10 steps to improving Supply Chain Management

mkozhemyakov | March 10, 2014

Understanding the advantages and disadvantages of sourcing and management of your supply chain base is critical to having an efficient and effective system for the manufacturing of products and/or delivery of services. The benefits of effective supply chain management cannot be overstated due to the critical role that a supplier plays in helping organizations produce defect free products and services which are delivered in accordance with contract requirements.

It begins with establishing a plan to select, vet and validate a supplier’s ability to meet your needs on a continual basis and supply material, components and services at a competitive price. While there is no “one-shoe-fits-all” for the overall process, there are some key steps that every supplier can benefit from if managed effectively. Your purchasing and quality assurance departments are generally the teams tasked with negotiating supplier contracts, gathering and assimilating supplier information, sourcing, managing and following up with suppliers when things do not go as planned. For some organizations, this ritual has changed very little since the beginning of the organization and it continues to be used to meet their needs regardless of how cost effective and efficient the overall process has become. Consider the following steps as a general guide for effective supply chain management to minimize cost while ensuring defect free products at all stages of the product realization process.

Supplier Selection:

  1. The investigative phase is generally determined based on the products or services supplied and their impact on the final product. A simple supplier questionnaire may be sufficient to gather all of the information necessary to award a pre-contract to a supplier. On the other hand, if the supplier you’re seeking will be manufacturing critical components, handling or providing proprietary services, etc., you may want to complement the supplier survey with an on-site visit and/or audit of the facility. The depth of the initial review can also be guided by your final customer who may have specific terms and conditions embedded in their contracts when outsourcing any products or services.
  2. As part of the selection process a full understanding of your supplier’s capabilities is essential. If you have short lead times and tight delivery windows, then you need to assess the supplier’s ability to meet these needs. In addition, if you are looking for a supplier that can effectively manage design modifications expeditiously with effective cost containment, and has an inspection program utilizing statistical methods, then this is also something that should be discussed early on in the contract negotiation phase with any potential supplier.
  3. The supplier’s ability to effectively manage ppm levels, and cost improvements over time are a few key issues that should be reviewed during this phase. In addition, it may be necessary to verify a supplier’s ability to mitigate major quality issues that become known after the delivery of the final product and/or service to your customer. If you require that your supplier have a process in place to effectively mitigate major quality escapes, then this should also be communicated and may need to be addressed as a line item in the initial contract between your company and the supplier. In short, you should identify and assess suppliers who operate with a commitment to total quality, competitive pricing, timely follow-ups on quality issues and professional service.

Transparency and building partnerships

  1. Building a solid partnership with your supplier starts with a review of each other’s needs, expectations and corporate philosophy or policy. The potential supplier may or may not have a registered quality management system which in itself should not disqualify them from being considered. Some organizations shy away from small manufacturers and prefer to work directly with suppliers with knows reputations. Others prefer smaller suppliers and the personal attention they receive when working with them. Whatever your preference, establishing good supplier relationships will benefit both parties and can even help in achieving shared goals and objectives.

Maintaining confidentiality

  1. As with any partnership, trust is earned and starts with open communication and transparency between both parties regarding confidentiality. In most cases, confidentiality is addressed in the initial contract with your supplier. It could also be addressed as a separate NDA (Non-disclosure agreement) between more than one party. However established, the management of customer supplied data and intellectual property should be given the greatest care and protection when in your possession. Building a solid relationship with your supplier will have long lasting benefits that can add to your bottom line and help drive continuous improvements within your organization.

Categorize and Review Suppliers

  1. Categorizing suppliers allows you to effectively devote the right amount of time and resources to your suppliers during both the initial selection and subsequent maintenance phases. This is directly related to the impact the supplied material, product or service has on the final product and should not simply be based on price, but should also focus on key metrics including:
  • Quality
  • Delivery
  • Change control
  • Support, etc.
  1. If we lived in a perfect world, there would be no question that a corrective action process would not be necessary to ensure that quality nonconformities are addressed thoroughly and in a timely to eliminate the causes. A review of your supplier’s quality history with respect to their responsiveness to customer quality defects, as well as, their understanding of your expectation when quality issues are brought to their attention will be time well spent, and will avoid surprises when the supplier’s competencies in this area are put to the test.
  2. Rating reports or supplier scorecards are just two examples of the many tools that have gained popularity for tracking supplier’s performance over time. Once again, consider the impact of the product and/or services provided has on your final product, when determining the appropriate metrics to track and the amount or resources you need to devote to tracking and analyzing the data at some defined interval.

Management of Outsources Processes

  1. If you have specific guidelines or requirements related to your supplier outsourcing of material, products, services, etc., then this should be clearly defined in your purchases order and should not be left to chance. Some customers require traceability, Certificate of Compliance’s and/or evidence of conformance to critical specifications at all stages of the development process and does not release your company from the responsibility of ensuring that all requirements established in the initial PO are being fulfilled. This may also include meeting deadlines for the shipment and commissioning of field installed equipment.

Supplier Development

  1. At the heart of any successful supplier relationship is working closely with your key suppliers and being receptive to their request for assistance when needed. Helping them develop as an organization can have long-lasting benefits. This could involve providing assistance with the development of their quality management system, corrective and preventative actions, internal audits, continuous improvements, cost control, training program, etc. The time and resources devoted to supplier development will often be based on how they are categorized or rated by your organization and the relationship you have developed with them over the years or your customer’s expectations.

In conclusion, a focus on the suppliers of the materials, services and processes that are used to product your end product or service will have long reaching benefits. Managing these relationships effectively will help your organization product defect free products and services. This, in turn, will increase customer satisfaction.






Al Madison
Project Manager Midwest Region