Mutually Beneficial Supplier Relationship

An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value.

Today, businesses are very interdependent on each other, their suppliers, and their customers. Decisions should not be made in isolation, as they can have an impact on others in the marketplace and may have a detrimental effect on the organization.

Organizations depend upon their suppliers. Organizations' success is dependent on having a strong and viable supply chain and ensuring cost controls, quality, and performance improvements of purchased products and services.

Your suppliers can impact your cycle time for time to market or impact your supplier costs. You need to establish supplier relationships, review rankings of key suppliers, and determine risks to the organization tied with the supplier.

Involve key suppliers in product design where applicable so you can utilize their knowledge, expertise, and innovation. Ensure your personnel have a thorough knowledge of the supplier's processes, costs, and capabilities in order to meet current and future needs. Your suppliers can also help you understand your competition and industry trends.

You may also be able to negotiate extended terms on purchases so that you can utilize your cash flow in a different area.

Be careful not to rely on only one supplier. Many companies were caught when the tsunami hit Japan, as they were getting materials from suppliers in this area. The unavailability of one part for an automotive industry could shut down assembly lines for a long time period if other suppliers were not available. Also if other suppliers were found, the item could have an increased cost factor tied to the part that was not considered.

Perform supplier audits to ensure that management system structure meets international standards – supporting the system of working with nonconforming products and having systems in place to analyze root causes and processes to continually improve their operations, which in turn support the continual improvement of your quality management system.


Focus: Quality – Customer

1 How does the organization build and manage supplier relationship? Are any of the following conducted, and if not, what is in place?

a. Financial risk analysis of high-risk suppliers

b. Supplier surveys

c. Supplier audits

d. Executive visits

e. Approved vendors in classification categories

2 Do you conduct supplier audits on your key suppliers?

3 Who are your key suppliers? Where are they located? With increased costs tied to oil and gas, are your suppliers in areas that will be impacted by these fluctuating supply-chain costs? 4 Does your organization have a reliable forecasting of its material needs for suppliers?

5 Do you keep your suppliers informed about what is going on in your company?

a. Employee changes

b. New product launches

c. Special promotions you have planned 6 How do you treat your suppliers?

a. Payments on time

b. Communicate openly with them

c. Visit them regularly

d. Invite them to your location

e. Give them sufficient lead time to process requirements

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