In this episode…
Let’s say you’re now working with a new supplier who’s doing your manufacturing in China (or elsewhere in Asia). No doubt some things will be great, and there may be issues that you wish could improve. Rather than abandoning a supplier with some problems, how to develop them to obtain better performance and results?
A supplier development program is for you.
Furthermore, what sort of results should we be aiming for if we embark upon such a supplier development program? Renaud explains here…
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00:00 – Greetings & Introduction
02:20 – What is supplier development and is it overlooked by buyers?
Buyers are often afraid of suppliers providing poor quality and other negatives points, but they don’t seek to develop them to reduce the chances of these issues occurring. Common goals that developing suppliers achieve are better quality, more on-time deliveries, stable costs, a good level of service, and the ability to produce newly developed products efficiently. These are made into KPIs for the supplier to be assessed on. Not developing a supplier who can improve is like not investing in a key employee.
Next, we’ll go into what a supplier development program includes:
08:36 – 1. Selecting suppliers with the right profile.
Selecting good fit suppliers is key. Even if their processes and capabilities aren’t great, they can improve in the long term and will be open to change in order to keep your business. Finding companies with forward-thinking management who’re prepared to invest time and money into improvement is a good start, such as hiring qualified staff and investing in new equipment rather than taking money out of the business for their own gain.
12:43 – 2. Helping the supplier during product development and new productions.
It makes sense for the buyer to pass on technical expertise etc to the supplier, as then they improve. Making your quality standard clear helps them understand what’s acceptable to you. Informing new suppliers of existing products about past issues can help them avoid them. Assistance to set up testing stations, control processes, etc, are great ways to support a supplier, too. All of this helps avoid quality problems and shipping delays.
17:09 – How phases 1 & 2 are connected to being a hands-on buyer and building rapport with the supplier.
Being involved in making sure things go well is worthwhile as it’s a win-win for supplier and customer, and building a rapport with suppliers is important otherwise they won’t be motivated to improve for you.
18:44 – 3. Ensure your quality standard is met.
A reactive approach is to provide feedback from quality inspections and give the supplier ‘homework’ to work on issues that occurred over time, this will help the supplier improve. For example, targeting improvements in the 10 most common quality issues. Do root cause analysis to find and fix problems where they occur. Providing training to help them do root cause analysis and do corrective actions properly may be necessary. Using PDSA is a good framework – plan, do, study, adjust. Continual improvement by doing cycles over time will improve their processes over time.
If they don’t or can’t do this, considering switching suppliers is wise.
27:34 – Proactive approaches. 4. Targeting low-hanging fruits (small projects for quick wins).
There is certain low-hanging fruit that is easier to target and change, and more complex changes that take more time and effort to make, such as deep organizational changes. How important a customer you are to the factory influences how much you can insist they do. You may need to negotiate who pays for this work, especially if consultants like Sofeast go in to audit the supplier or look at specific processes, etc. It often takes a crisis for manufacturers to proactively make changes, so sourcing one who will be receptive to it without being in a crisis is, again, an important goal for the buyer. Adversarial purchasers are not helpful here though, as they may use supplier efficiency changes, for example, as a way to drive down prices and that undermines attempts to get the supplier to improve.
33:05 – 5. Reorganizing manufacturing and/or supply chain processes.
Also proactive, but more in-depth. Being clear on the supplier’s main issues is key. Target the most serious that can be fixed fastest, with the least investment, and the best chance of being successful. Document the before and after results. An example of a low hanging fruit would be showing the supplier issues in materials yet to be finished that would lead to defects. If they identify these before production and don’t process them on the line, defects are avoided. Waste can also be avoided as the problematic materials can be reworked until they’re usable inputs. This is a win-win: lower costs for them, fewer defective pieces for you.
38:51 – Summarizing what a supplier development plan is.
Source the right suppliers to work with, make sure they understand your quality standard, teach them how to make the product better, give feedback and request corrective actions, work with them to improve processes and systems, starting on a small scale. This could take 6-12 months of work to reorganize processes in detail. The buyer needs to drive this as in general suppliers won’t proactively seek to improve.
40:46 – When is supplier development worthwhile over switching suppliers and starting again?
The risks involved in going through the sourcing process and working with a new supplier who may turn out to be worse than your current supplier are high. Often, developing a supplier who is able to improve is the right call and, despite the work, actually more efficient in terms of time, effort, and money.
41:45 – Why we started our own contract manufacturing subsidiary to embody the best practices discussed here.
We started Agilian Technology in Dongguan in 2018 to practice what we preach and provide Western-owned and managed product development and manufacturing services to buyers who want to outsource manufacturing to China, but value a supplier who wants to improve and is prepared to invest in doing so continually over time.
43:21 – Wrapping up.
- Part 1: Good Fit, Sourcing, Vetting, & Backups [Podcast]
- Part 2: Negotiations, Terms, Leverage, & Quality Standards [Podcast]
- Part 3: Project Management & Checking Quality Early [Podcast]
- Part 4: Final Inspections [Podcast]
- Part 5: Building Rapport [Podcast]
- Part 6: Hands-on or hands-off buyer? [Podcast]
- Developing a Chinese Supplier
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