Identify, Select, and Source From The Perfect Supplier in China (Part 2 of 2)

Part 1 of this article focuses on the identification of suppliers.  Now that a pool of suppliers has been narrowed down to a manageable group, it is time to further flush the list to a selected few.

Selecting Suppliers:

• Get buy-in from within: depending on industry, qualifying new suppliers can be a lengthy, and sometimes dreaded, process.  It is important to get management buy-in, BEFORE starting on the supplier selection and qualification process.  For companies with multiple divisions, myriad of production lines, and countless products, this is especially important.
• Trim the fat: Some of the current suppliers may have been “excluded” or “trimmed” during the identification process.  Common wisdom may tend to include them even if they appear to be less desired.  There is no argument to put a score and preference for current suppliers.  However, one must NOT put too much weight on current relationship and ignore the potential with the new suppliers.  As the company grows, requirement will change.  It is important that the supplier carries the same vision.  If the current supplier is significantly lagging, or decides to go into a different direction from that of the company, it is necessary to “trim the fat” and transfer all parts to more deserving partner.  Further, after years of non-committed business without a vision to implement a global sourcing strategy, the current base may become complacent, or may not be committed to the customers.  Unfortunately, this is much harder said than done.  One must acquire management support, supplier buy-in, and internal as well as corporate alignment.
• Invest the time in qualifying the suppliers: the importance of this step can’t be stressed enough.  Depends on the level of part customization, qualifying new suppliers is often a time consuming process.  Though, during this process, one can learn a lot about the potential supplier’s capability, level of commitment, and other tangible qualities that are essential to a fruitful relationship.  If resource is limited, enlist local sourcing experts when appropriate.
• Get PEOPLE involved: this is usually one of the most obvious but usually ignored aspects of any successful projects.  In the case of China sourcing, this is even more so the case.  All stakeholders must be timely informed on a regular basis.  Conduct meetings and training session whenever necessary.  A seamless sourcing implementation requires coordinated efforts among engineering, quality, R&D, purchasing, material planning, and warehouse.

Sourcing from Supplier (I will skip the obvious but lists out those that are often ignored):

• Introduce the new suppliers to the company and all stakeholders: this is especially important in China.  A supplier does not only exist in the ERP, MRP, BOM, and Vendor Master.  Instead, it is important to let the supplier to have a face to face meeting with the company.  Invite the supplier to come to the company and shake a few hands.  This will help the transitioning process.
• Define stringent yet flexible requirements during the transitioning period: this is commonly referred as the honeymoon period, where corporate standards are relaxed slightly to the new comers.  The same must be applied to a new supplier introduced to the corporate structure.  One must be firm, and sometimes be stringent then the incumbent suppliers, on the technical requirements.  This will help to establish a mutual expectation at the early stage of the relationship.  On another hand, it is reasonable to grant the supplier a free pass if mistake is made on non mission critical requirements.

A successful sourcing project takes a long time to build.  It is not a ONE time event, as many companies have mis-interpreted.  The work of the sourcing department is not simply collecting quotes and inputting them into the ERP system.  In contrast, the work has just begun when a part is “sourced”.  Managing the supplier relationship and improving supplier performance is the true value that a successful strategic procurement department brings to the company.

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Identifying, Selecting, and Sourcing From The Perfect Supplier in China (Part 1 of 2)

A quick search using many of the supplier identification and matching services will easily yield hundreds of potential “matches”. Some of the sites even provide a list of so called “trusted” suppliers, where they have been “visited”, “verified”, and “approved”. There is no question that these suppliers are better of the bunch. However, there is rarely sufficient evidence to choose any of these “selected” suppliers. The best that these services could provide is a long list of potential suppliers. Unless you are blessed with unlimited resources to perform an in-depth evaluation of each supplier, the odds of finding the perfect supplier from the list, unfortunately, are slim. To improve your chance of sourcing success, here are some methods to help you to navigate through the sea of suppliers:


Identifying Suppliers:

• Define the company’s sourcing “value”: Whether is it low cost, high quality, high technology, willingness to invest in technology, future expansion plan, company size…etc. One can refer to the global procurement strategy to determine the sourcing target for your industry. In theory, all requirements stated are “important”. However, using a score card to determine the sourcing value, it will make selecting suitable suppliers a lot easier.
• Determine the area best suited for your source: Good suppliers are scattered all over the world. You could spend the next life time to visit each of them. Again, it is best to have a global procurement strategy, and focus on one area to fulfill your procurement needs. This will not only minimize the sourcing efforts, but also reduce the logistics cost.
• Start with a LARGE pool of suppliers: Once a location has been defined, establish a long list of suppliers. Some of the common methods are: Internet, word of mouth / reference, trade publications…etc. You can also solicit from your current supplier base for potential suppliers. The goal of this exercise is to force your sourcing department to look “outside the box” in search of the most suitable suppliers.
• First pass evaluation: Match the pool of suppliers against the company’s sourcing value. This could be done using phone interviews, online surveys, site visits, or sales presentations. The goal of the first pass evaluation is to narrow down the large pool of suppliers down to a manageable group. Depends on the size of the sourcing project, and the associated monetary value, it is appropriate to narrow down to about 5 to 20 suppliers.
• Call up the suppliers: Email in general is the tool of choice in United States. In China, however, it is best to call up the sales, or the general manager, if the contact information is known. Introduce your company to them to gauge the interest level. I can’t usually stress enough that even with technology nowadays, a human voice, or putting a face to a name, is an important aspect of conducting business in China.

Now that you have identified a group of potential suppliers, it is time to select the best of the bunch. We will discuss some of the methods used to successfully source in China.

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Simple Way to Become FDA 21 CFR Part 11 Compliance

Many suppliers in China are confused by the FDA requirements. This has further added to the headaches when overseas sourcing professionals are trying to identify suppliers that are FDA compliance. In the FDA maze, FDA 21 CFR Part 11 -- Electronic Records; Electronic Signatures -- (Part 11) has generate quite a bit of press. For those who are unfamiliar with the requirement, I recommend a quick and brief review of the FDA guidance located in the public domain. A pdf version can be downloaded here. In short, FDA has dictated the use of the Part 11 guidance in March, 1997. Under widespread scrutiny by the industries, stating that the original guidance may not be consistent with FDA’s original intent in issuing the rules, and other factors, FDA has withdrawn the original guidance, but remained firm on the future usage of the Part 11. During the transition period to full Part 11 compliance, the FDA has outlined 3 main elements of the guidance:

1. Part 11 will be interpreted narrowly; FDA is clarifying that fewer records will be considered subject to Part 11.
2. For those records that remain subject to Part 11, FDA intends to exercise enforcement discretion with regard to Part 11 requirements for validation, audit trails, record retention, and record copying in the manner described in the guidance and with regard to all Part 11 requirements for systems that were operational before the effective date of part 11 (also known as legacy systems).
3. FDA will enforce all predicate rule requirements, including predicate rule record and recordkeeping requirements.

Basically, instead of a full-blown industry wide adoption, FDA will now use “discretion” and “interpretation” when auditing for Part 11 compliance. This, obviously, is good news for most firms that are not yet FDA compliance. However, the delayed guidance only means that companies will now have more time to determine the best strategy forward, and HOPE that the early adopters will work out all the bugs, where a clean, simple version of Part 11 will be available for late comers to follow. So, what shall an average medical device development firm do in order to prepare itself for future compliance?

1. Generate a log of documents related to the medical device, and specify whether the master document is being kept electronically, or on paper. For those who have not invested in document control software, the form could be done using a simple Excel tracking sheet. Further, please clearly states on the tracking sheet and on the document that only the printed version kept in the master document control area can be considered as the “controlled” version.
2. Do NOT implement a partial solution as suggested by the Part 11 guidance, i.e. only part of the documents is Part 11 compliance. Some may be tempted to implement a “pilot” solution to test out the document control software, or other software packages. However, this will only prompt for attention during an audit. Please remember a paper tracking mechanism will NOT harm you, but an incomplete electronic trail will.
3. Do start NOW with a pilot project. As with any kind of software adoption project, implementing the solution to all stakeholders will take some time. A pilot project will minimize any confusion for users. It will also help to flush out any bugs before rolling out the solution corporate wide. Many companies offer specific modules tailored for FDA compliance, i.e. Siemens FDA accelerator.

FDA compliance is not as daunting as most thought. On another hand, having the ability to comply with FDA will not only give your company and product the needed edge over your competitors, it may also "force" your company to have tighter quality standards.

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