section 2.4);
Supply Chain Complications (Section 2.5);
Supply Chain Stressors (Section 2.6);
Document Management Stressors (Section 2.7); and,
Frustrations with NCR Completion (Section 2.8).

Related Fact Sheet: Top Nine Challenges and Solutions for Processing NCRs

2 Challenges and Solutions: Processing NCRs

This section describes the challenges most projects experience processing NCRs and associated solutions employed by a smart project. Don’t just be a project. Be a smart project.

2.1 Typical Projects

The fiction and misperception that a project with well-established NCR processes is automatically efficient is dispelled by the extensive time it takes to close out an NCR; a smart project examines and implements lessons learned and opportunities for continuous improvement to speed NCR processing.

2.1.1 Challenges

Typical projects are established with many procedures and a QMS, which personnel believe are adequate to process NCRs. This may not be the case at all. The reality, in fact, may be the opposite!

Just because a QMS process has been used for years does not necessarily mean it is efficient. Just because something has been repeated in the past does not necessarily make it efficient or useful. It only means that the process is repeatable; nothing more. Instead, a QMS process may be woefully inadequate. Even worse, personnel may lack suitable experience and knowledge to manage the process. This is because projects have a hidden knowledge gap (Section 2.2) – not because personnel are apathetic, uneducated, unprofessional, or lack knowledge. The fiction and misperception that a project is automatically efficient with well-established NCR processes is quickly dispelled by the extensive amount of time it takes to close-out NCRs (i.e., weeks, months, and even years)!

Organizations can operate indefinitely using inefficient processes. For example, virtually any government squanders resources by employing inefficient and wasteful machinations. See a more succinct industry example in Section 3, which describes a problematic supplier that consistently fails to deliver. And yet, has operated for decades – and continues to operate today!

2.1.2 Solutions

A smart project examines lessons learned and opportunities for continuous improvement at the outset and not start by blindly re-purposing work processes from a previous project (which is, admittedly, tempting!). It will scrutinize previous similar projects to learn from its failures and successes, consider these data before the project starts full mobilization, and build these considerations into project plans. A smart project thoroughly reviews adequacy, appropriateness, and efficiency of previous and proposed work processes before issuing its first procurement documents.

Each project is different. Some could benefit from copy scope (e.g., duplicating design and execution from previous projects). For others, this may be totally inappropriate. A smart project works with known data to maximize efficiencies, lower costs and risks, reduce implementation timelines, and maintain quality standards. The specialized requirements of each project can usually be supported, at least in part, with lessons learned.

2.2 Hidden Knowledge Gaps

Because a hidden knowledge gap exists (i.e., there is no detailed information or formalized documented guidelines about how to process NCRs), a smart project proactively provides resources that support the processing of NCRs (e.g., assign an NCR coordinator, establish clear requirements, and provide coaching, training, workshops).

2.2.1 Challenges

The following bodies of knowledge (BOKs) have a hidden knowledge gap. This means they have little or no detailed information and no formalized how-to guidelines to process NCRs:

A Guide to the Project Management Body of Knowledge. Project Management Institute, Inc. (PMI);[2]
Operations Management Body of Knowledge Framework. Association for Supply Chain Management (ASCM);[3]
The Competencies of Canadian Supply Chain Professionals. Supply Chain Canada (SCC);[4] and,
The Supplier Quality Professional Handbook. American Society for Quality (ASQ).[5]

This knowledge gap occurs similarly for business and engineering educational curriculum – no detailed information or how-to guidelines are provided for processing NCRs. Personnel may be experienced with, and knowledgeable about, general NCR requirements; however, rarely have hands-on experience coordinating, identifying, and resolving non conformance challenges. Therefore, NCR methods, objectives, and strategies may be a mystery. Project personnel may completely lack NCR training.

An example of a knowledge gap is when project personnel believe that all NCRs are subject to a root cause analysis (RCA). When there is no requirement for an RCA, it is not performed. Another example is when project personnel believe that because NCRs are logged (i.e., identified in a spreadsheet with a status of open or closed), they are automatically incorporated into lessons learned. When there is no requirement for NCR data to be collected and analyzed, it will not be done.

2.2.2 Solutions

A smart project will take the bull by the horns (take initiative to confront a difficult or unpleasant situation) by:

Assigning an NCR coordinator (see Section 2.5.2);
Establishing clear requirements for the collection and analysis of NCR data;
Offering coaching, training, and workshops, or a combination to increase NCR understanding; and,
Providing resources to personnel to help manage NCRs (e.g., a project instruction, procedure, workflow chart, or a combination).

There was no commercially-available BOK published for NCRs until the KT Project produced the guideline KTP-SQS-009, Procedure for Processing Supplier NCRs.[6] This industry-leading intellectual property (IP) was written specifically for capital projects in energy and other sectors. KT Project documents capture decades of valuable knowledge and experience that help organizations mitigate, minimize, and eliminate project challenges caused by knowledge gaps.

2.3 Tribal Knowledge

The challenge of a knowledge gap and dearth of resources cause personnel to rely on ever-changing tribal knowledge, which a smart project addresses by supporting knowledge transfer, documenting tribal knowledge, and managing tasks using documented tribal knowledge (see adjacent inset for definition).

2.3.1 Challenges

NCRs processed using tribal knowledge produce NCRs that are likely managed inconsistently and therefore yield inconsistent outcomes. Personnel are prone to use whichever process was used on the last project because it is familiar. Worse than this, some just guess! Ye gods.

Because there is a knowledge gap and dearth of resources, there is no common understanding that produces consistent outcomes.

For example, even if an NCR is (eventually) closed out it cannot be considered successful if the:

Non conformance is repeated;
Process unnecessarily took weeks, months, or years; or,
Work distracted personnel from other priorities.

2.3.2 Solutions

A smart project uses knowledge transfer to address the ubiquitous adoption of tribal knowledge. This is the process by which experienced personnel organically share-distribute unwritten behaviours, knowledge, and skills and with colleagues, and with personnel who will replace them. A smart project uses formal and informal knowledge transfer to support workforces using as many means as possible. For example, when documented resources are provided to manage NCRs (e.g., a project instruction, procedure, workflow chart, or a combination), the process will become more formalized and systematic, and the use of undocumented tribal knowledge will become less prevalent.

2.4 Email and Electronic Infrastructure

The fundamental challenges of using inefficient email applications, shared folders, and Microsoft (MS) Excel spreadsheets can be resolved inexpensively using MS SharePoint software.

2.4.1 Challenges

The challenges of processing NCRs is significantly compounded when organizations manage their business primarily using older software solutions (i.e., email, shared folders, and MS Excel spreadsheets).

For example, many personnel process hundreds of emails or more every week, so a critically important email – about an NCR resolution – could easily be lost or overlooked, or queued until it is read and then actioned by the recipient. It is annoying and time consuming if personnel are forced to search for key information in documents that are haphazardly filed in project folders. For example, not knowing who initiated or owns an NCR and where it is filed can require significant unproductive effort for other project personnel.

Moreover, shared folders have structural limitations for grouping and categorizing documents. An MS Excel spreadsheet can be used to prepare an NCR log and produce detailed analysis, but is susceptible to change over time, data entry errors, and other shortcomings. Spreadsheets are inefficient and have many limitations.[7]

2.4.2 Solutions

MS SharePoint software offers all the benefits of legacy shared folders and MS Excel spreadsheets with better and truer solutions (i.e., solutions that are more effective, modern, and reliable). It is also infinitely scalable. It provides the ability to efficiently acquire and analyze data, effectively share documents and information for current and historical projects, and greatly supports future project success. A smart project already exploits MS SharePoint for other functions (e.g., company or project webpages).

For example, when the same NCR data is collected and analyzed for all projects the same way and using the same resource, it is easy to compare the outcomes and identify anomalies and trends. A smart project that uses MS SharePoint (or an equivalent platform) has a huge advantage over projects that do not.[7]

2.5 Supply Chain Complications

The supply chain complications of timing and using the supplier’s QMS can be simplified and addressed by a smart project that does not wait for the supplier to act and instead designates a dedicated, experienced, professional NCR coordinator who is adept at managing unfamiliar NCR formats.

2.5.1 Challenges

A project usually has two supply chain complications with NCRs:

Timing; and,
Using the supplier’s QMS.

2.5.1.1 Timing

For projects, procurement through a world-wide supply chain from many suppliers (and sub suppliers and sub sub suppliers) occurs over many months and sometimes years. The supply chain can effectively deliver the products needed for detailed engineering and construction.

A non-conformance often occurs at an inopportune time during production when there is inadequate time to process it. Drucker’s Law, which sees the complexity of management, states that if one thing goes wrong, everything else will, and at the same time.[8] For an NCR, this often results in a ripple effect. One non-conformance means that there may be more damaging consequences to the project.

An NCR is like a stone’s splash that ripples across an entire pond; none of the pond’s surface is unaffected. A non conformance could result in a:

Production and delivery delay. Additional time is required for processing the NCR, which also delays other suppliers, construction, or both; or,
Sub-optimal disposition. For example, repair, replacement, rework, or switching similar items between different scopes of work.

For example, a delay in the delivery of a non-conforming valve from a supplier in the United States to a module fabricator in Canada results in an incomplete module being delivered to site. This unplanned transfer of work to construction increases costs for the valve’s receipt and installation by others, which also delays the schedule for commissioning and start-up. The ripples extend all the way to the shore.

Switching a tagged valve with one available from another module sounds easy on the surface, but this has causes ripples too. The tags would then need to be changed either on the valves or the process and instrument diagram (P&ID). The former requires that relevant quality control (QC) records, such as material test reports (MTRs), also be changed (or rendered incorrect and obsolete). The latter requires the use of unplanned engineering labour-hours to revise related documentation.

2.5.1.2 Using the Supplier’s QMS

It is a best practice and preferred that the supplier uses their own QMS to process a non conformance, to take responsibility for their deficiency and the implementation of its disposition and corrective or preventative actions (CPAs), or both. After all, the product is usually in their care, control, and custody. If the supplier cannot or will not produce an NCR, then project personnel should prepare one.

Additionally, a non conformance may be identified at site during receiving, installation, commissioning, or start-up. Hence, an NCR may also be produced by the constructor, project owner operator, project team, supplier, or others.

Each NCR may be unique because it is issued by a different organization, with a different purpose, and with different personal responsible for processing it, providing input, or both. It may take weeks, months, or years for an NCR to be completely processed and closed out. As suppliers and projects mobilize and execute scopes of work and then demobilize upon completion, the personnel available to manage an NCR can change significantly. Familiarity with an NCR is lost when personnel demobilize and must be re-learned by other project personnel.

The NCR format that a project receives may vary greatly per the QMS from which it was produced. This is not insurmountable but can result in roadblocks that must be overcome. For example, a project typically requires that an NCR be submitted for approval and comment by the project engineer (PE) or responsible engineer (RE). When it is submitted, however, there may be no comment box signature line for the PE or RE. There may be a comment box and signature line for client or this may not exist at all. This challenge must be addressed because without it, personnel may not know what to do! Hence, the project needs additional time to determine next steps. It may even return the NCR unprocessed because it was not prepared for approval or input by others (e.g., no one could approve it because there was no approval signature box in the NCR to sign).

2.5.2 Solutions

A smart project does not wait for the supplier to act. An NCR that is out of sight and out of mind may be forgotten! Instead, a smart project will designate an adept, professional NCR coordinator who is:

A go-to resource and single point of contact for NCRs, and knowledgeable about the project, its products, and QMSs;
An NCR champion that obtains close-out as soon as possible (ASAP), follows procedures, and maintains proper records;
Dedicated for the duration of the project, such as a supplier quality surveillance (SQS) coordinator or PE; and,
Responsible for managing the project’s NCR log (e.g., a spreadsheet or other resource with NCR data and status).

An NCR with an unfamiliar format (e.g., no comment box signature line for the PE or RE) may be managed by one of the following methods if it is a digital Adobe Acrobat or hard copy form. The PE or RE can:

Comment and sign as client, since the project is the supplier’s client; or,
Strike-out client and write their company name, and then comment and sign as required; or,
Prepare an additional sheet with a PE or RE comment box and signature line, insert it into the NCR – then comment and sign as required.

2.6 Supply Chain Stressors

The discovery of a non conformance during production can severely impact the schedule; a smart project provides personnel and suppliers with go-to resources to consistently manage NCRs.

2.6.1 Challenges

Projects large and small have many similarities. Detailed engineering (DE) begins after completion of the front-end engineering and design (FEED) and the final investment decision (FID). DE is quickly followed by supply chain management (SCM) activities to procure necessary products, which must be delivered per schedules that are carefully planned and closely monitored.

The identification of a non-conformance during production can severely impact the schedule and cause additional work and stress for many personnel. Often, a project procures engineered equipment or expensive materials that are free issued to other suppliers, to be assembled in a module. An NCR with these products and those from other suppliers can cause significant delays that ripple through the supply chain and adversely affect many stakeholders.

A quick resolution is always ideal. But time slips by and labour hours grow while the project considers alternatives, exchanges emails, holds meetings, and determines how the work process should operate. Even worse, different time zones, holidays, sick and unexpectantly-absent personnel, and weekends mean that an NCR process takes much longer than it should. Hence, close out may take weeks, months, or years!

This means that either the NCR:

Festers and gets worse. Someone, somewhere … attempts to manage the NCR, or procrastinates … and then provides it to the party responsible for the next step because it is a low priority for them; or,
Explodes and cannot be ignored. The NCR requires an inordinate amount of attention by personnel who, in the process, get distracted from performing their higher priority activities because a manager has made the NCR a higher priority for them.

Often, both of the above occur. Thinking that personnel will figure this out at some point is lazy and reactive; this approach could put a project at serious risk of adverse outcomes.

A project may have resources to manage NCRs but their suppliers can struggle to meet expectations for NCR processing with approval, record, close-out, and other activities. This is because the supplier does not have access to the project’s resources (which is valuable IP that should be protected). How can the supplier know what to do or how to do it with inadequate information? It is impossible.

This is further complicated if the project requests that the supplier use their own QMS to produce an NCR (see Section 2.5.1). Typically, a supplier’s QMS will not anticipate that an NCR shall be processed using nebulous project-specific procedures.

2.6.2 Solutions

A smart project provides project personnel with go-to resources to consistently manage NCRs. For some projects, this may comprise detailed instructions with a workflow chart to assist with decision making and navigating the work process. For other projects, a procedure with guidelines may be adequate or preferred because of the variety of NCRs and stakeholders involved, or because it is used with multiple projects.

A smart project provides detailed information to the suppliers about how to manage an NCR. Specifically:

A supplier instruction that may be issued as-needed;
Instructions included in the purchase order (PO) as:
- Boilerplate text (i.e., the fine print with detailed terms and conditions that include information about how to process an NCR); or,
- An attachment to the PO (e.g., a supplier NCR specification) which is itemized in the technical document list (TDL).
A combination of these documents.

2.7 Document Management Stressors

To address the document management stressors of NCR approval and record-keeping, a smart project identifies NCRs that require project approval (i.e., either all NCRs or only specific types of NCRs) and when, and how NCRs shall be recorded in the document management system (DMS).

An NCR is a supplier document like any other (e.g., calculation, drawing, or MTR). But, by necessity, an NCR is handled differently because of the urgent need to resolve the non-conformance and eliminate, minimize, or mitigate all adverse outcomes ASAP.

2.7.1 Challenges

A project usually has these two document management stressors with NCRs:

Approval; and,
Record-keeping.

2.7.1.1 Approval

Projects typically request that specific types of NCRs are submitted for approval, which is reasonable. This may be required only for specific NCR dispositions (e.g., accept as-is, repair, or rework).

The assumption or request is often made, however, that all NCRs shall be submitted (e.g., including replace-in-kind or retest NCRs). This is unreasonable because the project could unnecessarily review and record numerous inconsequential NCRs that will not affect a product’s function or service. For example, a solenoid did not operate properly when a control valve was function tested, so it was replaced using the same make and model that was originally specified. This may be considered a non-conformance; however, it is of no concern or consequence to the project because it generates no negative outcome (e.g., no change resulted such as a delay to the schedule or the use of a different make or model).

The PO may require that NCRs are submitted individually for project approval and record, together in the manufacturing record book (MRB), or both. Or it may be assumed that there will be no NCRs, so nothing is requested – until there is an NCR (without any work process instructions). The supplier documentation requirements (SDR) may not identify the NCR as a document deliverable. This is also unreasonable because it defeats the purpose of the SDR, which is to identify for the suppler which documents must be included in their cost and supplied. Requesting additional unspecified documentation could require a change order (CO) to purchase the document, which would increase cost and delay the schedule.

The NCR submission process is dissimilar to the process used to submit other supplier documents to the project’s document management group (DMG) because:

NCR communications are temporarily (or completely) made using email or other means (e.g., meeting discussions or phone calls) because of the urgent need to resolve the non conformance and eliminate, minimize, or mitigate any adverse outcomes ASAP. For expedience, the DMG is not used, at least, initially. Identification of the cause, agreement of the disposition, and even verification of completion may all occur before the NCR is submitted to the DMG and input to the DMS for formal project review and record; and,
Per the SDR, the NCR may – at some point – be submitted to the DMG. DMG processes usually require that document submittal be performed using a project website with a document transmittal. After review by the RE and possibly others, the NCR is assigned a review code and returned to the supplier through the DMG, also with a transmittal.

A complete NCR may be returned with a code (e.g., 1) that indicates it does not require re submittal.

An incomplete NCR maybe returned with a code (e.g., 2) that indicates it requires re submittal upon completion.

The DMG may handle thousands of documents every week. So, although certain steps in the workflow only take a few minutes (e.g., uploading or downloading and review), the DMG may require a few days to process a document (including an NCR). The DMG may even refuse (at least initially) to process an NCR if there is no document requirement in the SDR or the PO is closed out!

2.7.1.2 Record Keeping

If an NCR is not included as a record in the project’s DMS, some project personnel will be unable to find it, obtain information, and acquire status updates. When only a limited number of personnel have access to all NCR-related files (e.g., in emails and shared folders), this lack of data transparency hinders project personnel who have no access and confuse communications between all personnel. This challenge can even stop the NCR process in its tracks or cause other unwanted challenges to ripple through the project. It is critical that key personnel (e.g., the buyer, expediter, PE, RE, and SQS coordinator) can each independently verify if an NCR exists and that it is closed out before:

Issuance of inspection and shipping releases for product shipment to the final destination;
Submittal and acceptance of the MRB; and,
Payment of the final invoice.

After a product ships and final payment made, it is much more difficult – and sometimes impossible – to obtain the supplier’s cooperation to close out an NCR. Also, if the product needs to be returned to the suppler for the disposition to be fully or properly completed, the project will incur additional unnecessary costs and schedule delays.

2.7.2 Solutions

A smart project clearly defines if only certain or all NCRs shall be submitted for approval and, just as importantly, when (e.g., individually, in the MRB, or both). This should be established in the SDR like all the supplier’s other document requirements. NCR and related work processes are an essential topic for expediting, kick-off, and pre fabrication meetings to clarify expectations and requirements.

For example, work processes are discussed so NCRs can be efficiently processed by the DMG to provide data transparency for the entire project team. This may require that an NCR be submitted when it is produced (even if incomplete) to create a traceable record and ensure it is accessible to all personnel. This may include empowering the NCR coordinator to send (return) an NCR to the supplier through the DMG, even if it was obtained by email and without a transmittal.

Another example: the DMG can register a placeholder in the DMS such that, even if there is no data or record available, the project team can be advised of the existence of a new NCR that needs processing.

2.8 Frustrations with NCR Completion

To address the challenge of not learning from lessons learned while processing and closing out NCRs, a smart project obtains and analyzes NCR data, and implements a cogent plan for continuous improvement in current and future projects based on the findings of the analysis.

2.8.1 Challenges

A project’s primary focus for any NCR is its satisfactory completion, with updated data entered into the NCR log ASAP. And rightly so. This means identifying the cause, approving the disposition, and verifying all CPAs are implemented before close out.

There is a secondary focus for NCRs, however, that is often overlooked in the haste to complete the current project and start the next one. This is the analysis of NCR data to glean BI that can be applied as lessons learned (see inset for definition) for continuous improvement.

It is frustrating when a project has lessons that are not learned because there is no:

Insight into why non conformances occur or their effects;
Plan to analyze outcomes, apply lessons learned, and eliminate, manage, or mitigate future non-conformances; or,
Visibility for comparison of past or similar projects.

For example, a completed project has 100 NCRs and all are closed-out. Awesome! But what can be learned from these NCRs? If these are hidden in shared folders or lost in emails, then the answer is nothing. Has the project simultaneously collected data that can be analyzed and applied as lessons learned? If not, then the answer is, again, nothing. This is money left on the table.

2.8.2 Solutions

A smart project obtains NCR data for analysis to be applied as lessons learned for continuous improvement in current and future projects. This need not be an onerous task requiring significant labour-hours to manage and report. A few key metrics can be included in the NCR log, which can be analyzed or reported as needed by business development (BD) or project personnel such as a comparison of NCR:

Categories (e.g., to identify NCR causes, costs, frequencies, and severities);
Impacts (e.g., to identify the costliest and most time-consuming NCRs); and,
Outcomes (e.g., to identify similar product, project, and supplier NCRs).

For example, a project may purchase several control valves, which cannot be purchased off-the-shelf and cost tens of thousands of dollars. If one of these valves is delivered with the incorrect fail position, the replacement cost and timeline would be significant. Regardless, a mistake was made, so the valve is non conforming and must be replaced.

But why stop there? Why not take steps to identify and correct the non conformance’s root cause(s), take every possible measure to prevent re occurrence in the future? Was the fail position:

Stated correctly on the datasheet and supplier drawings (e.g., closed, last, or open)?
Function tested per the:
- Inspection and test plan (ITP) and supplier quality requirements (SQR) – e.g., non witnessed or witnessed?
- Supplier’s procedure with a report produced to document satisfactory results?
Verified by:
- Documentation review by engineering?
- Visual examination during final inspection by the supplier’s personnel, a third party inspector, or both?

If any of the steps above are deficient or unclear, the appropriate documentation and requirements can be revised. Or, if the fail position was not appreciated or understood by personnel, they can be trained on this aspect of a control valve’s operation. Hence, the NCR will solve the current problem and eliminate or reduce the possibility of another control valve being delivered with an incorrect fail position.

A project ignoring lessons learned is like a professional sprinter who fails to watch replays of races with competitors, which is akin to refusing to learn from failures and successes. This is more money left on the table. To improve, learn from the past; failures and successes must be closely examined to improve future success.

A smart project uses lessons learned to eliminate and reduce requirements that are unnecessary (e.g., proven by less frequent or impactful NCRs, to be a lower risk) and increase or begin requirements that are necessary (e.g., proven by more frequent or impactful NCRs, to be a higher risk).

While tempting, a smart project does not simply copy-paste the last project’s SQS plans. For example, inspection or quality surveillance (QS) levels may be adjusted down or up as appropriate. If money spent on third party inspection is unnecessary or lacks added value, the QS level may be reduced.

Likewise, if a product or supplier frequently causes unnecessary costs and disruptions that drain project resources, the QS level may be increased.

3 A Real-world Example: Joe Blow’s Mechanical Devices International

A smart project addresses the challenge of a problematic supplier (a supplier that consistently makes too many mistakes and delivers products late) by enforcing strict expediting protocols (close and frequent monitoring) and covertly padding the delivery schedule.

3.1 Challenge

Almost 25 years ago, yours truly first began project work as an SQS coordinator with an engineering and procurement (EP) company (April 1998). My very first activity on my first day was to attend a meeting about a problematic supplier (name withheld), who I will call Joe Blow’s Mechanical Devices International (JBMDI). JBMDI consistently made too many mistakes and delivered products late. But they produce engineered equipment that is irreplaceable and unique from a complex and world-wide supply chain. I learned then, how a project may be forced to procure products from a difficult supplier like JBMDI.

Almost 25 years later (November 2021), JBMDI is still in business and widely-known as consistently making too many mistakes and delivering products late. Industry needs their products, so what can be done to mitigate challenges when JBMDI’s products must be purchased?

Are JBMDI mistakes and additional costs big or small? Are the delays simply challenging for the project team or do their late deliveries have ripple effects that impact other suppliers and construction by delaying their schedules?

So many questions. But who knows?

Have any NCRs been produced with metrics to offer lessons learned and a basis for informed decision making? Unfortunately, this is highly unlikely.

Because industry needs their products, JBMDI does not need to rely on continuous improvement or an efficient organization for their success. Industry must instead suffer because there is no other supplier that produces what JBMDI produces.

3.2 Solution

A smart project employs methods such as these to manage a difficult supplier:

Applies strict expediting protocols by monitoring the supplier closely and frequently, and follows-up for every deliverable – from the beginning to completion of every PO; and,
Covertly increases (or pads) their delivery schedule (e.g., by adding two to four months).

A smart project pads the schedule instead of relying on delivery just in time or just before the facility is scheduled to start-up when the supplier is notoriously late and problematic.

A smart project analyzes and uses data about past failures and successes; it does not rely on decades of anecdotes or tribal knowledge (see Section 2.3.2).

Don’t be like Joe Blow. And don’t just be a project. Be a smart project.

4 Conclusion

NCRs are the bain of any project because costly non conformances can and will happen. A smart project’s top priority is to ensure that NCRs are properly closed out ASAP, while ensuring minimal impact to budgets and schedules. A smart project provides personnel with efficient work processes and effective resources that save money and time every day. The need for proper detailed instructions and procedures cannot be understated (learn about KT Project products and services here).

NCRs can also be a boon to any project because non conformance data may provide invaluable BI about failures and successes. A smart project analyzes data and uses lessons learned for continuous improvement, for competitive advantage, and to earn money and generate success every day.

An NCR may cost hundreds or thousands of dollars, or much more. Without data about costs (even if estimated) and outcomes for each, a project has no understanding of the impacts or total cost of its NCRs. Reducing these costs is a boon to any organization in the form of significant savings.

The opportunity cost is something that BD personnel can estimate with bids for new projects that are won or lost. The value of a project may be millions or billions of dollars. Winning new projects is an even greater boon to any organization in the form of significant future earnings.

There is always reduced profit with inefficient work processes because of wasted resources. By managing NCRs correctly and efficiently, smart projects save money and time recurringly – every day.

And that is how NCRs can be a boon to any project. Take all the money. And leave no money on the table.

5 Figures

Financial Post. Are You Leaving This Money on the Table?. https://smartcdn.prod.postmedia.digital/financialpost/wp-content/uploads/2021/11/vw1110inflation.jpg

6 References

How Stuff Works. How https://people.howstuffworks.com/murphys-law.htm
Project Management Institute, Inc. (PMI). A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 6th Edition. https://www.pmi.org/pmbok-guide-standards/foundational/pmbok
Association for Supply Chain Management (ASCM). Operations Management Body of Knowledge (OMBOK) Framework, 3rd Edition. http://www.apics.org/apics-for-individuals/apics-magazine-home/resources/ombok
Supply Chain Canada (SCC). The Competencies of Canadian Supply Chain Professionals, 1st Edition. https://www.supplychaincanada.com/media/reports/Supply-Chain-Canada-Competencies-Framework.pdf
American Society for Quality (ASQ). The Supplier Quality Professional Handbook. https://www.amazon.ca/Certified-Supplier-Quality-Professional-Handbook/dp/0873899431
KT Project. KTP-SQS-009, Procedure for Processing Supplier NCRs. www.ktproject.ca
Roy O. Christensen. SQS and Technology: Adapt or Perish!. https://ktproject.ca/sqs-and-technology-adapt-or-perish/
Peter F. Drucker. Management, Tasks, Responsibilities, and Practices. New York : Harper & Row, 1973.

7 Read More

To learn more about project success, read other articles written by Roy O. Christensen here: www.ktproject.ca/articles.

7.1 About the Author

Roy O. Christensen founded the KT Project to save organizations significant money and time by providing key resources to leverage expert knowledge transfer for successful project execution.

7.2 Contact

Roy O. Christensen
Email: [email protected]
Telephone: +1 403 703-2686

7.3 Notes

This article was published by the Oilman magazine on 17-Jun-23: https://oilmanmagazine.com/processing-supplier-non-conformance-reports-are-you-leaving-money-on-the-table/