On paper procurement seems very straight forward. A customer wants something, they find a few suppliers who can deliver that, compare prices, and then chose the one representing the best value. We all know of course that the reality is far more complex! The early stages of any new Customer-Supplier relationship have built in risks, and nowhere is this truer than manufacturing, so how could these be managed better? Here are a few thoughts…
What Are You Looking For
Customers want to work with suppliers that provide good value for money, are reliable, communicate well and are operating a stable business. Suppliers want very similar, they want customers who will provide a regular flow of work, communicate well and again operate a stable business.
One of the initial ways in which Customers assess whether or not a potential supplier meets this criteria is through some sort of questionnaire. Most suppliers are audited in some fashion and must have relevant certificates, and certainly this is one way in which you can assess one supplier against another. In some cases however, these initial supplier questionnaires can be pages upon pages and represent many hours of work often without the guarantee that there will be any opportunities for the supplier. I would think it is better to get the basic information from a potential supplier, get a quote for pricing and then if you are likely to place an order send a longer document. This ensures you still have the fundamentals met but aren’t potentially wasting a suppliers time.
The next stage with a new supplier is often to get a quotation to indicate price. It is important to remember that a quotation is essentially a guess. It’s a very educated guess, but is still only an estimation. Any new customer or component represents a risk for the manufacturer making it and so it is only natural to over-estimate the time needed. Often when you get that job you can find process improvements which will make manufacturing more cost effective. An initial quote is often to see if the supplier is in the right ball park.
From a customer’s point of view using any new supplier represents a higher level of risk. It follows logically then that many people will ‘test the waters’ with a smaller order to begin with. The issue is that in manufacturing terms of that a small order of new product is more likely to get delayed. This is because it involves a new process, will require more oversight than a component that has been made before and it follow that regular customers with higher orders will be first on the bill. Although a small order may be used as a precursor to a larger one, it is simply bad business sense to count your chickens before the eggs have hatched. In some cases it may be better for the supplier to provide a paid sample where you are simply ensuring they can make the part, and rather than a small order it may be better to place a regular sized order but with a longer lead time to accommodate any initial issues with the supplier.
Both Supplier and Customer want to work towards a relationship that is both give and take, but will be naturally risk averse at the start. If a Customer takes the time to get to know a new supplier, maybe asks for a factory tour etc they should be able to proceed faster and with greater confidence.