6.4 Supplier Development

In the realm of procurement, ensuring timely and cost-effective material acquisition is just one side of the coin. The flip side, equally crucial, is fostering a long-term relationship with suppliers that emphasizes continuous improvement in both quality and cost. This dual approach is encapsulated in the concept of supplier development.

Supplier development encompasses a range of activities aimed at improving supplier performance and capabilities to meet the buying company’s short-term and long-term supply needs. Some of the key components of supplier development include:

• Supplier Evaluation: Regularly assessing supplier performance to identify areas of improvement.
• Supplier Training: Offering training programs to suppliers to enhance their capabilities.
• Joint Business Plans: Collaborating with suppliers to create mutual growth strategies.
• Cost Management Initiatives: Working with suppliers to identify cost-saving opportunities.
• Technology Exchange: Sharing technological advancements with suppliers to improve product quality or reduce costs.
• Performance Feedback: Providing regular feedback to suppliers on their performance to drive improvements.

Of these components, we’ll delve deeper into supplier rating and supplier certification.

6.4.1 Supplier Rating

Think of supplier rating as a report card for suppliers. It’s an essential tool that provides a quantitative and qualitative assessment of a supplier’s performance over a specific period, typically quarterly. The rating process involves evaluating suppliers on various facets:

• Price: Are the supplier’s prices competitive? Do they offer value for money?
• Quality: Does the supplier consistently meet or exceed quality standards?
• Delivery: How reliable is the supplier in delivering on time?
• Flexibility: Can the supplier adapt to changes in demand or specifications?
• Service: How responsive and supportive is the supplier in addressing concerns or issues?

To ensure a comprehensive evaluation, buying firms often assign weights to these facets based on their importance. For instance, a firm might prioritize quality over price for critical components. After evaluating each facet, a composite score is calculated for the supplier. This score is then shared with the supplier, offering them insights into their performance and areas they need to focus on for improvement. Such a transparent feedback mechanism not only helps suppliers enhance their offerings but also strengthens the buyer-supplier relationship.

6.4.2 Supplier Certification

Supplier certification is a rigorous process where key suppliers undergo thorough audits, facility inspections, and process evaluations. Once a supplier successfully clears these assessments, they are deemed ‘certified’. Being a certified supplier comes with a plethora of benefits:

• Assured Business: Certified suppliers often receive consistent orders, ensuring a stable business relationship.
• Bypassed Inspections: Their products are deemed of high quality and might not require regular inspections, allowing for faster processing and integration into the buyer’s production.
• Reputation Boost: Being certified by a renowned buying firm can enhance a supplier’s market reputation, potentially attracting more business.
• Operational Efficiency: The certification process often identifies areas of improvement, helping suppliers optimize their operations.

From the buying company’s perspective, the certification process offers several advantages. It ensures a consistent quality of products, reduces the time and resources spent on inspecting goods, and fosters a deeper, more collaborative relationship with suppliers. By investing in supplier certification, buying companies not only ensure a high standard of products but also drive continuous improvement in their supply chain.