The Importance Of Supplier Development Reviews
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Supplier development strategies are long term activities undertaken jointly by both the supplier and the buying organization. The development can cover a variety of facets, from improvement activity (i.e. improving delivery performance) through to aligning product or service requirements.
Supplier development doesn’t occur with all suppliers, typically development activity will occur with suppliers that are being retained (consider the application here of your supplier evaluation system where often suppliers will fall into the categories or maintain, develop or exit). The development activity is usually tailored to meet the needs of the buyer, but it’s often a mutually supportive activity which forms part of the ongoing relationship.
The Supplier Development Review
Supplier development reviews are a key step within the supplier development process. Reviews are carried out to:
a) Review business issues / problems;
b) Ensure performance is aligned with requirements
c) Monitor ongoing projects/initiatives
d) Share information and business strategy
Meeting Targets
Any supplier development strategy will have identified key targets that need to be met and the supplier development review is an opportunity to see whether or not these are being attained.
While this may sound negative supplier development programs are designed to be constructive and in determining the route cause of the problem, collaborative improvement plans can be deployed. It should be remembered that development targets set need to be realistic, unfeasible expectations do not usually foster supportive relationships!
Identify Areas For Support
The review will also offer the chance for the supplier to highlight any way in which the customer can support them. For example, your review may indicate a poor understanding of requirement, improved demand signal, access to specification documents etc.
Remember that the review is an opportunity for both parties to indicate how they are finding the relationship and whether it can be improved.
Without a review there is no constructive element to the relationship and it is almost bound to flounder; so the review is essential to ensuring a positive, constructive and perhaps most importantly, a lasting relationship between supplier and the customer!
Suppliers are an intrinsic part of your supply chain, poor performance can hinder your business and selecting the wrong supplier at sourcing stage can result in challenges later on. Supplier evaluation should be a cornerstone process for your organization as it provides you with an in-depth assessment of performance set against objective and detailed criteria.
Scoring Your Suppliers
The first part of this process is the scoring of suppliers. This is a means of evaluating your suppliers, measuring their performance against a set of targets. The targets have to be of importance to you and can include how they perform in terms of delivery, their lead time, the quality of items supplied, the price, service levels and so on. This process of scoring is helpful because it assesses all of the suppliers against a very standard set of criteria. The result of this is an independent and objective assessment of how well the supplier is performing and whether they are meeting your needs in a way that is acceptable.
Some scoring systems offer the opportunity to utilize weighting according to the importance of certain criteria. For example, if price is viewed as very important, then that will be given a higher weighting than something that is viewed as less important, which could be invoicing procedures etc.
Often there are various sub-divisions within any one measure. For example, the price of the product is not just about who much it costs, there are often more factors to be taken into consideration. These could include the stability of the price, whether invoicing procedures are acceptable and the invoices accurate and how much notice is given about any changes to the price etc. So this is about much more than simply how much each unit item costs, there are other ‘hidden’ factors that need to be taken into consideration.
All the points that will be used to rate or score a supplier will have the same variances, especially complex issues such as quality issues and service factors. This makes the whole scoring system quote an in-depth analysis of how the supplier is performing.
The system can also be used with potential suppliers to see how they could meet supply demands in the future.
Ranking Suppliers
To complete the analysis it is important not just to score the supplier, but also to rank them. This provides the customer with a real insight into who is performing well, who is average and who is languishing at the bottom of the league.
This format is very clear to understand and can also be used to share information with suppliers, so that those who are performing poorly can work towards improving their performance. Often details of other suppliers may not be shared, but individual suppliers will be furnished with details of how they scored and what their ranking was in the overall table.
Once ranked suppliers can be grouped (typically into A, B, C groups). Specific groups may then result in targeted action (often along the lines of Develop, Maintain or exit).
Objectivity Is Key
Key to this process is objectivity. There are times when personalities creep in or even personal bias, so if no objective scoring or ranking system is used, then it can be easy to use memory or even prejudices to rank a supplier as ‘good’ or ‘bad’ but with an objective tool to analyse performance and assess each supplier ‘against’ each other, a true picture emerges of exactly who is performing well and who is to some extent ‘the weakest link’.