Supplier: from Selection to Management

For global sourcing business, working with suitable suppliers is the key to success. The followings are some tips I’ve learned from my 20-year business in import & export industry.

 

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.

 

You would ideally want all of your suppliers to be performing at a high level. However, companies may have large supplier lists stretching into the thousands with some naturally more critical to quality than others. Selection should be the first priority for active supplier development management.

Importers and purchasers often consider various criteria for evaluating potential suppliers when beginning their search.

 

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.

 

Every business should make use of their approved supplier list and measure the performance of each with regard to cost, quality and delivery at a minimum. As mentioned above, listing your suppliers by category will make this a more efficient and value-added initiative.

 

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 (QMS). There are two main types of supplier audits:

 

(1) Questionnaire-type supplier audits

Most sourcing professionals are familiar with the questionnaire, or phone call audit. It’s an initial step that often saves time by helping you vet suppliers quickly.

 

Questionnaires are effective at collecting basic factual data about an organization, rather than determining how effective and efficient their processes are.

 

(2) On-site supplier audits

On-site auditing would, of course, provide you all of the information from a questionnaire-based audit and much more.

 

Though you can get information efficiently with a questionnaire-type audit, its main limitation is that such information is unverified. You’ll likely be relying on a sales representative from the supplier, who may simply be telling you what they think you want to hear. You’re also limited in the scope of information you can gather from a simple, questionnaire-type audit. An on-site supplier audit is typically the best way to get more in-depth and reliable information.

 

4. Measuring supplier performance

You can easily measure supplier performance if your systems support making the data readily available. Tracking supplier performance through a third-party sourcing partner. While some large purchasers invest in their own integrated enterprise resource planning (ERP) software, most small and mid-sized companies don’t. But a growing number of independent inspection and auditing firms offer access to ongoing reporting of product quality and supplier performance metrics.

 

These firms vary in the digital solutions they provide. Some simply offer cloud-based access to previous inspection or audit reports. While others offer a robust analytics dashboard, including a charted breakdown of quality defects by severity, SKU, product type and supplier. Clear and consolidated supplier performance data, whether through a third-party solution or your own digital ERP, can greatly enable supplier selection and continuous quality improvement.

 

5. Supplier development

Some larger companies will have a team of dedicated supplier quality engineers who spend most of their time at their own office, rather than at suppliers’ facilities. This defeats the purpose of supplier quality engineering. The engineer should spend most of his or her time at the suppliers' facilities where they’ll have the greatest impact and influence on “right first time” quality. Smaller companies, in particular, need to approach this in a smart way and use all the data available at their disposal to make informed choices with regard to supplier status.

 

Even if you’re a small business, you must allocate time to visiting suppliers, reviewing the organizations’ requirements and clearly defining your company’s deliverables and expectations.Make sure you plan each visit well by developing an agenda in advance. If this is one of your key suppliers, you may want to stay a few days and go through the whole process with them: design, manufacturing, inspection, packaging, delivery, etc. Make the most of your visit, and you can come away with a good feeling that all parties have a clear understanding of what is required. Nothing beats spending time upfront with your suppliers to avoid problems later.

 

6. Supplier 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. Tracking ongoing supplier performance is key to understanding each supplier’s needs and any required corrective actions. For example, you may experience disruptions in shipments due to seasonal fluctuations in production capacity of a particular supplier. Tracking on-time delivery over time can help you take appropriate actions to avoid subsequent disruptions at that facility.

 

Historical quality reporting can similarly help you find and address any recurring product issues that occur at certain facilities. This transparency lends to better supplier management strategies. And through effectively managing your existing suppliers, you can make informed choices regarding the retention, removal or further development of each supplier to suit the needs and requirements of your business.