Supplier Development and Continuous Improvement

Introduction

Supplier development is the deliberate effort by a buying organization and its suppliers to improve the supplier’s capabilities, performance, resilience, and contribution to shared value. It extends beyond monitoring supplier performance. Monitoring identifies whether requirements are being met; development addresses why performance is inadequate and builds the capabilities required for sustained improvement.

In contemporary supply networks, supplier development is strategically important because many organizations outsource design, manufacturing, logistics, software, maintenance, and critical services. A focal firm may therefore be accountable to customers for outcomes that depend on processes it does not directly control. Supplier development provides a structured response to this interdependence. It combines diagnosis, relationship management, quality engineering, operations improvement, capability building, and governance.

The central managerial challenge is to distinguish a supplier that is unwilling to perform from one that is willing but unable. The first may require commercial or contractual action; the second requires development, investment, technical assistance, or redesign of the relationship. Effective development also avoids creating dependency, transferring unreasonable costs to smaller suppliers, or using audits as punitive inspections rather than learning mechanisms.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. Diagnose supplier capability gaps using audits, performance data, process analysis, and risk assessment.
2. Design corrective and preventive actions that address root causes rather than symptoms.
3. Apply Lean, Six Sigma, quality-management, and process-improvement principles in supplier development.
4. Select appropriate supplier-development interventions and governance mechanisms.
5. Evaluate supplier capability using appropriate quality, delivery, cost, resilience, and sustainability measures.
6. Construct a joint value-realization plan with measurable benefits, responsibilities, and controls.
7. Critically assess the ethical, contractual, technological, and organizational limits of supplier development.

1. The Logic and Scope of Supplier Development

Supplier development can be understood as a cycle of capability improvement:

Assess → Prioritize → Diagnose → Improve → Verify → Institutionalize → Reassess

The cycle operates at several levels:

• Strategic level: network design, technology road maps, innovation, resilience, and long-term sourcing strategy.
• Process level: quality systems, production flow, planning, maintenance, engineering change, and logistics.
• People level: skills, leadership, problem-solving competence, and cross-organizational learning.
• Relationship level: communication, governance, incentives, information sharing, and trust.

Supplier development is most effective when it is treated as a joint operating system rather than a buyer-led inspection program. The supplier owns its processes and remains responsible for meeting agreed requirements. The buyer contributes knowledge, data, resources, access to experts, and sometimes investment, but should not remove supplier accountability.

Supplier development versus supplier selection and evaluation

Supplier selection answers the question, “Which supplier should we use?” Supplier evaluation asks, “How is the supplier performing?” Supplier development asks, “What capability must be built, and how can both parties build it?” These activities are connected but not interchangeable.

A supplier with low current performance may still be strategically valuable if it possesses scarce technology, strong improvement potential, or geographic importance. Conversely, a supplier with acceptable current performance may present unacceptable future risk because of obsolete equipment, weak succession planning, poor cybersecurity, or insufficient financial capacity.

Typical development triggers

Common triggers include:

• recurring defects or customer complaints;
• late or incomplete deliveries;
• excessive variation in lead time or process output;
• inability to support new products or volume changes;
• weak traceability or documentation;
• capacity, financial, cyber, environmental, or geopolitical risk;
• high total cost despite a low purchase price;
• dependence on a single source;
• opportunities for innovation, automation, or sustainability improvement.

2. Diagnosing Supplier Capability Gaps

A capability gap is the difference between required performance and demonstrated capability. Diagnosis should be evidence-based and should separate symptoms from causes. A delivery shortfall, for example, may result from poor production scheduling, inaccurate inventory records, unreliable equipment, late customer forecasts, inadequate supplier capacity, or conflicting commercial incentives.

2.1 Capability dimensions

A multidimensional assessment commonly includes:

A mature assessment distinguishes conformance capability—the ability to meet current requirements—from development capability—the ability to learn, adapt, and improve.

2.2 Evidence sources

No single source is sufficient. Useful evidence includes supplier scorecards, process audits, product audits, first-pass yield, nonconformance records, delivery history, capacity studies, maintenance records, employee qualification records, financial data, customer complaints, and interviews with operators and managers. Direct observation is especially valuable because documented procedures may not reflect actual work.

An audit should be planned around risk. High-risk processes deserve deeper examination than low-risk administrative activities. Audit evidence should be sampled, traceable, and reproducible. Auditors should distinguish an isolated incident from a systemic weakness and should record objective evidence rather than unsupported judgments.

2.3 Prioritizing gaps

A practical prioritization model considers impact, urgency, likelihood, and influenceability. A risk-priority score may be used as a screening device:

Here, S is severity, O is occurrence likelihood, and D is difficulty of detection, usually scored on an agreed ordinal scale. The product is not a probability and should not be interpreted as one. It is useful for ranking items only when the scoring criteria are consistently defined. Organizations should not rely on RPN mechanically; a low-frequency event with catastrophic consequences may warrant immediate action even if its numerical score is modest.

Where quantitative data are available, prioritization should use actual defect rates, downtime, financial exposure, safety impact, or customer risk rather than subjective scores alone.

3. Audits as Learning and Control Mechanisms

A supplier audit evaluates whether a supplier’s management system and operating processes can reliably produce required outcomes. Different audits answer different questions:

• System audit: Is the management system designed and implemented effectively?
• Process audit: Is a particular process controlled and capable?
• Product audit: Does the output conform to specified requirements?
• Special audit: Is a focused issue—such as cybersecurity, sustainability, or business continuity—adequately controlled?

An effective audit has four stages:

1. Preparation: define scope, criteria, team, evidence, sampling, and confidentiality arrangements.
2. Execution: interview, observe, examine records, trace materials, and test controls.
3. Reporting: classify findings, identify objective evidence, and communicate risk.
4. Follow-up: approve corrective actions, verify implementation, and test effectiveness.

Audits become counterproductive when they are excessively bureaucratic, duplicate customer requirements, or reward the appearance of compliance. A finding should explain the requirement, the objective evidence, the risk, and the expected response. Corrective-action closure should require evidence that the cause was addressed and that recurrence has been prevented.

4. Corrective Action and Root-Cause Analysis

A correction addresses an observed problem; corrective action addresses its cause; preventive action reduces the likelihood of a potential problem. For example, replacing defective components is a correction. Revising a process control that allowed the wrong component to be installed is corrective action.

4.1 The problem-solving sequence

A disciplined sequence is:

1. Define the problem in measurable terms.
2. Contain immediate risk to the customer and downstream operations.
3. Establish facts using data and process observation.
4. Identify potential causes.
5. Verify root causes with evidence.
6. Select and implement countermeasures.
7. Verify effectiveness over an appropriate period.
8. Standardize the improved method and share the learning.

Useful tools include the five-whys method, fishbone diagrams, process mapping, Pareto analysis, fault-tree analysis, and failure mode and effects analysis. These are aids to reasoning, not substitutes for evidence. Asking “why?” repeatedly can produce a superficial answer if the team stops at a person’s mistake rather than examining training, workload, interface design, incentives, or process controls.

4.2 Measurement of quality capability

For a stable process with approximately normal output, process capability can be summarized by:

USL and LSL are the upper and lower specification limits, μ is the process mean, and σ is the within-process standard deviation. The six-sigma spread is a convention for the central process spread under the stated assumptions. C_p measures potential capability if the process is centered; C_pk also accounts for displacement from the target or specification center.

These indices are meaningful only when the measurement system is adequate, the process is statistically stable, the data are representative, and the distributional assumptions are reasonable. A capable but unstable process is not reliably capable. For non-normal data, alternative percentile-based or distribution-specific methods may be required.

Worked example. A shaft specification is 9.90–10.10 mm. A stable process has mean 10.02 mm and within-process standard deviation 0.02 mm.

The process has greater potential than demonstrated capability because it is off-center toward the upper specification limit. The appropriate development response is not simply tighter inspection; it is to investigate centering and maintain control of variation.

5. Lean Supplier Development

Lean focuses on creating customer value with less waste and more reliable flow. In supplier development, Lean is not merely a set of tools but a management philosophy involving respect for people, direct observation, standardized work, problem visibility, and continuous improvement.

The classic waste categories are defects, overproduction, waiting, unused talent, transportation, inventory, motion, and extra processing. Supplier applications include reducing batch sizes, improving material presentation, balancing work, shortening changeovers, removing duplicate approvals, and stabilizing schedules.

Important methods include:

• Value-stream mapping: visualizes material and information flow and identifies waiting and inventory.
• 5S: organizes and sustains the workplace; it is not a substitute for process control.
• Standardized work: defines the current best-known method, sequence, timing, and work-in-process conditions.
• Set-up reduction: separates internal from external changeover activities and simplifies adjustments.
• Visual management: makes abnormal conditions visible and accelerates response.
• Total productive maintenance: improves equipment availability through operator involvement, planned maintenance, and loss analysis.

Lean interventions should be linked to customer outcomes. Removing inventory without improving process stability may increase shortages. Reducing inspection without improving capability may increase escapes. Lean therefore must be integrated with quality and risk management.

6. Six Sigma and Data-Based Improvement

Six Sigma emphasizes reduction of variation and defects through structured, evidence-based problem solving. The DMAIC sequence—Define, Measure, Analyze, Improve, Control—is appropriate for improving an existing process. Design for Six Sigma is more appropriate when creating a new product or process.

A supplier-development team may use:

• operational definitions for defects and measurement methods;
• measurement-system analysis to determine whether data are trustworthy;
• control charts to distinguish common-cause from special-cause variation;
• designed experiments when several factors may affect output;
• regression or analysis of variance when relationships need to be tested;
• control plans to sustain gains.

A process capability index should not be used to conceal poor data quality. Before calculating capability, the team should confirm that the measurement system is suitable and that the process is stable. Control limits are calculated from process data and are not the same as customer specification limits. Specification limits express customer requirements; control limits describe observed process behavior.

7. Quality Management and Process Governance

Supplier development is grounded in quality-management principles: customer focus, leadership, engagement of people, process approach, improvement, evidence-based decision-making, and relationship management. These principles support standards such as ISO 9001, sector-specific quality systems, and product or regulatory requirements, but certification alone is not proof of effective operational control.

A process approach defines inputs, activities, outputs, owners, measures, risks, interfaces, and feedback. For a supplier process, governance should specify:

• technical and commercial requirements;
• acceptance criteria and change-control rules;
• ownership of data and records;
• escalation thresholds and response times;
• audit rights and confidentiality;
• intellectual-property protection;
• responsibilities for validation, training, and requalification;
• conditions for corrective-action closure.

Quality agreements should complement, not contradict, the purchasing contract. Ambiguous requirements create disputes and encourage inspection-based behavior. Requirements should be measurable, feasible, and aligned with the actual use of the product or service.

8. Designing a Supplier-Development Intervention

The appropriate intervention depends on the gap, the supplier’s willingness and ability, the strategic importance of the supplier, and the expected value. A useful intervention portfolio includes:

Development should be proportional to risk. A routine supplier may need a focused corrective-action review; a strategic supplier may require a multi-year capability road map. The buyer should establish a joint charter specifying the problem, baseline, target, work packages, owners, resources, milestones, and decision rights.

Joint value-realization plans

A value-realization plan converts improvement into verified business outcomes. It should include:

1. Baseline: current defect, delivery, cost, lead-time, or risk performance.
2. Target: measurable future state and time horizon.
3. Mechanism: how the intervention creates value.
4. Owner: accountable person at each organization.
5. Investment: labor, equipment, training, data, and cash requirements.
6. Benefit measurement: agreed calculation method and data source.
7. Allocation: how benefits and costs are shared.
8. Control: how gains will be sustained.

For example, annual quality cost may be estimated as:

This is a classification identity for cost-of-poor-quality analysis. The categories must be defined to avoid double counting. Prevention and appraisal are often called conformance costs, while internal and external failure are nonconformance costs. A reduction in inspection cost is not necessarily a real benefit if defects increase.

A credible benefit calculation should state the baseline, volume, unit cost, time period, and whether the benefit is cash-releasing, capacity-releasing, risk-reducing, or merely cost-avoidance. Procurement should not claim the same benefit as operations, quality, and finance.

9. Governance, Motivation, and Relationship Dynamics

Supplier development is influenced by power, dependence, trust, and fairness. A buyer with substantial purchasing power may obtain rapid compliance but can also suppress honest reporting. Suppliers may hide problems if disclosure threatens future business. Psychological safety and non-punitive escalation are therefore operational assets, while deliberate concealment remains unacceptable.

Governance mechanisms may include executive steering committees, operational improvement teams, monthly performance reviews, shared dashboards, escalation paths, and periodic value reviews. The level of governance should match risk and complexity. Excessive meetings can consume supplier capacity without improving performance.

Incentives should reinforce the desired behavior. Possible mechanisms include longer-term commitments, preferred-supplier status, gain-sharing, development funding, joint intellectual-property arrangements, and recognition. Gain-sharing requires a transparent baseline and an agreed treatment of volume, mix, inflation, currency, and quality effects. Otherwise, the parties may dispute whether an apparent saving is genuine.

10. Technology, Data, and AI

Digital tools can improve supplier development by connecting quality records, production data, maintenance information, logistics events, and audit findings. Supplier portals can support corrective-action workflows; statistical-process-control software can provide earlier warning; digital twins can test process alternatives; and predictive-maintenance models can identify conditions associated with failure.

Artificial intelligence may assist in classifying nonconformances, detecting patterns in text-based audit findings, forecasting late deliveries, or prioritizing suppliers for review. However, AI outputs are decision support, not automatically valid conclusions. Risks include biased historical data, false alarms, leakage of confidential information, cyberattack, opaque recommendations, and accountability gaps. Human review, access controls, model validation, audit trails, and supplier consent are essential.

Data governance should address ownership, permitted use, retention, interoperability, cybersecurity, and the right to challenge an automated assessment. A supplier should not be downgraded solely because a model inferred risk from incomplete or systematically biased data.

11. Ethics, Sustainability, and Regulation

Supplier development has ethical dimensions. A buyer may demand higher quality, faster delivery, lower cost, and better environmental performance simultaneously while refusing to provide realistic prices or lead times. Such pressure can cause excessive overtime, unsafe work, falsification of records, or environmental shortcuts. Responsible development aligns requirements with feasible operating conditions and monitors actual outcomes.

Important governance practices include:

• prohibition of forced labor, child labor, bribery, and retaliation;
• safe working conditions and respect for freedom of association;
• environmental compliance and transparent emissions data;
• responsible sourcing of minerals and other sensitive materials;
• protection of confidential information and personal data;
• due process when suppliers are suspended or terminated;
• remediation where harm has occurred rather than relying only on exclusion.

Audits must be culturally aware and should not mistake local communication styles for lack of capability. Social-audit reports can also be unreliable when workers fear retaliation or when audits are announced in advance. Worker voice, grievance mechanisms, and independent verification may be necessary.

12. Illustrative Case: Developing a Precision-Components Supplier

Background

The following is a fictional illustrative case. Orion Mobility purchases precision-machined housings from Delta Components, a strategically important supplier. Delta has strong engineering knowledge and competitive prices but has experienced a first-pass yield of 91%, late deliveries on 18% of orders, and repeated customer complaints about dimensional variation.

Problem

Orion initially proposed increasing incoming inspection. Delta argued that inspection would not solve the underlying issue and requested technical support. The supplier relationship was becoming adversarial, and both parties lacked a common baseline.

Analysis

A joint team mapped the value stream and reviewed twelve weeks of data. It found that measurement methods differed between shifts, tool changes were triggered by operator judgment, preventive maintenance was largely calendar-based, and the production schedule changed frequently. A gauge study showed that measurement variation was material relative to the component tolerance. The team therefore concluded that reported process capability could not yet be trusted.

A containment plan protected Orion’s production while the team corrected the measurement system. After calibration, standardized measurement instructions, and operator training, the team collected stable data. The principal causes of dimensional variation were tool wear and inconsistent offset-setting practices. Late delivery was associated with unplanned machine downtime and schedule changes communicated with insufficient notice.

Approach and solution

The parties created a six-month value-realization plan. Delta owned standardized work, tool-life monitoring, and preventive-maintenance improvements. Orion provided engineering support, a clearer frozen schedule, and training in statistical process control. The plan included weekly operational reviews and a monthly executive review.

The team introduced a control plan, verified gauges, a tool-change trigger based on measured wear, daily equipment checks, and a formal engineering-change process. Orion also revised its forecasting process and separated genuine demand changes from avoidable schedule noise.

Outcome

After six months, first-pass yield increased from 91% to 97%, late deliveries fell from 18% to 6%, and emergency freight declined. The parties verified benefits using agreed shipment, quality, and freight records. They did not claim all improvement as procurement savings: some benefits were capacity released at Delta, some were avoided disruption at Orion, and some were customer-risk reduction. The improved process was sustained through audits, control-chart review, refresher training, and quarterly capability reassessment.

Learning points

1. Incoming inspection was a containment measure, not a development solution.
2. Measurement-system adequacy had to be established before capability indices were interpreted.
3. Supplier performance was jointly influenced by supplier processes and buyer scheduling behavior.
4. Improvement required both technical controls and relationship governance.
5. Benefits were credible because the baseline, calculation method, owners, and verification rules were agreed in advance.

13. Challenges and Limitations

Supplier development can fail for several reasons. The buyer may diagnose the wrong problem, impose a preferred tool without understanding the supplier’s context, or demand improvement without sharing relevant forecasts and design information. The supplier may lack financial capacity, leadership commitment, or skilled personnel. Improvements may also decay when a champion leaves, demand changes, or commercial incentives reward local optimization.

There are also strategic limits. Development is not always economical for a low-value supplier, and not every capability gap can be closed within the required time. A supplier may be fundamentally incompatible with the required technology or ethical standards. In such cases, qualification of alternatives, redesign, insourcing, or controlled exit may be more appropriate.

Measurement can create unintended behavior. If buyers reward only on-time delivery, suppliers may build inventory or ship incomplete orders. If they reward defect rates without considering inspection intensity, suppliers may over-inspect. Balanced scorecards should therefore combine outcome, process, risk, and learning measures.

Best-Practice Principles

1. Begin with customer and risk requirements, not with fashionable tools.
2. Use multiple evidence sources and validate the measurement system.
3. Separate containment, correction, corrective action, and prevention.
4. Address process design and management conditions, not only operator behavior.
5. Match development effort to strategic importance and risk.
6. Make responsibilities, investment, benefits, and data rights explicit.
7. Integrate Lean, Six Sigma, quality management, and resilience rather than applying them in isolation.
8. Verify both implementation and effectiveness.
9. Protect suppliers that raise problems in good faith while addressing concealment or negligence firmly.
10. Institutionalize successful practices through standards, training, audits, and leadership routines.

Chapter Summary

Supplier development is a structured, collaborative approach to closing supplier capability gaps and improving network performance. It begins with evidence-based diagnosis across quality, delivery, cost, technology, management systems, resilience, sustainability, and innovation. Audits are most valuable when they generate learning and lead to verified corrective action rather than merely documenting nonconformance.

Root-cause analysis distinguishes symptoms from systemic causes. Lean improves flow and removes waste; Six Sigma reduces variation through data; quality management provides process governance; and joint value-realization plans connect improvement activities to verified benefits. Capability indices such as C_p and C_pk are useful only when measurement systems are adequate and processes are stable.

Effective development requires appropriate governance, incentives, ethical conduct, data discipline, and shared accountability. Technology and AI can strengthen diagnosis and monitoring but require validation, cybersecurity, transparency, and human judgment. The ultimate test is not whether a supplier passes an audit, but whether the improved capability is sustained and creates reliable value for customers, suppliers, and the wider supply network.

Key Terms

Capability gap: Difference between required performance and demonstrated supplier capability.

Corrective action: Action that removes the cause of a detected nonconformity.

Correction: Immediate action that resolves an observed problem without necessarily removing its cause.

Corrective and preventive action: A structured system for addressing existing and potential nonconformities.

Process audit: Examination of whether a process is controlled and capable of producing required outputs.

Product audit: Examination of whether a product conforms to specified requirements.

Root cause: Underlying condition whose removal prevents recurrence of a problem.

Lean: Management approach focused on customer value, flow, waste reduction, and continuous improvement.

Six Sigma: Data-based approach for reducing process variation and defects.

DMAIC: Define, Measure, Analyze, Improve, and Control improvement cycle.

Standardized work: Documented current best-known method for performing a task.

Control plan: Document specifying process controls, measures, reactions, and responsibilities.

Process capability: Ability of a stable process to produce output within specification limits.

Cₚ: Potential capability index based on specification width and process variation.

Cₚₖ: Capability index that also considers process centering.

Cost of poor quality: Costs associated with prevention, appraisal, and internal or external failure as defined by the organization.

Value realization: Verification that an improvement produced an agreed operational, financial, risk, or customer benefit.

Supplier resilience: Ability to continue, recover, and adapt under disruption.

Measurement-system analysis: Evaluation of whether a measurement process is sufficiently accurate and precise for its intended use.

Review Questions

Short Answer Questions

1. How does supplier development differ from supplier evaluation?
2. What is the difference between correction and corrective action?
3. Name four types of evidence used in supplier capability diagnosis.
4. Why must measurement-system adequacy be considered before calculating capability indices?
5. What elements should a joint value-realization plan contain?

Long Answer Questions

1. Explain how Lean and Six Sigma can be integrated in a supplier-development program. Discuss the risks of applying either approach in isolation.
2. Describe the stages of a risk-based supplier audit and explain how audit findings should be converted into sustained improvement.
3. Critically evaluate the use of C_p and C_pk as measures of supplier capability, including their assumptions and limitations.
4. Discuss how buyer behavior, including forecasting and scheduling, can contribute to supplier performance problems.
5. Explain the ethical and governance responsibilities of a buyer undertaking supplier development in a global supply network.

Analytical / Application Questions

1. A supplier reports high process capability, but customer complaints continue. Design an investigation that tests the measurement system, process stability, data representativeness, and customer-use conditions.
2. A strategic supplier has excellent technical capability but persistent late deliveries caused by equipment downtime and volatile buyer schedules. Develop a six-month joint development plan with metrics, owners, governance, and benefit-verification rules.
3. A buyer is considering replacing a supplier after repeated defects. Construct a decision framework comparing further development, dual sourcing, redesign, and supplier exit, incorporating cost, risk, resilience, ethics, and time-to-recovery.

Multiple Choice Questions with Answers

Question 1

Which statement best distinguishes supplier development from supplier evaluation?

A. Supplier development identifies suppliers, while evaluation negotiates contracts.

B. Supplier development builds capability, while evaluation assesses performance.

C. Supplier development is limited to price reduction, while evaluation concerns quality.

D. Supplier development replaces supplier audits, while evaluation replaces contracts.

Correct Answer: B. Supplier development builds capability, while evaluation assesses performance.

Question 2

Which audit primarily examines whether a particular operating process is controlled and capable?

A. System audit

B. Process audit

C. Product audit

D. Financial audit

Correct Answer: B. Process audit

Question 3

A correction differs from corrective action because a correction:

A. Always eliminates the systemic cause

B. Addresses an observed problem without necessarily removing its cause

C. Can only be performed by the buyer

D. Is used only for preventive risks

Correct Answer: B. Addresses an observed problem without necessarily removing its cause

Question 4

For a stable, approximately normal process, which expression represents C_pk?

A. (USL − LSL) ÷ (6σ)

B. (USL + LSL) ÷ (6σ)

C. min[(USL − μ) ÷ (3σ), (μ − LSL) ÷ (3σ)]

D. (μ − Target) ÷ σ

Correct Answer: C. min[(USL − μ) ÷ (3σ), (μ − LSL) ÷ (3σ)]

Question 5

A process has USL = 10.10, LSL = 9.90, and σ = 0.02. What is its C_p?

A. 0.83

B. 1.33

C. 1.67

D. 2.50

Correct Answer: C. 1.67

Question 6

Which condition is necessary for capability indices to be meaningfully interpreted?

A. The process must be completely inspection-free

B. The process should be statistically stable and measured adequately

C. The specification limits must equal the control limits

D. The process mean must always equal zero

Correct Answer: B. The process should be statistically stable and measured adequately

Question 7

Which activity is most characteristic of Lean supplier development?

A. Increasing batch sizes regardless of demand

B. Making waste and abnormal conditions visible while improving flow

C. Replacing all process controls with final inspection

D. Optimizing supplier price without examining operations

Correct Answer: B. Making waste and abnormal conditions visible while improving flow

Question 8

What is the primary purpose of a joint value-realization plan?

A. To transfer all improvement costs to the supplier

B. To document agreed baselines, targets, responsibilities, and verified benefits

C. To eliminate the need for supplier contracts

D. To rank suppliers solely by purchase price

Correct Answer: B. To document agreed baselines, targets, responsibilities, and verified benefits

Question 9

Why should incoming inspection not be treated automatically as a supplier-development solution?

A. Inspection can contain defects but does not necessarily remove their process causes

B. Inspection always increases process capability

C. Inspection is unrelated to customer requirements

D. Inspection can only be used for service suppliers

Correct Answer: A. Inspection can contain defects but does not necessarily remove their process causes

Question 10

Which is an appropriate governance practice when using AI in supplier-risk assessment?

A. Accept model outputs without human review

B. Hide the model’s use from suppliers

C. Use validation, access controls, audit trails, and human accountability

D. Replace all supplier performance data with historical averages

Correct Answer: C. Use validation, access controls, audit trails, and human accountability