Critical Supplier Management

Managing critical suppliers allows you to evaluate your most important sources of products and services. Depending on the size of your company and number of suppliers, you will use either a standard classification or a more complex system. The first step is to classify all of your suppliers based on their weight in your production process. You can place suppliers in one of four categories based on their performance and role. These categories include:

• Incapable Partner: This category may also be referred to as a Basic Partner. They do not meet quality standards. Their information sharing is limited. Their products or services are needed, but you should strongly consider dropping the contract at the end of its term.
• High Risk Partner:  Your relationship to this partner may impact operational efficiency. There is limited benefit in extending your contract with this supplier. The cost and quality are below ideal.
• Associate Partner: Also known as a Preferred Supplier. They demonstrate a commitment to improvement, openly share information and have valued expertise. They should be willing to work toward becoming a full or critical supplier.
• Full Partner: These partners can also be referred to as Strategic Suppliers. They are your most critical suppliers. Your partnership will offer a unique advantage. They will be willing to assist with market changes and demands. You will have direct communication. They will always demonstrate high quality, on-time delivery, superior service and flexibility. They will have well documented controls. They will provide full support quickly, and are available anytime for questions.

Evaluation of suppliers should be conducted on a yearly basis, at a minimum. You should thoroughly document evaluation criteria including:  Price, Performance, Service, Reliability, Quality performance, Risk potential and Complaint information.

Key criteria in choosing critical suppliers relationships include:

• Specifications, standards and supplier response
• Volumes and pricing
• Change control
• Innovation potential
• Production part approval
• Traceability
• Competency
• Supplier process monitoring and self-audit
• Non-conformance management

The weight of each criterion may vary depending on the product or service. For example, is it more important for the supplier to provide high quality or low price? Is innovation potential more important than process monitoring? Points should be given for each criterion. Once this process in complete you will have a clear overview of your production chain and suppliers.  You can then share your evaluation with the suppliers and identify areas where improvements can be made. In addition, the results can be used  to strengthen the most important relationships.

An effective supplier relationship management system,  will provide digital documentation of all  suppliers, data, documentation and evaluations in one place. This is especially useful when working with a large number of suppliers. The system should be standardized and allow for easy  access and evaluation.

Critical suppliers are the most important piece of the supply chain. You rely on them for the most crucial parts and services. You must maintain a strong relationship with these suppliers and maintain open communication. In today’s global marketplace competitors can spring up at a moment's notice, challenging product quality and prices. You likely buy components, ingredients and services from all over the world to source quality at the best price. Control of your supply chain allows you to protect your business. Clear documentation, scheduled re-evaluation and the support of managers are necessary for successful supplier management, which will give you a tangible competitive advantage.

For more information on how Accupoint can help you with critical supplier management, contact us today.