10 tips for Mitigating Problems with Suppliers
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Depending on a robust supply chain is essential for any enterprise and problem suppliers are a very big determining factor for success or failure. All too often disasters are experienced due to poor performance (product below standard), delayed or failed deliveries, and even financial issues such as bankruptcy. Problems such as these can cause the buying organization to lose income and in some cases causes you’re the business to grind to a halt. It is therefore important to implement risk management and preventive measures as part of your supply chain optimization.
Supplier optimization includes tools and process that ensures the best possible operation of manufacturing and distribution within your supply chain. The process and tools identify potential problem sources within the supply chain and creates a window of opportunity where the customer and their supplier through collaboration can place mitigating practices to address key issues and concerns.
Ways of mitigating the problem can be formulated by both parties, by considering the most common causes of issues. For example:
Production Capacity
Miscalculating the supply chain capacity produces disastrous consequences, particularly for those suppliers that little experience of your product. The best way to handle this is to be fully aware of your suppliers capacity and to start small on new suppliers, gradually building on available capacity as they gain experience.
Miscommunication between customer and supplier
Failure to speak at the same level or language with your supplier is an open invitation to potential problems. For example when carrying out a forecasting exercise, use the language that your supplier understands like how many customers are using the supply chain and how many SKU’s/Shipsets are expected within the period rather that asking for their estimated increases in production. Develop processes that ensure communication is well understood and acted upon.
Your tools and systems
Tools and systems for planning should be flexible enough to include current and future requirements. Your existing tools are maybe good enough for current needs but you must consider how you will interface with your supply chain – sharing information about future orderbook (especially where the product is complex or susceptible to lengthy leadtimes) can be a key success factor.
Shared planning between supplier and buyer
Where there is a heavy reliance on an external supply chain – involving these ‘partners’ in your planning is vital – planning should be a shared activity.
Production risks and issues
Determine any risks or issues in your suppliers production processes – is there reliance on hard to get material – or reliance on key machinery – what will happen if there are issues? Does your supplier have a mitigation strategy?
Planning for reductions in requirement
Once again sharing information with your supplier about your orderbook can not only help the supplier when capacity requirements increase but also where there is a reduction in demand. Variation in demand can have wide reaching implications – forward planning can ensure that your supplier mitigates any financial issues and remains available.
Personnel turnover
Particularly for key personnel in the supply chain, measures should be in place to cover issues such as departures or lengthy absences – this is especially true where manufacturing knowledge may be held within a small team of people – your supplier may have the material and equipment but without the knowledge to manufacture the product they are in trouble!
Continuous improvement
The supply chains adherence to constant improvement is a good mitigating measure. Supply chains that have continuous improvement systems such as kaizen will more likely be able to handle production problems. How are your suppliers geared up for this?
Formal capacity planning program
Continuous improvement on the effectiveness of the capacity-planning process is a requirement in setting goal for expansion and improvement of at least one part creating new versions of the plan. These help mitigate supply problems on flexibility, ensure capacity is assessed regularly.
Learning from lessons when things go wrong
One of the most powerful tools for mitigating problems with suppliers when things go wrong is to learn from mistakes. However harsh, mistakes will happen – what sets apart a goods supplier from a poor one are those that learn from their mistakes – fix the problem and improve. Repeated issues or a failure to stop systematic issues are a sign that all is not well.