The term “supply chain” is not new. As the sources for our goods and services become both closer, due to speed of travel and, more so due to the global nature of economies, the term “supply chain” increases in relevancy and meaning.
Managing supply chains requires awareness and competency in many fields from understanding the elements of lead time, to incorporating the public holidays of foreign countries in the planning cycle, to managing exchange rates. Some of the factors to be managed for successful supply chain however are not directly under our control, consider the recent West Coast ports slow down as an example.
Yet, we still have to plan and manage our businesses in a way that allows us to be profitable while maintaining buffers to insulate us from unexpected or out of our control events. For some organizations a method that they use to improve performance of their supply chain is to have formal and rigorous processes for selecting and qualify vendors. Such methods are sometimes required by customers, as occurs in food and automotive industries, but in many other industries these methods are simply seen as good business policies.
We believe a well-balanced and effective vendor selection and qualification system consists of these elements.
Product quality. Product quality is not just lack of identifiable problems but also a measurement of errors found against all materials procured. A system therefore helps identify trends and provides base line data for determining improvement in quality.
Price. Price is another clearly vital value. After all, this is where the concentration of purchasing effort occurs, but for organizations focused on vendor selection and quality, price encompasses more than consideration of a currency amount. It is understanding if the price is consistent with the overall market conditions and recognizing what is included in the service of price.
Delivery. Delivery, too, seems like something that cannot be ignored. After all, if the materials don’t show up it is pretty obvious as production plans have to change and customers have to be contacted. But those actions are just a response to problems and are not the same as evaluating and rewarding vendors for consistency of on time and complete performance.
Responsiveness. Responsiveness is generally only considered in emergencies, when something breaks or mistakes are made. But vendor responsiveness should incorporate other factors like delivery of samples for new products or pricing adjustments if market conditions change. If we need information for our records or have to schedule a site visit these should be easy and quick to obtain. These factors form a broader picture of responsiveness.
Effective use of the improvement management system. When effective use of the improvement management system comes up, it really needs to be preceded by confirmation that the vendor has an actual improvement management system in place. The impending release of ISO9000 and 9001:2015 will bring heightened awareness to the need for improvement management systems. But in the meantime, we need to know our vendors have tools to ensure a mistake identified is not a mistake repeated.
Certainly, when you expand your business process to incorporate formal vendor selection and qualification you are expanding the business tasks that need to be accomplished. Like any other business process however, such an expansion will prove beneficial if the time is taken to develop and incorporate systems that help us collect and analyze the generated data. For some organizations, the challenges of effective data collection and analysis are what delay the deployment of formal supplier selection and qualification methods.
Quality Essentials Suite includes tools to help formalize, document and analyze the data from such efforts to help organizations move forward. You can get started by learning about some of these tools when you view video 2 in our Summer Learning Series.
If effective supplier management can help your organization reduce shipping costs by 5% or reduce annual purchases by even 1% would that be worthwhile?