Published June 10, 2020
Many different items and services in multiple business categories are sourced and purchased in the course of daily procurement duties. Qualifying a new vendor and building a supplier base is essential for any business, especially during uncertain times.
Vendor selection requires an analysis of critical performance criteria, driven by quality and reliability standards, as well as material cost and availability. Choosing a supplier, especially a new supplier, is a process followed with care to ensure an overall fit with a company’s core values, the value the external provider’s products bring to the organization and ultimately customer satisfaction. Building a company’s supplier base is similar to building a talented team. You must source and identify, qualify, get to know one-another, on-board and communicate, and then build a relationship. Below are the key steps followed in supplier selection and vendor management.
The sourcing and identification process can be long and complex. The first step is creating an outline of the ideal vendor partner. Depending on material requirements, sourcing often requires research to find competitive bidders and develop a list of potential external partners. This process is achieved by utilizing online tools, interaction with vendor representatives and creating requests for quotation.
The qualification process is the most essential element in selecting your vendor partner. The first step here is to create a list of supplier qualification criteria critical to your business and production process. This criterion should include a capability assessment describing internal controls and process management, a robust quality management system and certifications, company operations, an on-site audit and the supplier’s financial position. Third party service firms, supplier rating websites and other software can report on criteria to help you filter your list of qualified partners to consider.
Delivery of products is critical to new vendor consideration and is often taken for granted. Supply chain requirements have become more integrated into production scheduling and program management, and any breakdown in performance can be catastrophic to the promise of timely delivery. Reliability is key to scheduling, project management, costs, client satisfaction and is necessary for Miltec to maintain competitive turnaround times on custom system orders. A strong on-time track record can set a supplier apart. Similarly, a concern regarding on time delivery can be a disqualifying factor when deciding between competitive vendor proposals.
The procurement process takes time, especially when manufacturing custom equipment. Engineering must stipulate materials, specifications and tolerance requirements, but the time required for the quoting process is an area that is often compromised, facilitating the need for supplying products or services as fast as possible, without sacrificing quality. The quoting and estimating process requires many hours when done manually. Streamlining the quoting process utilizing compatible software can provide timely quotations and have a quantifiable advantage as a potential supplier. Whenever you can gather data from multiple sources and use that data to instantly put together quotes, you are in a better position to hit the customer’s target costs and delivery expectations and optimize your company’s profitability.
The new vendor selection process also depends on supplier competency and stability. Understanding a supplier’s infrastructure is vitally important when assessing a new vendor partner. It must be determined whether a supplier has the capacity to not only fulfill an order, but to stand behind a product throughout its warranty. Suppliers must understand a customer’s industry, desired quality standards, reliability and delivery schedule. Creating metrics and key performance indicators applicable to the business allows you to rank supplier’s performance relative to the supply chain. This will help you determine consistency and hopefully eliminate surprises.
Evaluating a supplier’s quality management system and how they address quality issues, including prioritization of replacing or reworking nonconforming material can be a deciding factor in the formation and continuation of a business relationship. As companies are held to higher quality standards by their customers, they must ensure the same level of performance and service from their suppliers.
It is equally important to assess a supplier’s financial position. Knowing in advance how your vendor partners deal with economic disruptions and other crisis events, as we are seeing now in this era of the coronavirus, allows for preparation and contingency plans, which is key to being resilient during declines in economic activities.
The last stage in vendor selection is the competitive bid process, which ensures transparency, fairness and equality of opportunity, while reducing complacent tendencies in material sourcing. Additionally, a periodic Request for Quote for commercial off the shelf products not only evaluates the material cost, but the value-added services provided by selected vendors. Miltec UV strives to achieve the most advantageous balance of quality, service, performance and cost in the supplier selection process – the same set of criteria our customers expect from us.
Selecting a new vendor requires a commitment to communicate often; set clear expectations; know our products, parts, and timelines; and establish goals and key metrics to ensure success. A new vendor who is flexible and able to accommodate a dynamic scheduling environment, communicating any constraints to meeting a schedule, will become a value-added service provider helping a manufacturer reduce not only costs, but lead times and ultimately increase their throughput. Procurement is fast-paced and in today’s competitive market, our suppliers must assist us as much as possible in simplifying the manufacturing process.
As we learn to navigate and work in the current COVID-19 pandemic era, our suppliers must also show that they have plans in place to mitigate these additional risks; supply chain disruptions and fluctuations in demand, anticipate delays from their sub-contractors/suppliers, and the ability to secure proprietary information with an increased percentage of their employees working at home.
The success of our Procurement team depends on the success of our vibrant supplier base. We engage with and value our vendor partners, communicating and working together to positively impact our bottom line. It is as important to develop new partners as it is to continue the strong relationships with our long-term suppliers, always being guided by our core values, including trust, integrity and teamwork. Suppliers are our friends and an extension of our company.
Written by Bill Zlakowski, Purchasing Manager, Miltec UV