Promoting quality, controlling costs - purchasing and materials management - includes related article

Railway Age, June, 1993 by Gus Welty

One of the biggest mistakes any railroad can make is to regard its purchasing and materials management department as a cost center populated by paper shufflers.

In the proper hands, a P&MM department can be a savings center. It's also the place where "quality" takes place, in terms of making sure that what's purchased is up to specification. P&MM is the place where almost $2 billion in purchases take place each year for materials and supplies. P&MM is also the place where another $2 billion in the purchase of diesel fuel takes place. And, P&MM is the place where problems get handled and solved, between railroad and vendor. And there are problems.

* "Quality" confusion. The process of the whole "quality" certification thing is one problem not yet fully understood by suppliers trying to meet the standards, or what they believe to be the standards. There is some confusion as to how "quality" audits are done and what they're supposed to mean.

A supplier is angry, because he's spending a lot of money for an auditor sent by the Association of American Railroads, and the auditor spends two days sitting at a table, going over papers, never once going out into the shop--which is maybe 30 feet away--to see what's actually going on in terms of producing the product.

The supplier's point may be well taken--especially since he says he asked the AAR agent if he really understood. He says he got a less-than-reassuring reply.

The "quality" program, as regards vendors, simply may have too many players playing.

There is the National Association of Purchasing Management-Rail Industry Group, plus the AAR, plus individual companies. There is AAR M-I003, Chapter 2. There are individual companies' specific standards for product quality, which may go beyond those of AAR and/or NAPM-RIG. There are the ISO standards, and there are consultants out there who are telling people that if they aren't up to ISO, then they aren't going to make it.

That, at this point, seems to be overkill. The ISO quality standards being promoted tend to be generic, while the standards in the rail industry are considerably more specific.

There seems to be a lack of understanding that the AAR program deals more with the process than with the individual product. The audit has to do not specifically with the product that comes out the door, but with the processes of its manufacture. Therefore confusion, and sometimes anger.

One railroad's chief purchasing officer, a major player in the development of the NAPM-RIG quality program, sighs. "It's had a rocky start," he says. That's why a new publication has been in preparation that will try to better explain what the process is all about.

Presumably, it will say that there's a presumption that if the processes pass muster, the product should--but that product inspection is still up to the buyer. This makes sense, since different buyers may have different requirements for what essentially is the same product.

The AAR program, dealing only with freight car components and tank cars, is safety-oriented and dates to 1982-83 and development of the M-I003 specification for quality assurance, although the first M-I003 audit wasn't conducted until 1986.

Essentially, there are two audit levels: certification/recertification and compliance. Initial certification covers about 20 quality criteria and is good for three years, subject to annual compliance audits that generally are limited to about four factors plus resolution of any past unresolved problems.

What happens if a company fails to win certification? There is a 12-month certification window, and the supplier is given ample opportunity, the AAR says, to make the fix or fixes needed in order to be in compliance. But if, when the window closes, the supplier still falls short, the AAR program--because of the safety factors involved--has teeth in it. The supplier is precluded from selling his product for use in interchange service.

Currently, the AAR covers six product groups; new and reconditioned products are included in each:

--Group A: Journal roller beatings.

--Group B: Truck side frames and bolsters, couplers, yokes, knuckles, truck springs, draft sills, and center plates.

--Group C: Draft gears and cushioning devices.

--Group D: Wheels, axles, and roller beating mountings.

--Group E: Brake beams, air brake valves, rubber products, empty/load devices, and brake hose assemblies.

--Group F: Tank car fabrication, repair, alteration, conversion, and assembly.

The NAPM-RIG program is broader in the sense that it covers a wider product area, including roadway and track and signaling and communications vendors. But, NAPM-RIG audits are voluntary, whereas if a supplier wants to sell products covered by the AAR program, it must have certification.

As to how the actual audit is conducted, the AAR doesn't defend an auditor who spends all his time on paperwork and who doesn't look around. At the same time, the AAR stresses that its agents have to verify that a vendor's Quality manual conforms to AAR standards; and that the company is really doing what is set forth in its manual. And this kind of verification has to be based in large part on objective, hardcopy evidence (i.e. paperwork).