Companies are increasingly recognizing that the supply chain is a key contributor to competitiveness. In most circumstances the companies that excel recognize that their suppliers are in effect leverage which can be utilized to influence their position in the marketplace, developing more cost effective products at shorter lead-times.

For those companies that are purported to be best in class not only have they got control over their spend but also run effective strategic sourcing programmes establishing a robust supplier network. Purchasing and its processes then, are at the heart of what makes many of these businesses a success or a failure. Selecting the right network of suppliers to do business with is that first crucial step. Get it right and material will flow in combination with effective relationships forged in developing what’s important for the business. Get it wrong and you could be presented with a myriad of problems impacting your shipments to your customers.

These problems can range from the minor to the severe but all of them can impact your product and your customer – consider the following examples:

1/ “You’re deliveries are going to be late again”

Poor Delivery Schedule adherence can kill a production line. Poor communication, lack of risk management and an inability to manage issues can result in your supplier missing your required delivery date and all too often informing you at the last moment.

2/ “Our prices are going up by 50%”

Dramatic cost increases are never an easy pill to swallow but when they are significant and you are unprepared they can be disastrous. Even worse is when the supplier is merely exploiting their commercial position for financial gain.

3/ “I’m bankrupt and I’m closing my company with immediate effect”

It’s the call that we all dread. “We’ve experienced a huge financial issue and we’re having to close the company” – you may have stranded work in progress – urgent deliveries required. The result is that your often faced with a significant lead time to establish an alternate supply leading to significant impact on production and customer.

4/ “I have other customer work that is more important than yours”

You’re a small fish in a large pond. Your supplier may value their relationship with their other customers more than yours or you may just find your work being reprioritized for other reasons. If you have little influence on your supplier and they have pressures from other customers with greater financial clout, then you can find it difficult to have your voice heard.

5/ “I don’t agree to your commercial terms and I wont sign your contract”

You’re trying to establish a formal commercial framework from which to operate from. You’ve developed your terms and conditions and your requirements but your supplier is not interested – whatever the rationale (be it financial or otherwise) they are not interested in a formal LTA tying them down to performance or cost criteria. This leaves you exposed to greater risk and fluctuations in terms of price and leadtime.

6/ “I’m the only manufacturer of this product – you’ll do as I want!”

Adversarial relationships with suppliers offer little. Where the supplier is single source and you are unable to take your spend elsewhere you can be stuck between a rock and a hard place testing your negotiation skills to the limit. You have your objectives to meet but how on earth do you meet them?

7/ “I have to do a product recall as we’ve had quality problems”

Suppliers that have quality issues are as bad as those that don’t deliver on time. They may deliver you product but if you can’t use it it’s worthless. You don’t want to give your customer a defective product do you?

8/ “I don’t talk to the purchasing team – I do business with Fred in Engineering”

Effective relationships are just as important as the products that are delivered. With today’s increasingly complex mix of development and supply you need suppliers that will work alongside you as well as just handle the more tactical (ordering) aspects of the job. For that to work you must establish the right lines of communication – all too often your colleagues within your company establish relationships with your suppliers that can affect your commercial or negotiating position. It’s in your own interest to establish an acceptable method of working with your supplier and hold them to it.

9/ “The person that makes your widget has gone on holiday – they’ll be a delay to your order”

Capacity and capability assessments highlight potential production pitfalls in your suppliers. Not only must they be fit to actually manufacture your material but they need to be able to handle it consistently and be able to scale in line with your requirements.

10/ Everything is fine – honest!

Effective and honest communication has to be a fundamental of any supplier relationship. No one likes bad news but equally nobody wants to be given the impression that everything is ok when its not. If you don’t know there are problems in your supply chain then you can’t plan and mitigate.

Summary

These are ten common examples of supplier related issues which can be addressed up front (before they happen) by effective sourcing techniques and supplier selection. If the supply chain is a critical success factor for your organization (influencing your competitiveness) then selecting the right suppliers must be at the heart of your processes. Effective sourcing strategies should screen potential suppliers and attempt to discard those that could cause problems in the future.

In simplistic terms this may focus on QCD (Quality, Cost and Delivery) in other circumstances it may be a more considered approach looking a range of variables. Whatever the method used the principle is the same

“I will validate the potential suppliers available to select one that aligns best with my business requirements”

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