Tag: supplier

Best Practices For Minimizing Global Supplier Risk

We were just reading through an article posted by Supply Chain Management Review that discusses Four Best Practices for Minimizing Global Supplier Risk.  As a third-party quality engineering and consulting firm, we get questions about this often and have written a handful of articles related to the topic.

We like the SCMR’s four best practices, but did want to add some additional comments.

1) Make routine site visits.

It can be quite costly to manage routine site visits, whether your supplier is domestic or abroad.  All of the benefits discussed in the article can be achieved by partnering with a third-party to represent your interests on-site.  From facility audits to product inspections, a third-party has more local knowledge and specific experience in supplier development.

“Site visits allow procurement officers to ensure that workplace practices and product quality are consistent with their expectations, as well as to increase the likelihood of early discovery of major problems—from supply chain hiccups to unsafe working conditions.”

2) Invest in local advisors.

Local advisors can be the third-party QC organization or agent if one is being used, but a solid relationship with suppliers isn’t an impossible achievement either.  Open communication goes a long way here.  Third-party quality providers (3PQs) are unbiased and can offer extensive local expertise. Many third-parties are actually perceived as extensions of an organization’s own in-house quality representatives.

“Investing in consultants or other advisors on the ground in the countries where your risk is greatest, who understand the dynamics relevant to your business and can flag problems early, is critical to maintaining a smooth foreign procurement experience.

3) Reward supplier performance.

Supplier development is more than a reward system for supplier performance.  When organizations work with suppliers to develop partnerships, evaluation and corrective action is seen as more of a continuous improvement effort rather than a grading and/or carrot-stick system.  When weighing risk vs. reward, many suppliers that feel they are in a partnership are thinking long-term.

Rewarding supplier performance is good though.

“Getting out in front of potential disasters with a program that benefits suppliers for avoiding or mitigating risk is one of the best investments a procurement department can make in protecting the procurement function and the company.”

4) Build internal support.

Pick up any quality book, and it’s going to mention the necessity of top-down support.  Communications become especially relevant here. Make sure you’re capturing the right data and using it to communicate effectively to whoever your audience is.

Getting buy-in from the top corporate brass, as well as from senior executive peers in other departments, can be critical to securing the resources necessary for a robust and effective risk-management program. 

Also check out our recent post on 3 Ways to Improve Supplier Communications.  Pro QC’s VP/Americas also contributed a newsletter article regarding Reducing Outsourcing Risks and Cost.  Read this one to learn more about the third-party quality provider (3PQ) value.

3 Ways to Improve Communications with Suppliers

Developing and maintaining strong supplier partnerships depends on a solid foundation of successful communication.

In our thirty years of experience at the table with clients and suppliers around the world, we’ve seen a range of outcomes where communications are concerned.  The impact is quite often more substantial than you may think, with some arguing that communications are the primary reason for a partnership’s success or failure.

think it aboutCertainly, there is no shortage of recommendations out there for improving communications.  However, our three recommendations focus on suppliers and our observations over the years.

1. Recognize that communication is about understanding. 

In order for us to understand a perspective outside of our own, we need to actively listen.  We are all guilty of wanting to believe we’re right, but the mindful moment is when we realize that others think they are right as well.

Recognizing that communication is about understanding means that we allow all parties to express their position without judgement, interruption or disrespect.  Communication ceases to exist without this.

Ask yourself, what is their purpose as compared to yours at this particular moment?  Our clients and their suppliers often find their objectives are more similar than they thought.  With common ground, understanding is less stressful and more focused on problem solving.

Bonus: Taking time to listen and evaluate in any given situation actually saves time because it’s likely to avoid conflicts, miscommunication, etc.

2. Nonverbal communication counts.

In addition to managing our own nonverbal communications, it is helpful to assess the other party’s as well.

The tone of someone’s voice is considered nonverbal communication.  Be mindful of the tone in any communications, from email to face-to-face. Clarify before assuming. 

With operations in over thirty countries, we recognize there’s a heavy reliance on email.  But, when emails and regular phone calls fail to get the desired results, try Skype (or whatever similar) or an actual face-to-face before giving up.  The best communicators know exactly when to make that call.

3. Stay positive.  Seriously, stay positive.

Staying positive definitely sounds easier than it may be at times, especially when you’re facing production issues, shipment deadlines, etc.  Higher stress situations often send all of the regular rules of communications packing. You want your purchase order and you want it to match the specifications.  The supplier wants their payment and says you weren’t specific enough.  What’s there to smile about in this situation?

Well, take a moment and consider the effect of not smiling in this situation.  Not staying positive has a much higher incidence of the situation not getting resolved in an ideal manner.  Even if you feel like you’ve gotten what you wanted in any given situation, the future of the relationship  may have suffered because you didn’t think about the long-term investment.  There’s often significant value there.   And, consider that even if you don’t value this particular relationship, it is entirely possible to believe that your negative reaction will result in a poor perception of your organization to your stakeholders.  That’s not good.

So, be positive… Take that extra moment to process the effect that being negative will have on the situation and rest assured you do catch more flies with honey.

Using a Grid Analysis for Supplier Selection

An article was published in MasterControl’s November newsletter that simplifies the process of supplier selection.  A grid analysis is great for almost any decision-making situation where you want to objectively compare multiple options.  It also complements many other decision-making tools as well.

Per the article, factors that should be considered in the grid analysis for supplier selection may include:

Cost – Initial quotations and negotiations are not always representative of future costs.    However, this is certainly an important competitive advantage if that’s the desired positioning.  Contractual commitments should be discussed to avoid incremental increases.

Quality/Standards – Depending on the industry, specific supplier audits may be required.  If the organization requires ISO or other certifications, audit reports are a useful snapshot of the supplier’s strengths and weaknesses in specific areas.  This should incorporate management as well.

Location – The geographic component of supplier selection not only affects cost but it can also be required for certain products.

Shipment Expectations – The quotation and audit reports should include enough information to reasonably determine how well the supplier complements your existing demand schedules.

Expansion Capabilities – Long-term strategy will require that any supplier partnership considered important during the expansion plans of the organization should not be overlooked.

Grid analysis can be done in two ways, with or without weights.  If the assumption is that each factor decided on is equal in importance, go through each supplier and provide a rating for each factor based on all information available.  Do this for each of the three and total each row.  Scale each choice from 0 (poor) to 5 or 10 (great), and you don’t have to use different ratings for each one.  Assign each factor and supplier the rating it deserves based on all of the available information. 

For most situations, we know that all factors are not equal in importance.  That being true, a grid analysis can adapt to placing weights of importance on each factor.  To do this, multiply out the factors for more accurate results.  Weights may include something that is not important at all, which may have no value assigned, or something that is very important that may be assigned a weight of 5 or 10.   If a factor is determined to be twice as important than others, assign it a weight of 2.

Grid analysis can also incorporate team decision-making and offers useful comparative perspective as well.  If everyone on a team completes the grid analysis process individually, take the final score of each supplier from each team member and add them together.  Divide that number by the number of team members.  Do this for each supplier.

View the full article, including example data sets here.

Supplier partnerships are key

Many organizations approach us and are currently in volatile partnerships with suppliers over missed deadlines or unacceptable quality.  Communication has broken down, and both parties are unclear of how to proceed and ensure customer value.

The key to accomplishing objectives and mutually realizing benefits from continuous improvement initiatives is through cooperation and understanding from all party’s perspectives.

Supplier partnerships work best when the following is incorporated:

Transparency – It is important that information is shared with all parties in order to expedite resolutions and brainstorm long-term solutions.

Dependable Payment Terms & Service Delivery – Payments should be made in a timely manner, and services rendered should reflect accordingly.

Third-Party Evaluation – It is often less intrusive and move objective to have a third-party evaluate a system or process and make necessary recommendations.  Continuous improvement can be monitored and ensured by an unbiased source.

Understanding Perspectives – All parties have unique objectives to meet as a result of the partnership.  Understanding these objectives and incorporating mutually beneficial decisions unifies and strengthens the  relationship.  Focusing on long-term growth and objectives, in addition to aligning these objectives to meet both organization’s objectives, creates an environment for growth and continued success.

Successful supplier partnerships exist with open communication and ongoing evaluations.  Successful partnerships create customer value, greater efficiency, reduced costs, and more.

Preparing for an audit

checkmark_blueA previous Quality Q & A newsletter article featured tips for audit preparation.   In the reprinted content below, Pro QC’s Supplier Development Manager discusses how each party can expedite the process.

 

Preparation for a factory audit can be broken down by responsibilities of the client, supplier (factory) and third party (Pro QC). Communication and documentation are key actions that increase the likelihood objectives are met.

The Client:  

  • Inform the supplier to let them know an audit will be scheduled and provide additional contact details as available. Consider the length of time requested by the supplier, in addition to any initial hesitations noted.
  • Evaluate the expectations of the audit and relevant necessary components that should be incorporated into an on-site checklist or other evaluation tool.
  • It is not considered appropriate to surprise a supplier with a visit to perform an audit.

The Supplier:

  • Inform related internal people about the scope, agenda and contents of the upcoming audit.
  • Complete and submit the Supplier Profile and Booking form that will be supplied to you by the Pro QC Project Coordinator.

Pro QC International (3PQ):  

  • We work with the client to understand their expectations and the product and specific standard(s) involved.
  • We select a suitable audit checklist or develop a customized one if necessary.
  • We select the auditor best suited to the requirements noted and provide him/her with necessary training and recommendations to follow.
  • We provide an audit notification letter along with an agenda of the audit, the booking form fro scheduling and the Supplier Profile form to the supplier to inform them of the audit activities so that they can inform and prepare their internal attendees.