Five Crucial Steps in the Supplier Development Process

When importing finished goods or components from manufacturers based overseas, healthy supplier relationships are critical. As you set out to build a new supplier development process, it is a good idea to regard each supplier as a strategic business partner. The objective is to build a collaborative, long-term relationship for mutual benefit. 

In other words, a dedication to continuous improvement is key to ensuring that the manufacturers in your supply chain are working to fully satisfy your needs. The goal is cost reduction, minimization of product defects, improved lead times, and much more. 

Today, we present five crucial actions you can take with your manufacturing partners to perfect the supplier development process.

Draw Up a Needs Analysis

Start by assessing the performance of your current suppliers, then determine a starting point for development. Establish Key Performance Indicators (KPIs) covering the following: 

  • Pricing 
  • PO and invoice accuracy
  • Defect rates, compliance rates
  • Responsiveness 
  • Lead times and on-time delivery rates

Your supplier performance KPI data will enable you to formulate a more detailed roadmap for developing the supplier relationship.

Rate Suppliers Using KPIs

Rate your supplier against these KPIs, then consider the urgency and importance of improving in each area. Perhaps your supplier costs are uncomfortably high, and that the factory is also struggling to consistently deliver on time. You might prioritize tackling the substandard delivery performance over the per-unit cost because it is already detrimentally affecting customer relationships and causing lost sales opportunities.

Build a Plan for Addressing Issues

Now that the key issues are clearly defined, you can help the factory address any shortcomings by engaging outside expertise, running training sessions, or establishing new processes to fix the issues. Try to spend time with the manufacturer to achieve an inside view of every stage of the manufacturing process, from pre-production to delivery. Then co-operate on building the necessary solutions.

Initiate Supplier Development Plan

Once you’ve determined the real issues and have a detailed plan for improvement firmly in place, it is now time to implement. Continue tracking your KPIs to check if the supplier’s latest metrics are hitting the mark. Are they delivering more consistently? Have they enabled cost reduction? Are their manufacturing processes more efficient? Keep on monitoring the situation.

Rinse and Repeat With Your Next Supplier

Now that you’ve moved through this process with one supplier, you can repeat it with the next. Rate all of your suppliers to identify which are the top priority for supplier development, then take action to improve on these relationships. In doing so, you’ll be able to get the best out of your suppliers over time, while also achieving customer satisfaction and an enhanced bottom line for your business.

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