Your manufacturing company relies on suppliers to ensure operations run smoothly. After all, you want your products created on-time and on-budget, without impediments. Your company’s reputation is on the line, as well as organizational goals, such as quality, safety, environmental-compliance, and more. But it’s not just about your organization; your customers have expectations on what they want, too. And you have regulatory requirements that your company needs to meet.
So, how do you meet organizational goals, appeal to customers, and comply with federal, state, and local regulations?
Have a process to handle suppliers.
The supplier management process
Companies that follow an ISO quality-management system, work in a business where regulatory requirements exist for purchasing, or have similar standards likely already have a supplier management system in place. Great. But it’s still important to think through supply risks.
Having a supplier management process enables you to:
- Source a product or service
- Approve, reapprove, or remove that supplier from an approved supplier list so you can use/not use them again, as applicable
- Monitor suppliers to assure they are meeting contractual agreements including quality, safety, and environmental requirements
Let’s look at the first part of this process: sourcing a supplier.
Sourcing a supplier
When considering sourcing a product and/or service supplier, there are a variety of requirements to wade through. Many of those requirements above, include safety, quality, environmental requirements, regulations, customer expectation. Additionally, sourcing a product or supplier should include timeframes and availability.
Whether you’re getting a new supplier or switching suppliers, you’ll want to reflect on requirements and expectations.
Get a new supplier
You’ll typically get a new supplier when you’re a new company (including an organization spun off to handle specific products) or you have a new product to bring to market.
Source your supplier based on:
- New designs or a design changes requiring smaller quantities or specific services from a supplier such as testing or software development
- Manufacturing from a pilot-design project scaling up for production, including availability of resources or specialty supplies
- Company and customer requirements, including multiple bids, price, timing, purchasing agreements and contractual requirements, and customer service expectations
Although price is always a consideration, sometimes getting the product you need quickly and easily, while being able to talk on the phone to customer service employees, may mean more than a cheaper product. That’s especially important if you’re trying to meet customer demands on your new product or design quickly.
Change a supplier source
There are a couple of reasons you’ll want to switch suppliers. Sometimes it’s your business is changing … and other times, your vendor may not be delivering as you need.
Strategic business needs changed
Business needs change. Your company may want to re-evaluate vendors to save time or money. Perhaps your organization wants to review supplies based on ensuring inventory and the supply chain itself.
Supply chain, contractual issues, or ethics problems
There are times when a vendor just can’t meet your needs. You’ll know it’s time to alter suppliers when the current supplier is
- No longer supplying the product or service you have been purchasing. There are a variety of reasons for that, including no longer carrying the product or performing the service or is going out of business.
- Not meeting contractual requirements. Those contractual requirement issues may include failure to meet metrics, late products or services, lax standards, billing issues, unforeseen charges, rework, and more. Bottom line, if your expectations aren’t being met, it’s time to reconsider your supplier.
- Having ethics issues. These issues typically fall into two categories – not acting according to your business ethics policies or not following various regulatory requirements. It’s important for companies to act on ethics; your vendors impact the reputation of your company and your products.
Switching suppliers may be tricky, but sometimes it’s worthwhile … even necessary. Vendors can impact your company’s reputation, employee morale, compliance (causing legal issues), and product quality.
Adding or switching vendors
When adding or changing suppliers, you’ll want to consider a host questions important to your business. Some of the questions to ask include, but aren’t limited to:
- Customer service and integrity. Have you used this supplier before and, if so, what is your experience with them? What do other customers think about this vendor?
- Product quality and availability. Does the supplier have the core strength for providing the product or service? Will this be a single-source specialty material or service, or will you need more flexibility? Is this a catalog “off the shelf” item or customized solution? Will the product or service affect the product(s) and/or service(s) that your company offers? Will the product or service affect your business, quality, safety, etc.? Are there supply chain issues to address – customs, logistics, expedition, etc.?
- Your customer requirements. Are there customer requirements you must meet?
- Regulatory requirements. Will the supplier be able to meet regulatory requirements?
In addition to the questions above, you’ll need to consider risk and mitigate it. Some of the items you may need to consider in choosing a supplier include:
- Overall risk. The overall risk should be matched to the importance of the work. How much risk is there in choosing the supplier? For example are they cleaning as they should? And what’s the potential risks if the product fails?
- Quality, validation, and auditing. Ensuring quality is vital, and auditing for that quality, is essential to a successful relationship. Will a supplier audit be necessary before deciding on the use a supplier? Do you require validations of their product or service? Some types of work that would need to show validation of their processes including sterilizers, anodizers, welders, etc. Do you require Certification, accreditation, or other or professional designation? What records would you expect them to keep? What type of training? Is their management involved in the company? What processes do they have in their system? Knowing these answers ensures you’re delivering a quality product.
- Vendor reviews and recommendations. Look for reviews, including from the Better Business Bureau as well as professional sites. Be careful – some review sites include paid reviews. The least risky is to get recommendations through your potential vendors other customers. As part of asking for recommendations, consider customer service, how your potential vendor handles complaints, return policies, and processes.
Put the time in on supplier management
It may seem like supplier management requires a lot of time and resources to be expended. If the risk of the product or service is high enough, that’s probably true. If not, the activities involved are considering less.
Determining risk is essential as it prevents you from violating laws, experiencing legal fees and fines associated with those violations, reputation issues, brand devaluation, losing customers and good employees, and decreased revenue. It could even cause loss of life. It’s not an exaggeration to suggest death is a possibility with some products; NASA’s space shuttle, Challenger, blew up due to a defect with the O-ring. People were killed. NASA faced a PR nightmare as the “teacher of the year” also died in the explosion, along with brave astronauts. Aerospace and exploration came to a halt temporarily. Even NASA itself had trouble recovering, losing personnel and national confidence.
But if a company has good supplier, because of a good supplier management processes, company needs are met, likely saving time and money. Quality is increased due to a more reliable supply chain. The brand is protected. Customers are happy. Often, employees are, too.
Ask yourself, are your supplier management practices providing the results you expect? If not, it is time for a change.