Supplier Selection

What makes one supplier better than another? What are the characteristics that earn new business for some organizations and cause lost business for others? If you have ever asked yourself these questions you may want to consider the "Five Cs" of selecting a world-class supplier. The "Five Cs" - an easy-to-remember tool - are controls in manufacturing and work processes, communication/cooperation, creativity, competitive pricing, and continuous improvement. They may not work for everyone, but the Five Cs are one tool you can use when making sourcing decisions.

Controls in Manufacturing or Work Processes

"The customer is the most important part of the production line."

- W. Edwards Deming

Controls in manufacturing or work processes covers a wide range of the supplier's internal functions. These controls are best identified when conducting a supplier audit. Things to be on the lookout for include:

·        What quality systems are used? Is the quality philosophy pushed down to the lowest levels of the organization? Although supplier pre-surveys or other correspondence may indicate what type of quality systems are being used, an on-site audit allows you to determine if the supplier is truly using Six Sigma, or other quality assurance methods.

·        Is the supplier's site clean? If the facility is clean it usually means that there is more organization and structure in regard to layout and flow of materials through the plant or business offices which lends itself to greater efficiency.

·        Is everybody working? Look on the production floor (or office setting for the non-manufacturing supplier) to see if everyone is making a tangible contribution to the manufacture of the product (or supporting the services). Workers standing around can have a significant negative impact.

Communication and Cooperation

"I never forget a face, but in your case I'll make an exception."

- Groucho Marx

Do your suppliers exhibit the run-and-hide mentality after they win your business or when their parts or services are rejected? Good suppliers do the opposite. Good suppliers exhibit superior communication by responding quickly to issues and becoming active participants in trying to correct problems in an expeditious manner. To take it a step further, world-class suppliers often develop a sixth sense - an ability to anticipate your organization's needs. To maximize communication, especially at a world-class level, it's important to remember that communication is a two-way street. A supplier cannot satisfy all of your organization's needs to the fullest, unless you're willing to be forthcoming and share information.

Creativity

"A man flattened by an opponent can get up again. A man flattened by conformity stays down for good." - Thomas J. Watson, Jr.

You should depend on your suppliers to come up with innovative new ideas and work with your organization to improve existing products. Suggestions for a new or substitute material on an existing product, improving manufacturing processes, or material cost reduction programs are only a few of the ways a supplier's creativity can be put to use. Once again, cooperation and communication between you and your supplier are critical.

Competitive Pricing

"If you want to be a winner, hang around with the winners."

- Christopher D. Furman

The supplier you choose may not always have the lowest costs on comparable products, but it should usually be competitive with its rivals. In fact, in most cases, competitive pricing is a byproduct of the controls in manufacturing described above. For example, low scrap rates, adhered-to quality systems, efficient process flows, low inventories, and high productivity are all items that will reduce the supplier's total cost of manufacturing a part. As always, consider the total cost of doing business. Extended payment terms, inventory programs that reduce the investment and risk to your organization, EDI, e-commerce, and other tools are just a few incentives that may be considered.

Continuous Improvement

"There is no resting place for an enterprise in a competitive economy." - Alfred P. Sloan

The fifth and final "C" is continuous improvement. As purchasing and supply professionals we should seek continuous improvement within the purchasing function. With this idea in mind it makes sense that the only way we can fully have continuous improvement is to have suppliers who strive for that same goal. Seek out suppliers who not only manifest the four criteria just mentioned, but endeavor to improve on them.

How do you know which organizations embrace a continuous improvement philosophy? One of the easiest ways is to ask suppliers to share unique success stories they have had with other organizations. A characteristic of a continuous improvement mindset is the amount of money the supplier reinvests in research, development, and employee training. Also, if possible, use purchasing methods that track specific and objective purchasing measurements such as on-time delivery, quality, and leadtime reduction. These reports are great mechanisms to monitor continuous improvement progress with your supplier.

In these days of shortened product life cycles and increasing emphasis on speed-to-market, it's more critical than ever for purchasing and supply professionals to align themselves with world-class suppliers. Any of the Five Cs are virtues a good supplier should possess, but a supplier who embodies all five attributes is one who most likely has separated itself from the competition and become world class.