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.
- 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).
- 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.
- 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.
- 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 article discusses each of the primary five stakeholders identified above and includes some interesting supporting data.