The Launch Director of a rocket destined for space relies on a series of signed-off instructions before a rocket is “go for takeoff.” These operational checklists are meticulously reviewed to assure each flight is executed safely and flawlessly. Similarly, manufacturers must maintain a robust process to efficiently and effectively assess suppliers’ capabilities, operations, and financial stability both early in the supply-building stage and post sourcing to ensure successful production launches and ongoing operations.
Our supplier assessment research has revealed that many mid-size manufacturers and larger have as much as 25% overlap in the type of information collected across departments during supplier assessment. Such overlap amounts to wasted time and money. Leading companies are reviewing their supplier audit criteria, eliminating redundancies, and transitioning to quantitative metrics for assessing suppliers resulting in substantial improvements in supply performance.
Customers expect the highest in quality and uninterrupted supply. It is important that manufacturers conduct remote and onsite assessments of their suppliers. The very nature of the term audit creates an us versus them adversarial dynamic, which can communicate that buyers need to “catch” suppliers by identifying issues. Many departments have varying supplier assessment definitions and information requirements adding confusion and slowing the process.
The resources required to properly audit foreign suppliers: travel costs, language skills, and process experience can pose difficult to overcome. The vast amounts of data collected today during supplier assessments can be overwhelming, including the resources needed to effectively store, reference, and take action on the resulting information. Manufacturers and supply partners must come together to focus on assessing the operations and processes that create the components that make up the end products in order to collaboratively drive supply chain value for customers.
Key Considerations for Supplier Assessments
The traditional supplier audit definition is coming under pressure and many leading organizations are transitioning to supplier assessments rather than confrontational sounding audits. Supplier assessments are metrics compared to internal best practice requirements that forecast supply success. Supplier assessments should be periodic, usually quarterly or annual evaluations, of suppliers at a specific point in time.
There are four types of Supplier Assessments with distinct purposes; capabilities, determines initial supply fit; sourcing, approves sourcing; plant, ensures quality and continuous supply; and financial, calculates stability of organizations. Companies are reviewing their entire spend to pair supplier assessments levels based on supply: demand, risk, and market dynamics. Our research and experience has demonstrated the below Supplier Assessment actions drive positive supply performance.
- Action 1) Convert from an Audit to a Consultative Mindset
It is impossible to know everything about every manufacturing process so a consultative approach is the right one to take to enhance relationships. Offer potential solutions and avoid being an “all knowing expert” who dictates that a supplier must solve a problem a certain way. Drive value by offering operational enhancements through sharing lessons learned in every interaction to quickly build rapport and ultimately improve supply chain performance. Develop and reinforce the skills needed to properly advise supply partners using many techniques utilized by leading service companies. As issues inevitably arise, make a conscious effort to foster partnership language. Your goal should be to collaboratively address assessment disconnects and not default to disqualification. Clearly outline next steps: leads, timing, and process for corrective actions while onsite, and follow-up with an email to deliver results.
- Action 2) Meticulously Document Process, Train People, & Enhance Over Time
Of all processes within manufacturers, the supplier assessment process is arguably one of the most critical. Even so, there often seems to be a lack of consistency in execution, tracking and action. The process time to complete supplier assessments pre-sourcing for supplier sets can be cut as much as 24% by documenting, timing, and refining every step in the supplier assessment process. Further, robust training must be conducted including: mentoring, exams as well as certifications to establish process mastery, consistency and repeatability. International supplier assessment certifications establish cross-border continuity in the metrics attained and tracked.A core segment of an effective process becomes instilling a continuous feedback loop for receiving, processing and implementing improvements. Incorporate real time improvement feedback from your team to ensure a high functioning Supplier Assessment Process is maintained.
- Action 3) Utilize Quantitative Metrics & Track Progress
A supplier assessment process must include a quantitative rating scheme for every line item to contrast with supply requirements. Move away from arbitrary scoring scales that force auditors to use judgment to specific capability tiers associated with scores. Convert traditionally qualitative leading supply performance indicators, supplier engagement, leadership involvement, and overall responsiveness into quantitative metrics. Companies are experiencing a 12% compression in program timelines through tracking and monitoring supplier engagement among potential and current supply partners. Supplier assessments must be logged, filed, and tracked in a timely manner to guarantee proper use of the data collected. Consistent monthly reviews of supplier performance on supplier assessments can save valuable time and allow for quicker sourcing decisions when comparing future potential suppliers to past scores within similar commodities.
As with a rocket launch, the steps to complete a supplier assessment must be followed in proper order and with care to safeguard success. A consultative approach to supplier assessments will differentiate your company, strengthening your supply-partner bonds and supply performance. Empower your teams to conduct effective supplier assessments by providing them with the needed training to confirm process mastery. Tracking traditionally qualitative leading supply performance indicators can fend off issues before they arise. A steady focus on the core task at hand, ensuring continuous flow of quality components by suppliers to ultimately assemble quality finished products for customers is the key to success. Our experience has demonstrated that diligently taking action to instill a consultative approach, document ongoing improvements, and foster quantitative tracking for supplier assessments improves supply performance.