When visiting suppliers ahead of a potential business relationship, the primary goal is to come away with a partnership that provides quality parts at the right time in the right place without adding undue risk to the program. A good audit program has a standard template with questions all suppliers can answer to ensure that every potential partner is assessed objectively. But due to the complex nature of most modern businesses, deciding which questions to ask becomes the real challenge.
Understanding how much risk a potential business relationship carries with it means asking pointed questions about a supplier’s workforce, finances, operations, and business plans. If a supplier is unable to clearly communicate to prospective customers the internal systems in place to ensure programs meet cost and timing requirements, it’s likely the risk is far too great to include that supplier’s products or services in critical programs. The five questions described below are a great starting point so an organization comes away with a better understanding of its new supplier’s capabilities than it had before it visited them.
5 Risk-Reducing Questions to Ask During a Supplier Site Audit
1. What Are the Supplier’s Crisis Management & Backup Plans?
Operations aren’t always able to continue as planned. Accidents, fires, natural disasters, and other unforeseen catastrophic events can render a plant inoperable and, thus, unable to produce the parts that were purchased. A supplier should have a plan in place to continue operations during this scenario, and asking for a detailed summary of that plan is an easy way to see if the potential supply partner is sufficiently safe to do business with.
2. What’s the Supplier’s Program Management Strategy?
A supplier’s experience in managing complex programs is important to de-risking the supply base. It can be a red flag if a supplier isn’t comfortable with or can’t sufficiently describe a scenario in which a project manager was appointed to manage a customer’s business. All site audits should include a discussion about the project management strategies employed by the prospective supplier to understand their capabilities. The risk associated with suppliers that are unable to effectively manage programs for their customers is far too high not to explore in depth when visiting the supplier.
3. Does the Supplier Have Design Capabilities?
Design capabilities are an important risk-mitigating factor when evaluating prospective supply partners. Can the supplier respond to design input when cost reduction efforts are critical to the success of a program? The risk reduction benefits of a supplier with significant design capabilities goes far beyond just responding to difficult situations when needed, including preventing them from occurring altogether. A supplier with the capability to be proactive in recognizing cost and timing reductions in design is a valuable partner in the supply chain and a key risk mitigator for production programs.
4. Does the Supplier Develop KPI’s and Post Them for Associates?
Suppliers that are open with managing performance and rewarding associates are far more favorable to partner with than those who don’t. Asking suppliers to see how KPI’s are presented is a key step in the audit process that tells a significant story about how management sees its role in running the business and managing programs. Understanding which KPI’s are chosen and if they’re posted for all associates to see is a good indicator of how seriously the supplier takes its commitment to its customers and the success of its associates.
5. What Percentage of the Workforce is Temporary?
In most manufacturing environments a temporary workforce is necessary and unavoidable. Temporary hires are a quick and relatively inexpensive approach to scaling for projects that grow quicker than the hiring process can keep up with; however, too significant of a temporary workforce can send some signals that a supplier may be a bit more risky than they’re worth for a new program. A high percentage of temporary hires in regular production suggests a lack of long-term commitment from other customers to the supplier and therefore are potentially not a wise partner, depending on the criticality of the program the supplier is being evaluated for. Suppliers are mostly up front about the quantity of temporary workers in the organization so this is a simple question that goes a long way towards de-risking the supply chain.
Approaching supplier site visits with a standard template and an objective plan for evaluating the potential business relationship is the best step towards ensuring the audit process eliminates as much future risk to the production program as possible.