Step-by-step Approach to Supplier Chain Management
Supplier chain is an integral factor in the success of your importing business. They can work like a well-oiled machine, where confidence levels are high, and the quality and delivery of products and services from your suppliers exceeds your expectations.
Or they can become a burden to bear, swallow up precious resources and cost your business thousands of dollars in administration and performance management. Like most importers, you probably find yourself in a situation somewhere between these two extremes.
But there’s hope when it comes to finding and developing great supplier relationships. Stick to this step-by-step approach, you’ll be reaping the rewards of supplier chain management.
1). Supplier selection
Choosing suppliers is crucial to your business. And categorizing your supply base is also vital to making the most of your available resources when managing those suppliers.
Importers often consider various criteria for evaluating potential suppliers when beginning their search, such as:
A. Minimum order quantity (MOQ): smaller purchasers or those with a limited budget, in particular, will be sensitive to the minimum order size a supplier requires.
B. Payment terms: importers large and small may consider payment terms an important factor in choosing a supplier.
C. Certifications: common certifications like ISO 9001 may be valuable to you. But remember that certifications may not always be legitimate and are best verified through an on-site audit.
D. Production capabilities and capacity: an obvious point but one that many importers don’t know how to verify. Requesting and approving a pre-production sample and performing an on-site audit are among the most reliable ways.
2). Developing an approved suppliers list
We often find that a company’s supply base invariably expands over time. Indeed, taking advantage of the “risk management” option of a “second source supply” is a very prudent business strategy.
However, it is occasionally a good practice to review your supply base and consolidate the number of suppliers you have to manage, which is an expense in itself.
3). Auditing suppliers
As with most audits, supplier audits represent a snapshot in time. Lots of information can be collected by this method, and it is indeed a mandatory requirement for most quality management systems. There are two main types of supplier audits:
A. Questionnaire-type supplier audits
B. On-site supplier audits
Performing your own informal audit during a supplier visit. One way is to audit your supplier informally while you’re visiting their facility. You can get a lot of valuable insight just from having a look around the production area, warehouse and other grounds.
4). Measuring supplier performance
You can easily measure supplier performance if your systems support making the data readily available. And KPIs will become a very powerful tool if used correctly. Supplier KPIs are a good measure of overall supplier performance, such as: on-time delivery rate, defect rate, response time, etc.
5). Supplier chain management
Once the development stage has matured to an acceptable level, it’s time to tailor on-going management to the needs of each supplier.
Sourcing to find the right suppliers is one of the most important functions of manufacturing. Your suppliers have a direct impact on the quality of your product or service. "Fighting fires" later in the process is costly, wasteful and invariably leads to customer dissatisfaction—in one form or another—and loss of revenue.
Begin by choosing the suppliers that best match your criteria. Compile your suppliers into a categorized list for ease of organization. Audit each supplier, either by phoning them and asking important questions, or better still, visiting them in person to perform a more comprehensive audit on site.
Measure the performance of your suppliers, and evaluate each objectively, by looking at their KPIs. Work with your suppliers directly to cultivate a strong relationship and improve quality. By taking all of the steps above, you can make informed decisions about which makes the cut and which needs further development.
Invest the time in your suppliers, maintain good lines of communication, speak to the right people and avoid confusion. Suppliers are an essential key to your success. And the ones you choose to work with can either make or break you.