You have a supplier approval process
 
Companies rely heavily on the capability of their suppliers to ensure that their products will be delivered on time, meet all national and international standards and satisfy their customers’ quality expectations. Selecting appropriate suppliers has become more complex with the emergence of low cost economies capable of undertaking work at significantly reduced manufacturing costs.
Key Issues
·         Judgement on the suitability of suppliers should be based on:
o     organisational planning, location and management style
o     safety culture, risk assessments, employee attitudes
o     factory layout, age of equipment, working environment
o     quality approvals, process capability of equipment
o     evidence of past performance, customer lists, reputation
o     available technologies, skills of workforce, language
o     financial position, investment in equipment and tooling
o     ability to plan, manage supply chains, control documentation
·         Purchase price should NOT be the only factor, when selecting key suppliers
·         Price comparisons should be based on the total acquisition costs
·         When selecting key suppliers, the aim should be to
o      work in partnership, sharing information with mutual support
o      together find ways to reduce costs through eliminating waste
o      obtain deliveries in full, on time, without the need for inspection
o      receive small batches - reduce lead times and release cash
o      make the relationship an asset for all parties
·         Purchased items should be classified as:
o      A – proprietary components from named suppliers,
o      B – parts that are manufactured to your design specification, and
o      C – commodities that can be sourced from different suppliers. 
·         Each classification type should be managed differently
·         Manufacturing costs should be calculated by you, and used in negotiations
·         Where possible, try to establish long term contracts with agreed cost reductions
·         Moving manufacturing to low cost economies can appear attractive for B items, but quality can suffer and delivery lead times extend significantly
·         A full risk assessment should be made before items are sourced off shore
·         Sourcing within a country is, however, a good way of establishing new markets
·         Key suppliers need to be assessed and routinely audited by your company
Factors for Success      
Factors to  Avoid
1.     Managers spending time identifying the correct criteria for selecting the best suppliers
2.     Documentation you provide to your suppliers is current, accurate, and user-friendly
3.     A good deal is where both parties feel somewhat aggrieved
1.     Selecting a supplier solely based on the cheapest price
2.     Failing to calculate the true cost of moving suppliers
3.     Using several different suppliers when making the same parts in low volumes
Who does this apply to?
Senior managers responsible for sourcing and managing the supply chains
Realisable Benefits
A good, reliable supply base that provides quality products at competitive prices

Guides:

Logistics co-ordinationLogistics co-ordination

Logistics co-ordination

Uninterrupted material flowUninterrupted material flow

Uninterrupted material flow

Responding to changes in volumes and product mixResponding to changes in volumes and product mix

Responding to changes in volumes and product mix

Make versus buyMake versus buy

Make versus buy

The supplier approval processThe supplier approval process

The supplier approval process

Monitoring supplier performanceMonitoring supplier performance

Monitoring supplier performance

Sharing information with suppliersSharing information with suppliers

Sharing information with suppliers

Managing inventory throughout the supply chainManaging inventory throughout the supply chain

Managing inventory throughout the supply chain

Improving the delivery performance of suppliersImproving the delivery performance of suppliers

Improving the delivery performance of suppliers

Material flow and the factoryMaterial flow and the factory

Material flow and the factory

Production scheduling processProduction scheduling process

Production scheduling process

Calculating production capacityCalculating production capacity

Calculating production capacity

Visual managementVisual management

Visual management

Health and safetyHealth and safety

Health and safety

HousekeepingHousekeeping

Housekeeping

WasteWaste

Waste

Ensuring equipment is availableEnsuring equipment is available

Ensuring equipment is available

ChangeoversChangeovers

Changeovers

BottlenecksBottlenecks

Bottlenecks

Consistent manufacturingConsistent manufacturing

Consistent manufacturing