10 Things to consider before introducing a new Supplier in your Company

These are ten basic following points for anyone as a purchaser to introduce successfully a new supplier in your organisation:

1.- Is Supplier strategic to the Company? How important is the commodity of the supplier for the organisation. How much purchasing volume globally are you dealing with in this commodity. can it be a competitor? Make sure that you make the right choice. Make sure also that you do not dedicate too much time to new suppliers if they are not in support of your sourcing strategy. Time is also money.

2.- Motivation: How much is the supplier interested in working with your company? can the supplier be developed as an alternative to an existing one? if so, can it become a competitor? how important is the RFQ you are giving to him? Also we need some sectoral information, is your supplier oriented to your sector? How much percentage of sales dedicate to this sector? and is it their strategy to grow in this sector ?

3.- Purchasing Volume decision: You would need to give enough purchasing volume to the supplier to make the offer attractive? makes sense to start with some component to see its evolution in service (logistics, QA, Engineering…)? Double Sourcing: reduce volumes with current supplier and afterwards increase volumes to the new one? Or sometimes you can go aggressive and give the supplier a whole customer volume, a whole project of single parts volume, etc… In order to justify the impact and effort of the supplier introduction in your organisation with very good savings.

4.- Supplier Location: Make your that supplier geographical location lies within your own purchasing strategy: Do you want to develop low/best cost country suppliers? do you want to develop suppliers close to any factory? are you hands-tied by supplier technology country (i.e. electronics) which is your competitors strategy? which is the commodity trend in the market? (make sure that you are not missing anything from market trends).

5.- Supplier Assessment (on site): Go a visit the supplier with a group of experts. Make sure the standards, technology, Management, etc… evaluate all areas of interest in a Supplier are according to your organisation. Not visiting a supplier is totally a mistake, a huge mistake.

6.- Quality Standards: It is paramount to check with your Quality/Supplier quality people the requirements globally for a supplier validation in your company, specially locally with a project. It is also important to review the process of supplier release and nomination. The Same applies to other departments like logistics and engineering. Make sure that you do not miss anything, so that after contract is signed any surprise does not come in other departments. Big organisations have a clear guidelines on costs, but being driven unilaterally on a purchasing savings direction is a mistake aswell.

7.- Factory satisfaction: No one likes changes or new things in general at the the factories: “if a thing works well why to change it?”. Never forget that your factories are your customers and a supplier rejected by a factory can cause you many problems. Therefore try to avoid discussions with your plant, convince them instead of the importance of these savings in their yearly results. Convince them that it is their savings, and that they are the main actors in this movie. Finally, listen to the factory before, during and after start of production.

8.- Contracts: Be careful at this point. The fact of not having contracts signes could be critical if the future. Specially in case that things might go wrong. The motivation to sign agreements simply tells you in which direction the supplier is going as a relation. By not signing a contract, it can be a signal that the supplier just wants the business not the obligations.

9.- Price comparison: Make sure that you are doing the right comparison on several suppliers by having the same costs breakdowns from all of them (The old and the new). Supplier must perform always the same controls, the same operations and have thesame type of  investments and technology (i.e. supplier does a manual quality control when the specification in automatic, if so, you are comparing apples with peers).

10.- Internal Feedback: Monitor after the nomination of the supplier, the first deliveries, other departments feedbacks, etc.. When a new couple is formed any of the both parts might have small problems or differences, but also this will help you to quickly detect big mistakes in supplier selection. Don’t leave things to get solved automatically because it never works.

There might be more things probably to be considered, some specific to purchasing and other departments, but this it is just my personal approach to new supplier introduction in a company.

Post by miguelbrinesconsulting.com

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