Why do we need to invest in Supplier Development? The main reason is because our future depends upon it! Our customers are demanding lower prices, shorter lead times, lower inventory, perfect quality, continuous improvement, and production innovation. Our collective challenge is to meet the demands of a changing world market with smaller quantities, shorter lead times, and affordable prices and with world-class reliability and quality. We need to team with suppliers that are committed to providing speed, flexibility, and total quality.
But it wasn’t long ago that a buyer’s main mission was to figure out how to beat up suppliers on price. It is certainly true that buyers still gripe about unscrupulous salespeople or suppliers that don’t seem to be customer-focused, but your more likely to hear purchasing professionals talk about suppliers being “an extension of our company” or “a key part of our value chain.” Purchasers now seek suppliers that not only can meet standard performance criteria, but also will:
- Work very closely with customers to raise performance levels, contain costs, and develop leading-edge technologies.
- Share data, resources, and people to overcome obstacles that stand in the way of mutually agreed upon goals.
- Identify aspects of the buyer’s operations that can be improved.
- Respond quickly to problems and emergencies.
Continuous improvement of the supply chain from the supplier to customer is the key concept underlying the journey to supplier development and certification. Customers and suppliers need to become more competitive and to jointly share in the increased market share and resultant increased profit generated by continuously improving the supply chain.
How do we help our suppliers improve? First, you need to develop Standard Work for your Supplier Development Program. You will also need to obtain Senior Management Commitment. Next, a formal supplier selection program needs to be developed. Lastly, a generic Long-Term Supplier Agreement needs to be generated, which can be tailored for each particular key supplier – commodity.
The implementation strategy will be to collect and review supplier data as follows:
- Group suppliers by type (commodity)
- Determine impact of each group on total cost
- Pareto based on total cost, lead time, inventory and quality impact
- Prioritize which commodities will be worked on first
Once this data is compiled, the commodity teams can be launched. These teams need to have cross-functional membership so that there is representation (at the minimum) from purchasing, engineering, quality, manufacturing, and finance areas.
The Supplier Certification Plan should consist of the following steps:
- Supplier Self Evaluation
- Conduct Supplier Audit
- Obtain Corrective Action Agreement (based on audit results)
- Rate Supplier’s Performance
- Follow-up on Corrective Action
- Conduct Supplier Symposium
- Qualify Supplier
- Consolidate Suppliers
- Negotiate Supplier Agreement
- Conduct Continuous Improvement Activities (Kaizen)
- Improve Supplier’s Performance Rating
- Sign Long-Term Agreement
- Certify Supplier
- Set-up Supplier Monitoring Program
- Follow-up on Further Continuous Improvement Opportunities
The Supplier Certification Program is an integral part of any continuous improvement program, which is intended to help you and your suppliers attain the level of World Class and to realize all the benefits associated with that classification. The goal of this certification program is to develop partnerships with your suppliers to jointly share in the continuous improvement journey.
Do You Need Help With Supplier Development?
Why not get in touch and see how Flow Consulting can help you with Supplier Development improvements.