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.
Related Stories:
- Identifying, Selecting, and Sourcing From The Perfect Supplier in China (Part 1 of 2)
- Avery Dennison's Supplier Selection Insights
- Buyers search the globe for the right logistics partners, strategy
- Evaluate spend strategy in Asia
- Global Supply Chain Management
