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I’ve never heard the process of switching suppliers described as easy. People may say that it “went smoothly” or “could have gone worse,” but the reality is that it’s not easy. Because of this, many organizations delay the process and experience increased costs and consumer dissatisfaction as a result.
Questions to consider:
In a recent post, we discussed several New Year’s goals that we frequently hear from clients and prospects around this time of year. One of the most common is evaluating and improving supplier performance.
We know that suppliers may appear qualified at first and then fail to deliver the required quality after time and money have been invested in project development. Other suppliers have many of the desired capabilities for your projects but are inconsistent in quality and performance. Supplier switching costs can be very high and risks to quality and delivery unacceptable.
Juran describes the process of supplier evaluation as:
- The evaluation of product samples
- The evaluation of the supplier’s manufacturing process
So, how well are your suppliers performing?
We were just reading through an article posted by Supply Chain Management Review that discusses Four Best Practices for Minimizing Global Supplier Risk. As a third-party quality engineering and consulting firm, we get questions about this often and have written a handful of articles related to the topic.
We like the SCMR’s four best practices, but did want to add some additional comments.
1) Make routine site visits.
It can be quite costly to manage routine site visits, whether your supplier is domestic or abroad. All of the benefits discussed in the article can be achieved by partnering with a third-party to represent your interests on-site. From facility audits to product inspections, a third-party has more local knowledge and specific experience in supplier development.
“Site visits allow procurement officers to ensure that workplace practices and product quality are consistent with their expectations, as well as to increase the likelihood of early discovery of major problems—from supply chain hiccups to unsafe working conditions.”
2) Invest in local advisors.
Local advisors can be the third-party QC organization or agent if one is being used, but a solid relationship with suppliers isn’t an impossible achievement either. Open communication goes a long way here. Third-party quality providers (3PQs) are unbiased and can offer extensive local expertise. Many third-parties are actually perceived as extensions of an organization’s own in-house quality representatives.
“Investing in consultants or other advisors on the ground in the countries where your risk is greatest, who understand the dynamics relevant to your business and can flag problems early, is critical to maintaining a smooth foreign procurement experience.”
3) Reward supplier performance.
Supplier development is more than a reward system for supplier performance. When organizations work with suppliers to develop partnerships, evaluation and corrective action is seen as more of a continuous improvement effort rather than a grading and/or carrot-stick system. When weighing risk vs. reward, many suppliers that feel they are in a partnership are thinking long-term.
Rewarding supplier performance is good though.
“Getting out in front of potential disasters with a program that benefits suppliers for avoiding or mitigating risk is one of the best investments a procurement department can make in protecting the procurement function and the company.”
4) Build internal support.
Pick up any quality book, and it’s going to mention the necessity of top-down support. Communications become especially relevant here. Make sure you’re capturing the right data and using it to communicate effectively to whoever your audience is.
Getting buy-in from the top corporate brass, as well as from senior executive peers in other departments, can be critical to securing the resources necessary for a robust and effective risk-management program.
Also check out our recent post on 3 Ways to Improve Supplier Communications. Pro QC’s VP/Americas also contributed a newsletter article regarding Reducing Outsourcing Risks and Cost. Read this one to learn more about the third-party quality provider (3PQ) value.
Developing and maintaining strong supplier partnerships depends on a solid foundation of successful communication.
In our thirty years of experience at the table with clients and suppliers around the world, we’ve seen a range of outcomes where communications are concerned. The impact is quite often more substantial than you may think, with some arguing that communications are the primary reason for a partnership’s success or failure.
1. Recognize that communication is about understanding.
In order for us to understand a perspective outside of our own, we need to actively listen. We are all guilty of wanting to believe we’re right, but the mindful moment is when we realize that others think they are right as well.
Recognizing that communication is about understanding means that we allow all parties to express their position without judgement, interruption or disrespect. Communication ceases to exist without this.
Ask yourself, what is their purpose as compared to yours at this particular moment? Our clients and their suppliers often find their objectives are more similar than they thought. With common ground, understanding is less stressful and more focused on problem solving.
Bonus: Taking time to listen and evaluate in any given situation actually saves time because it’s likely to avoid conflicts, miscommunication, etc.
2. Nonverbal communication counts.
In addition to managing our own nonverbal communications, it is helpful to assess the other party’s as well.
The tone of someone’s voice is considered nonverbal communication. Be mindful of the tone in any communications, from email to face-to-face. Clarify before assuming.
With operations in over thirty countries, we recognize there’s a heavy reliance on email. But, when emails and regular phone calls fail to get the desired results, try Skype (or whatever similar) or an actual face-to-face before giving up. The best communicators know exactly when to make that call.
3. Stay positive. Seriously, stay positive.
Staying positive definitely sounds easier than it may be at times, especially when you’re facing production issues, shipment deadlines, etc. Higher stress situations often send all of the regular rules of communications packing. You want your purchase order and you want it to match the specifications. The supplier wants their payment and says you weren’t specific enough. What’s there to smile about in this situation?
Well, take a moment and consider the effect of not smiling in this situation. Not staying positive has a much higher incidence of the situation not getting resolved in an ideal manner. Even if you feel like you’ve gotten what you wanted in any given situation, the future of the relationship may have suffered because you didn’t think about the long-term investment. There’s often significant value there. And, consider that even if you don’t value this particular relationship, it is entirely possible to believe that your negative reaction will result in a poor perception of your organization to your stakeholders. That’s not good.
So, be positive… Take that extra moment to process the effect that being negative will have on the situation and rest assured you do catch more flies with honey.