Category: Supplier

A Guide to Supplier Management

By The Pro QC Quality Assurance Team

Part 1 – Supplier Identification, Quality Systems Audits & Supplier Relationship Management

You’ve already defined your targets in support of your business strategy. You have designed and defined the product specifications that are necessary to fulfill your customer’s needs. Now you just need to find and collaborate with a reliable supplier to produce a product that meets your specifications. A reliable supplier or factory delivers excellent product quality, ensures on-time delivery at a competitive cost and most importantly within an ethically responsible environment.

However, finding the right supplier or vendor is only half the battle – maintaining the supplier relationship and performance throughout is key to achieving long term success. We’ve put together a go-to guide for this and other topics related to supplier development that you’ll need to bear in mind as you embark on your production and quality journey.

Choosing a Supplier

The hardest part about getting started is finding the right supplier. You do need to dedicate time to this – when you begin your supplier identification investigation, it is always a good practice to dedicate resources to formally review and approve your list of suppliers. Whether it is being done internally by your own team or outsourced to a reputable agent, an approved vendor list is a crucial first step to achieving quality assurance.

A supplier with the right technical capability is obviously important, but one should never overlook production capacity and quality consistency. A small manufacturer may not be able to keep up with your demand whereas a big manufacturer may have too many orders to cater to your needs, which often leads to late delivery.

Another important consideration is the legal side – contracts, tax audits and so forth – this is part of a different service usually, but one that is imperative to ensure is included in your forward-planning as you embark on your supplier investigation.

When Pro QC gets started finding our clients the right supplier, we assess their potential options on-site – doing a deeper check into a shortlist of factories, visiting them to verify documentation and environmental and working conditions.

One challenge when you don’t already have a relationship with a supplier can be getting valid references and ensuring the accuracy of information. Stringent background checks are imperative.

We then provide detailed reports on their general operations, quality systems, qualifications, and capabilities. We are also able to locate and manage the supplier base for you, as your sourcing agent.

Through our initial supplier audit, we evaluate the supplier’s current practices – e.g. operational excellence & working conditions – to ensure they are right for you.

Alongside this is ensuring the legal registrations are valid for suppliers, and that they have passed all relevant certification checks.

Once you’ve narrowed down a supplier that works for you, always have at least one back-up in mind in case you quickly realize the first relationship may not be quite the right fit.

Production Quality and Audit

To make sure your suppliers are manufacturing your product to expected levels of quality, Supplier Audits, or what we call Quality System and Compliance Audits here at Pro QC, are the next imperative consideration in the supplier development process.

This type of audit makes an initial assessment of whether the quality system of the factory has the right leadership, management team, infrastructure, resources, processes and procedures in place to deliver a satisfactory end-product according to your specifications. Other audit types include the social compliance audits (e.g. SA8000) which evaluate that working and environmental conditions in the factories meet all safety regulation standards. If you are interested in more than a snapshot-in-time-audit, an auditing program can be established which provides an ongoing check of the compliance level of the supplier to ensure they consistently maintain standards and focus on continuous improvement.

At Pro QC we engage an independent review, conducted by a certified auditor, which ensures full neutrality of the supplier audit or factory audit. The auditors assess the supplier through a very structured checklist that is recognized by a global certification body (e.g. ISO, IATF, SMETA, BSCI), and client-specific requirements can also be incorporated.

A thorough review of production line processes can also be carried out in order to make any necessary recommendations to improve the quality, performance or delivery time of your product.

Supplier Relationship Management

After you have found the right suppliers following an initial or more detailed supplier audit, it is imperative to approach the Supplier Relationship Management (SRM) process systematically. In short, this entails cultivating a relationship with the supplier to ensure your needs are being communicated efficiently and effectively.

Important to remember here is that there are often cultural differences to be mindful of when working with suppliers from different regions, so setting the tone for the relationship and ensuring everyone is on the same page is the first step. This process can be challenging and time-consuming if you are going in with the little experience of working where your suppliers are located, which is why it is important to enlist a company that has experience working with suppliers in the market you are looking at.

Pro QC considers facetime to be imperative to cultivating a working relationship with suppliers. Not only do we take the time to conduct regular supplier visits to put a human face to the various product and quality requirements, but we also ensure contact is maintained through monthly calls and consistent communication.

We support our clients through tailor-made programs which include the handling of purchase orders and invoices, ensuring regular communications during first production and other key dates. This keeps everyone on the same page and informed of any changes as they happen. This level of communication is central to maintaining and managing an effective supplier relationship.

A good supplier relationship can help make or break a business, as suppliers can also be helpful sources of information and advice. If supplier engagement is high, there is a greater likelihood of stronger supplier performance and a more successful end product for the client.

Breaking up with suppliers is easy?

A recent blog post caught our attention.

Is breaking up with suppliers easier than we think, even if it’s done “with tact, sensitivity and an appropriate level of empathy?”

Our answer is no. It’s not easy at all.

Is it necessary? Sometimes.

According to the article, little value is placed on the supplier relationship and the assumption is that price rules all.  Is it all about price though… or, cost?

With that logic, an alternate idea is suggested…

Prior to breaking up with the supplier, evaluate how much you’re willing to invest in improving their performance vs. the associated switching costs. Identifying a solid supplier is more than a Google search.  Assuming everything they say on the website is true, it’s still recommended to verify if they exist, if they have that capacity you need, what their current on-time delivery is, what equipment is really on-site, how they’re managing in-house QC, etc. And, the qualification process often identifies investments required for the new supplier to meet expectations. Then, there’s the costs associated with updating logistics, etc. It all adds up and takes longer than people think.

Before switching, consider developing.

Many times, a supplier isn’t meeting expectations because they simply don’t have the resources to improve themselves. They need help.

Organizations that partner with suppliers and assist to provide development resources have a win-win situation. They’re investing less than it would cost to switch suppliers (generally speaking) and the suppliers see an overall improvement that results in better products/service for all customers.

Two examples:

You just scored a big deal with Walmart (or Lowe’s, Home Depot, Dick’s Sporting Goods, etc.) and now have to make sure you’re working with a compliant supplier.

  1. You immediately start looking for a new supplier that’s already working with Walmart. How long does that process take? And, how long does the transition take? Will it work within Walmart’s schedule? It usually doesn’t.  And, the cost involved is generally much more than investing in compliance with the existing supplier (assuming no other issues are noted).
  2. You need to find out how compliant your existing supplier is. If they haven’t worked with Walmart previously, a gap analysis is helpful. It identifies non-conformaties and estimates the cost involved in obtaining and maintaining what’s required.

You’ve received three late shipments, and your warehouse has identified similar paint issues during the incoming inspections. Rework is required, and you’re facing back orders and returns.

  1. You panic and are tired of emailing the supplier and hearing that everything is being taken care of. You can’t risk another shipment with issues and decide to switch. That process won’t be quick, or cheap. And, you’re not guaranteed to have any less issues.
  2. You leverage a local quality professional and assess the root cause of the paint issue and shipment delays.  The quality professional identifies corrective actions and then assists the supplier with implementation and ongoing management as required.

As a side note, switching suppliers because you want to diversify or expand your supply base isn’t questioned here. Strategic plans generally make sense and are vetted more thoroughly.

Contact us for help with your suppliers, or for additional information. We have more examples throughout our 35 years of experience to share. We provide solutions in 88 countries.

The Value of Expediting in Supplier Development

It’s not uncommon for us to receive calls and emails related to issues organizations are having with expediting orders, either from new or existing suppliers.

By expediting, the assumption is that a delivery date or other expectation has been provided, but is not being met. Reasons for delays in production might include:

  • New sub supplier
  • Equipment issues
  • Key staff turnover or other lack of resources
  • Packaging issues
  • Larger orders from other clients taking a priority

Whatever the reason(s) might be, communication can quickly become an additional layer of complexity as the supplier continues to assure the buyer that all is well and on schedule.  No fun for anyone involved here.

A quality solutions company, such as Pro QC, can recognize when product quality control might not be the issue.  In some cases, the supplier just needs support to address the root cause issues.

Having a local quality professional assist in expediting adds value:

  • Local follow-up can include regular calls and/or on-site visits as required. Accountability is increased. Any potential language and/or cultural issues are addressed.
  • On-site evaluation of issues noted can be evaluated. Corrective actions are developed and implemented.
  • If the supplier lacks internal resources, a company like Pro QC can allocate internal experts to the team to assist as necessary.
  • Weekly reporting (or other frequency as needed) reports progress and provides advance notice of potential delays or new issues. No more surprises.
  • Regular calls between the supplier, Pro QC and buyer presents opportunity for discussion of various perspectives and options as necessary or required.
  • Professionals on-site are able to evaluate the issues and current situation. A non-biased recommendation can be made to identify new suppliers depending on the conditions or other at the supplier location.

Supplier development solutions are customized depending on needs and the priority of those needs.  Development activities can incorporate a range of services and resources, from product testing to compliance auditing. Whether it’s expediting, inspecting, auditing or testing, an organization with experience and a global presence can find the right mix of resources to address and solve problems. Contact us for additional information.

Preventing Product Diversion

Written by: Jean Champlain, Supplier Development Manager

Just when you think you’ve made it through the most difficult challenges in the supply chain, another problem often catches people by surprise.  It’s product diversion.

Product diversion is when an unauthorized party sells a product outside of authorized distribution channels. It is an increasing practice and one that presents a serious hurdle to profits.

The way these unauthorized retailers and e-commerce sites obtain the products often involves reaching out to an authorized seller of the product. For example, many manufacturers have a signed contract with various salons or shops to exclusively sell their products. These salons, in turn, sell the products per their contract. However, there are salons who don’t respect the deal, that work within the “black market.” The salons or shops that are in the “black market” enter into deals with a third party that offers to buy the items in bulk. The third party then sells the item to an unauthorized seller. The unauthorized seller then sells the items on websites such as eBay and Amazon.

Apart from profit lost, the danger of diverted products going through these unauthorized channels is high for both the consumer and manufacturer. For example, products can be tampered with during the process and the quality level on those diverted products can change. It could cause serious health problems or high damage accidents in consumer hands.  In addition, the manufacturer can receive negative reviews from the public. For example, if a consumer, who has used Brand X cosmetic product for years bought from store at $10 per unit, and then suddenly found the same Brand X cosmetic product sold at $8 per unit on Amazon, cheaper than in store, and has a severe allergic reaction to it, he/she may be tempted to post a negative review.  The problem is that the blame is not on Brand X, but on whoever tampered with the product before it was sent to the consumer. Although the blame is on someone else, Brand X will receive the negative review that will discourage other consumers from purchasing the product. Because product diversion. The impact on the brand can be significant in many respects as it relates to product diversion.

How do you prevent product diversion?

Organizations seeking to stop and prevent product diversion should consider adopting zero tolerance policies within the organization and between several authorized sellers. In essence, a zero tolerance policy must be supported by actual financial consequences to mold authorized distributors’ behaviors.

This structure to ensure zero tolerance policies should start by identifying the potential risk of product diversion within its business distribution channel, and by an internal education within personnel to understand the impact or product diversion that will cause to their organization’s profit.

Another option is to use a tracking system on the packaging. That system consists of placing a discreet tracking sticker on the packaging. It will allow the organization to track what channels the product went through and where it ends up. This type of tracking can occur with just a simple connection to the Internet. A tracking sticker can also help to authenticate the product if the organization wants to conduct an investigation.  A more common method is to inform your consumers of the authorized resellers and to be aware of diverted products from unauthorized parties. The organization can do this by putting a list on its official website listing authorized sellers.

Regular one day on-site surveillance is recommended at the manufacturer to evaluate the level of prevention system established both by the manufacture and its various sellers and distributions. Assessment areas of focus include:

  • ANTI-DIVERSION POLICY
  • SELECTION OF SELLER / DISTRIBUTOR
  • NON-DIVERSION AGREEMENT
  • CONTROL OF AUTHORIZED SELLER / DISTRIBUTOR
  • CONTROL OF UNAUTHORIZED SELLER

Pro QC International also provides on-site product diversion evaluations that can be customized to meet your objectives. Contact us for more information.

Managing Supplier Compliance Requirements

A recent article posted to Supply Chain Digital “raises the point that all companies need to see evidence of suppliers’ own manufacturing and sourcing practices, particularly in health and safety, quality assurance and ethics.”

Due to the risks involved, retailers, associations and others are increasingly refining supplier requirements. Organizations wanting to sell products to these companies must ensure their suppliers meet code of conduct or other specific standards. Walmart is certainly one of the largest companies that comes to mind here and has changed the landscape of supplier compliance in many ways.  When qualifying suppliers to Walmart sourcing standards, audits are performed that address global security, social responsibility and general quality management systems.