A nice way of doing business with your Suppliers
https://www.dhirubhai.net/company/continuous-wave-pty-ltd
Supplier Development is one of the key strategies that the Automotive Industry uses to ensure quality, on time delivery & to reduce the cost of their component parts. The results are impressive, benefiting both the car manufacturers & the suppliers, so why don't more companies use this approach?
If you really consider the impact your suppliers can have on your business, then Supplier Development is the logical way of working. If you get a late delivery of parts, or you have to reject half of them due to damage, what impact does that have on your operations & your customers? If a supplier is unreliable, do you hold extra stock to counteract the risk to your business? When the price goes up do you lose margin or annoy your customer by passing the rise on?
After labour, brought out parts/services are often the next highest expense for a business, so working with & understanding your suppliers to gain mutual benefit just makes sense. The automotive industry expects 5% year on year reduction in the costs of their parts, while most other company's seem to be happy accepting small increases in cost every year? Yes the automotive industry can beat a big stick at their suppliers pushing for these savings, but they realise to sustain themselves & the suppliers, working with them is a much better approach that gives reduced costs, better quality & assured delivery, while strengthening the supplier, which is good for everyone in reality.
Supplier Development is all about being open & honest with your suppliers, understanding their business needs as well as your own, which is where the whole idea can fail if you are not careful. You need to be willing to work together openly for the benefits to come to fruition. Sending someone in to a supplier with a check sheet to audit their process & highlight missing bits, will not work, creating needless work for a supplier is not developing a relationship based on mutual benefit. Process compliance is not Continuous Improvement of Quality, Time & Costs.
Your customers want your products at the right quality level, at the lowest price possible & with the shortest lead time possible, invariably right now. To be able to give your customer these requirements, is the massive juggling act your company performs on a daily basis, ensuring you have the right staffing levels, the right stock holdings, the right components, the right order processing systems. the right logistics etc. etc. Now to truly meet your customers needs you need the ideal production system, whereby you can produce the customer's requirements, when you get the order at the right price, to the right quality level, all in the shortest possible lead time. This is known as synchronisation with the customer.
So your target is the ideal production system, looking to remove waste & only provide value to the customer, if this is your goal (and it should be) then there are a number of synchronisations you need to consider. Synchronisation of Sales with the Customer, Synchronisation of Logistics to the Sales, Synchronisation of your Production to the Logistics & Synchronisation of your Suppliers to the Production. So if you are following me up to this point, what this is telling you is, you will never get to the ideal production system & synchronisation with your customer without being synchronised with your suppliers. The way you improve your synchronisation with your suppliers is through Supplier Development :-)
By taking the lessons learnt from your own continuous improvement journey & even other suppliers you work with, you can start to support your suppliers, understand how what they do impacts your production, understand how what you do impacts their production. Wouldn't it be different & I would suggest nice, to go to your supplier & start a conversation along the lines of "We need to get the price of your part down by 10 cent to win some new business, if we send in our Lean Manufacturing experts to help you improve your processes, can we put the cost savings found against the part price & you can gain the benefits for your other customers & parts" or "We are having to keep high stock levels of your parts & I know you are doing the same, can we send in our Lean Manufacturing experts to look at your changeover times with you to see if we can half them, allowing you to make smaller batches more regularly which would reduce both our stock holdings, freeing up cash, while allowing you to react better to ours & your other customers demand"
As well as the benefits on Cost, Quality & Time that can be achieved for you by working with your suppliers & sharing your Lean knowledge, there are many benefits for them, training of their staff, opportunity to benchmark themselves, the same Cost, Quality & Time improvements for all their products & customers. Just as importantly the understanding they are working in partnership with you for the great benefit of both companies, building a stronger relationship that can discuss issues & work together to resolve them.
There are many ways of initiating Supplier Development, often resource from all sides is the limiting factor, but if done correctly the results are impressive for everyone. Creating a group of suppliers, say five or six, willing to work together with your Lean Manufacturing Experts, taking the lead is often a very good approach. Each supplier can hold a meeting at their site, get to see other suppliers sites for benchmarking, learn the best practice & lessons learnt from each other, develop a joint action plan with common goals & celebrate the success of the activity as a team. This works well when there is a joint theme that everyone can see the benefits of changing, such as improving equipment efficiency or reducing material handling.
If your suppliers see themselves as competitors then the team approach may not get buy in from them, this does not mean you cannot work with each supplier separately, targeting specific waste or issues indentified which will improve quality, cost or time. The automotive industry also works with distress suppliers, so when a company is struggling rather than letting it go under, they will invest time & knowledge to help them become strong & stable again. This might be a step too far if you are just starting out with Supplier Development, but shows how building a strong jointly beneficial relationship can really work for the good of all.
When you understand that synchronisation with your suppliers to improve quality, cost & time is critical for you to achieve synchronisation with your customers then Supplier Development starts making sense. Why not give it a go, work with your suppliers for mutual benefit, the results can be amazing & as I think, it is a much nicer way of doing business.
if you don't have the internal Lean Experts then maybe it's time to get in some help, very quickly you can build up your own knowledge & be developing your suppliers with support from the right consultants to teach you all the tools & theories needed to start this lean journey together. Then before you know it, you will have your own Supplier Development Team who are making a real positive difference to your quality, costs & delivery offering to your customers with a stronger, more collaborative & streamlined supply chain.
Thanks for reading, if you want to know more, please get in contact with me.
Dave
https://www.dhirubhai.net/company/continuous-wave-pty-ltd