Developing Partnerships

The partnership with your supplier officially begins with the joint signing of the volume purchase agreement. The volume purchase agreement is a robust, yet simple, docu­ment which outlines the terms of the partnership. A volume purchase agreement is necessary to stabilize cost, reduce administrative costs, reduce the supplier base, andform strategic alliances. It gives your partner a long-term commitment, the ability to better plan production, a stabile relationship, and a greater volume of business. In the volume purchase agreement, you typically commit to hav­ing all of your needs for the part numbers listed in the agreement fulfilled by your new partner.

Business review meetings are an important activity of partnerships. During the business review meeting, your company's cross-functional team meets with your supplier's team to discuss such business issues as delivery, cost, new product designs, and improvement initiatives. These meet­ings typically occur quarterly and rotate between your company location and your partner's location.
Performance measurements systems are another neces­sary ingredient of a partnership. Your company and your business partner share the success of the partnership by comparing actual performance to plan.

Routine site visits are another activity of the partnership. Your company and your partner will regularly visit each other's facilities to observe production processes and par­ticipate in new product design meetings.

Supplier Certification

Supplier certification is the final step in the supplier partnership process and represents the highest level of achievement in the partnership. Candidates for certifica­tion are the suppliers who became your partners earlier in the process. You and your partner have already invested in the partnership. You both have worked together long enough to understand each other well.

The objective of supplier certification is to develop partners who will provide defect-free parts 100% of the time by means of capable processes which are under statistical control.

Your partners are typically given a rating. A typical rating scheme might be Approved Supplier, Qualified Supplier, and Certified Supplier.

A certified ranking reflects the highest ranking possible. Certified suppliers deliver product dock-to-stock or dock-to-production without any receiving inspection required.

You will often work closely with your certified partners to use information technology as an enabler to streamline the supply chain. For example, you might send your orders or authoriza­tions to deliver to your partners electronically by either electronic data interchange (EDI) or direct access to your partner's order entry information system. You often have direct access to your partner's information system to deter­mine order status. Conversely, your partner often has access to your information system to determine inventory levels and to automatically replenish based on inventory levels.

The benefits of certification include certainty of supply for your company and assurance of your continued business to your partner.

Summary

Supplier partnerships require a significant investment by both your company and your supplier. However, the benefits invariably make the partnership a worthwhile invest­ment. Benefits include an increase in quality and timeli­ness. Perhaps the greatest benefit of a supplier partner­ship is a least total cost solution which will result in increased profitability, market share, and customer satis­faction for both you and your partner.