Supplier development, supplier certification, supplier partnership, and "partnering" are terms that are widely used to describe how two companies conduct business with one another. The APICS Dictionary defines supplier partnership as "the establishment of a working relationship with a supplier organization whereby two organizations act as one." My corporation defines it as "an approach to business that involves close cooperation between the supplier and the customer. It provides benefits and responsibilities that each party must recognize and work together to realize."
These two definitions help us to understand how important it is for supplier and customer to work together to accomplish mutual, self-sustaining goals. This is the "partnering" required of such a relationship. By adding measurement to the partnership, we can recognize those suppliers that meet or exceed expectations of the relationship. Customers hope that by recognizing their best suppliers, the best will strive to get better, and the underachievers will strive to become one of the best. Some of the reasons companies strive for recognition from their customers include
•ease of conducting business
•opportunities for increased business
•new product development opportunities
•recognition for a job well done.
As companies partner with each other, and as they become more open with each other, their business relationship will allow them to conduct business more efficiently and with less effort. Both will learn the importance each places on the various aspects of their business and will focus their efforts on those areas. Every level within the two organizations will work closely together to simplify their processes.
It has long been the practice of most purchasing organizations to select suppliers based on cost alone, or cost within required lead times. Once a buyer-supplier relationship was established, each party would work together to ensure delivery schedules were met and to address any quality issues that might arise. Typically each year, the supplier would make an attempt to increase prices to meet his company's goals for profits. You might think that this traditional approach to supplier partnering is fading away, but I contend that much of it remains today.
Many companies today still rely on traditional measurements for evaluating their suppliers on quality, delivery, and costs. Quality is measured by the number of parts rejections versus the number of parts received in many companies. Delivery is measured by the number of production line stoppages, or by the adherence to a fixed schedule, i.e. one day before and two days after a specified due date on a purchase order. And finally, cost is measured by the buyer's weekly or monthly measurement of purchase price variance. If a supplier should attempt to increase a buyer's price on a part, the buyer would seek prices from other suppliers until a lower price was found, and then force the current supplier to hold prices based on a competitive quote. In today's fast-paced business environment, we simply do not have time for this traditional approach to supplier partnerships.
What is supplier development? How do we measure our suppliers and even ourselves toward continuous improvement? What is more important—total costs or purchase price variance? Where should buyers be allocating their time for the overall good of the corporation? How should we measure improvements in quality, delivery, and cost?
First, we need to recognize that our company's success is dependent upon the success of our suppliers and of our customers. With this in mind, we must commit ourselves to the forging of mutually beneficial "partnerships" with both our suppliers and our customers. A partnership is like a marriage—both sides must work hard to make the relationship work. The foundation of the partnership is to adopt and nurture a total quality culture based on continuous improvement.
A total quality culture is one in which the commitment to quality governs all other aspects. It is where quality is defined as the complete fulfillment of customer expectations. Levels of customer expectations must be clearly defined and understood, and anything short of meeting this level is unacceptable. In short, supplier parts must meet our expectations for quality, delivery, and cost, which in turn meets our customer's expectations for quality, delivery, and cost.
Supplier development is then defined as those actions undertaken by both the supplier and the buyer to strive for continuous improvement in the quality, delivery, and cost of the supplier's delivered products or services. As previously stated, relationships must be nurtured and cultivated. They do not just happen overnight. Part of the development process for your suppliers is clearly articulating your expectations for the products or services to be provided. In order to develop your supplier, you must ensure that they know your total expectations for quality, delivery, and cost. Now that I have drilled QDC into you, let's review what is included within these areas, as well as typical measurements to ensure that continuous improvement is a part of the overall process.
To Be Continued
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