“The buyer needs a hundred eyes; the seller but one.” This Italian proverb gets right to the heart of a problem all importers face. How do you find and develop quality suppliers? You’ll need to watch all of your current and prospective suppliers in order to drive supplier quality development and avoid problems.
Suppliers are, without a doubt, an integral factor in the success of any organization. They can work like a well-oiled machine, where confidence levels are high and the quality and delivery of products & services from your suppliers exceeds your expectations. Alternatively, they can become a burden to bear, swallow up precious resources, and cost your business thousands of dollars in administration and performance management. Importers most commonly find themselves in a situation somewhere between these two extremes.
For the purpose of this article, the term “supplier” also includes “sub-contractor”; they’ll be treated synonymously with regard to the following methods and requirements. Stick to this step-by-step approach, and you’ll soon be reaping the rewards of supplier quality development.
Step 1: Supplier Selection
Selecting suppliers is crucial to your business, and categorizing your supply base is also essential to making the most of your available resources when managing those suppliers. Ideally, you would want all of your suppliers to be performing at a high level. However, companies may have large supplier lists stretching into the thousands and some are naturally more critical to quality than others. Selection should be the first priority for active Supplier Development Management.
The criterion for selection varies from company to company and is also influenced by which quality standard you have chosen for your business model, as well as the objectives and policies of your organization.
Step 2: 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, from time-to-time it is 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. Your supplier list should contain categories based on the following criteria:
- Supplier type – Critical, Tooling, Office Supplies, Maintenance and Training.
- Spending – High, Medium, Low
- Frequency of use – Often, Occasionally, Infrequent
- Second Source Supplier – Yes or No
By adding categories such as these to the supplier list, you can then filter this information in numerous ways to find:
- Top 5 highest spending suppliers
- Top 10 critical suppliers
- Critical supplier with no second source
- Infrequently used suppliers with low spending
A categorized list becomes a powerful tool for managing suppliers and making the most of your resources to get the best added value from your supply chain. The list will help you plan the most efficient audit schedules that will have the greatest impact on the performance of your suppliers and, therefore, your own business.
Step 3: Supplier Auditing
Supplier audits, as with most 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 audit: the remotely-conducted, questionnaire-type audit and the on-site audit.
The questionnaire, or phone call audit, can be an initial step that saves time. Questionnaires are effective at collecting basic factual data about an organization, rather than determining how effective and efficient their processes are. A questionnaire would answer queries such as “What quality standards do you have?”, “How many personnel do you have, and how many employees work in quality assurance?” and “What type of industries do you supply and at what quantities?”
On-site auditing would, of course, provide you all of the above information and much more, such as:
- The structure of the company’s Quality Management System
- Performance data
- Product and process management
- Results of supplier internal audits and certification audits
- A tactile feeling of how the company operates and the atmosphere within the organization
- Personal interaction with key members of the supplier’s staff
The most effective auditing technique is a continual process. Each time you visit your suppliers – for whatever reason – some kind of audit takes place. You’ll be able to proactively manage supplier audits and factory visits in the most efficient way by analyzing the information in the approved supplier list and Key Performance Indicators (KPIs) data, such as “Right First Time”, “Delivery on Time” and others.
Step 4: Supplier Performance
Supplier performance is easily measured 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:
- Right First Time
- Delivery on Time
- Response Time, Quotes and Inquiries
Step 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. This defeats the purpose of Supplier Quality Engineering. The engineer should spend most of his or her time at the suppliers’ facilities where they will 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 in small businesses, time must be allocated 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 on.
Step 6: Supplier Management
Once the development stage has matured to an acceptable level, on-going management should be tailored to the needs of each supplier. Through effectively managing your existing suppliers, informed choices can be made regarding the retention, removal, or further development of each supplier to suit the needs and requirements of your business.
Sourcing to find the right suppliers is one of the most important functions of manufacturing, as 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 selecting the suppliers that best match your criteria. Compile your suppliers in to 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 Key Performance Indicators (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, open up good lines of communication, speak to the right people and avoid confusion. Suppliers are an essential key to your success, and the ones with which you choose to work can either make or break you.
As published on inTouch Manufacturing Services Website, author Graham Young.