It’s just as the old saying goes: “Your supply chain is only ever as strong as its weakest supplier relationship.” Okay, I just made that up, but it’s absolutely true.
As product managers and quality managers know all too well, the heart of effective supplier management is, in reality, effective supplier relationship management. It’s all about the people inside the processes.
From procurement to supplier qualification, contract management to compliance assessment, every step of supplier lifecycle management boils down to establishing collaborative partnerships.
Avoid Downfall Due to Human Error
The universal truth about managing human partnerships (in both work and life) is that they tend to be messy and unpredictable. Obviously, that won’t fly when you have KPIs to meet—and particularly today, with the constant potential risk of supply chain disruption looming over your head.
We’re living in an age of ongoing supply chain disruptions; it’s no longer about recovery and “waiting it out,” it’s about renewal and gaining control over your supply chain now by developing more strategic supplier partnerships and adding alternate sources.
Everyone involved in the supplier management process has been experiencing this. The real question is how can you effectively streamline these partnerships to get the maximum value throughout your entire supplier lifecycle and reduce risk at the same time?
The answer is digitalization—keep the human relationships, remove the messiness.
Cloud-based product management platforms have supplier lifecycle management built right in. When you’re working within a single system that tracks everything in real-time, you’re not only strengthening supplier collaboration, you’re dramatically diminishing your risk.
Evaluation: Assess Risk from the Start
Just as in life, the first step of building a new relationship is determining if it's right for you. Best-in-class approaches to procurement processes look further ahead than just cost savings and strategic sourcing.
The next disruption could be right around the corner. Do you have robust supplier risk management in place, and is your supplier qualification process adjusted for the greater potential for risk? You may need to reexamine your criteria to assess new suppliers. These include (but are not limited to):
- Commodity. Is whatever component or material the supplier provides otherwise difficult to come by? Will it offer a competitive advantage for your product?
- Critical component. Is this supplier’s component crucial to the success of your product and meeting your business needs?
- Safety and certifications. A crucial box to check for your Quality Management team. Does the new supplier have all the credentials to meet your own quality and regulatory standards?
- Past performance. What do you know about this supplier’s history? Do they collaborate well? Do they meet deadlines? Seek out and examine reviews and case studies to determine these answers.
- Finances. Spend management may be an obvious one, but it’s always critical to determine if there are potential cost savings from onboarding the new supplier.
- Software. Nowadays, suppliers who use cloud-based software that integrate easily with the manufacturer’s system are becoming less of a “preference” and more of a necessity.
Speaking of software, in this age of digitalization and automation, manufacturers prefer suppliers who have a modern Quality Management System (QMS) in place.
More specifically, they’re looking for a QMS that goes above and beyond what’s needed to simply meet compliance requirements, but in addition share and collaborate on the design, manufacturing, and continuous improvement processes.
After the selection process is completed and you’ve determined the new supplier meets your onboarding criteria, you’ll need to acquire further documentation of their qualifications and your new partnership agreements. These records would also include the likes of quality plans, change controls, contracts, and supplier certifications.
Integrating the onboarding process into a cloud-based supplier management software is especially beneficial, both for the convenience of speed and for streamlining future evaluations and reevaluations.
Reevaluation: Build In Ongoing Risk Assessment
One of the starkest differences between an on-premise process versus using cloud enterprise software is the ability to continually monitor supplier performance in real time, including dashboards and trends.
Controlling for supplier risk cannot be done effectively without regular audits of your supplier data: Have they been on time with delivery? Have they slipped on meeting any of your acceptance criteria? Is their component quality consistent or do they have a high number of returns?
When all of this information is saved digitally, you can create automated scorecards that continually track your supplier criteria and trigger notifications if anything falls below your preset metrics.
Instead of lengthy manual audits for supplier compliance, you can streamline the reporting process by checking your supplier dashboard to get much of the information needed.
Consider how these automated processes could optimize your supplier risk management. Instead of digging through disparate changes, nonconformances, part approvals, and supplier agreements to double-check timelines and component quality compliance—all this information is kept together, seamlessly connected, and constantly analyzed.
You’ll get alerted the moment a risk factor reveals itself and be able to quickly understand the impact across product, quality, and the value chain to best prepare for or even prevent any disruption.
When it comes to your supplier management or vendor management workflows, you won’t be able to move the needle without digitization.
Using a cloud-based solution with inherent supplier management software built in, you can keep an eye on supplier performance in real-time, implement automation for risk management processes, identify the right suppliers from the start, and ensure the best suppliers into the future.
How prepared is your team for the next disruption? Arm yourself with The Disruption Survival Guide: 3 Key Ways to Prepare.