SUPPLIER MANAGEMENT - ARE SUPPLIERS A THREAT OR AN ASSET?
Ask a supply chain expert where things become most challenging and more often than not they’ll point to supplier and contractor management. Supplier management is a fundamental component of any decent compliance system, however it’s an area that many organisations only pay lip-service to.
Understanding your supplier management weaknesses
Before using a supplier, many organisations will ask them to complete a self-assessment questionnaire, made up of general questions with yes/no answers. Questions such as “Do you have a quality system?” and “Are you certified to ISO 9001?”
The thing is, it’s far too easy for us to view our organisation in isolation: a self-sufficient entity. We focus inward. We see our systems, behaviours and practises comprising of what happens on our own patch. This generates a thought process that goes something like: “We’ve got enough on our plate without worrying about our suppliers’ problems!”
It’s a fact that in many industries that a significant portion of a company’s cost of goods/service is typically externally purchased or supported from contracted services. In some industries that rely very heavily on contracted support this can be as much as 70% to 80%. There’s a lot of risk sitting in these numbers…but also a lot of wonderful opportunity.
You can send out questionnaires that will (barely) meet the quality standard, plenty of organisations continue to do so! Sooner or later however, a supplier will have a negative impact on you and your customers. The second this happens, your reputation is put at risk.
The bottom line is, that you’re going to have to get proactive and, whilst there’s no silver bullet, it’s really not that hard to work with your supplier to get the assurance that you have in fact appointed the right company, you just bring some focus and discipline into things. Here’s how to get started…
There’s a lot of buzz regarding ‘Engagement’ but forget all that and simply take it the way it reads in the dictionary. We are meaning ‘to become involved’.
Adopt the mind-set that you are in a partnership with your suppliers and contractors. Partners naturally help each other out and want to bring the best out in each other. Think of yourselves as being on the same team, a team whose ultimate goal is to delight your end-customer.
Spend a little time identifying your top ten most critical suppliers or contractors. Choose them based on risk: what impact do they have on your company and the end-customer? How many non-conformances, accidents or complaints have been reported about them in the past 12/24 months? What activities do they undertake for you, or what products do they provide to you? Is there a potential problem just waiting to happen?
Set up a meeting with your supplier, to outline what you’ve identified and importantly, what their impact could be on your company and your clients. This doesn’t have to be face to face but in terms of building relationships the benefits of visual and verbal interaction are difficult to beat.
Before the meeting takes place consider what additional information you need about the supplier. What could they share with you to provide you with that comfort and assurance? You may want to undertake an audit, or simply a visit to see them in action on a site. Perhaps it’s the details of previous audits or the story they can tell of how they’ve handled previous non-conformances or audit findings that puts your mind at ease. There are many ways to approach this, but you need to identify the method that works for you and to have the supplier on side…remember that word, relationship!
Does the following statement sound familiar? “We’ve always used them, they’re great, they do exactly what we ask them to do and they know exactly what we want from them.” Is this a fact or a feeling? You may wish to reconsider what this ‘feeling’ is based on. Is it because someone that worked in our compliance department some time ago, said so? Sometimes you have to hear it with your own ears and see it with your own eyes, simply to be satisfied that things really are as you would expect them to be and to take the opportunity to look at improvements, how things might be done better, not just as they’ve always been done.
Once a healthy relationship is established the chances to have follow up chats and outline areas of improvement, with input from both parties, are commonplace.
Too few organisations make supplier management a priority, but the ones that do reap impressive rewards. Focus on supplier management and you’ll find risk is reduced because communication is open and two-way, meaning you are much less likely to be caught unawares – besides, you never know what else might come out of it!