Supplier Development: What It Is, And How To Manage It

Supplier Development Process

The supplier development process is a key component of an organization’s procurement and supply chain management operations. It can be used to improve the quality and performance of an organization’s supplier base, as well as to identify and assess potential new suppliers.

1. Assess Supplier Capabilities

   When sourcing suppliers for goods and services, it is important to assess their capabilities in order to gain a competitive advantage. Capabilities can be assessed by evaluating the supplier’s performance in three areas: delivery, quality, and price.

   Delivery is assessed by looking at the supplier’s track record for meeting deadlines and delivering on time.

   Quality is evaluated by assessing the supplier’s track record for producing high-quality goods and services that meet or exceed customer expectations.

   Price is evaluated by assessing the supplier’s track record for offering competitive prices without sacrificing quality or delivery.

   By evaluating a supplier’s capabilities in these three areas, organizations can make informed decisions about whether to do business with them and what type of business relationship to establish. This information can help organizations to identify potential areas where they could improve their own operations.

2. Plan and Execute Improvement Activities

   All successful supplier development programs work by systematically going through the supply base to plan and execute improvement activities.

   • Evaluate Your Supplier Base

     First, look at the number of suppliers your procurement teams rely on every day. Is there room to remove dead weight? Do you have enough supplier diversity to protect your operations from unscheduled downtime in the event of an emergency or other supply chain disruption?

   • Meet with Suppliers

     Schedule time with each of your most crucial suppliers to discuss areas where they can improve, and what initiatives the two of you can collaborate on to monitor improvement.

   • Consider Implementing Cost Reduction Teams

     These teams are typically composed of individuals from different areas of the organization, such as purchasing, engineering, and quality assurance. The goal of these teams is to work with suppliers to identify ways to reduce costs and improve quality.

   • Establish Supplier Quality Requirements

     These requirements can be used as a guideline for suppliers when manufacturing products or providing services. They can also help to identify problems early on and prevent them from becoming bigger issues down the road.

   • Use Supplier Performance Audits

     These assess how well suppliers are meeting certain quality and delivery requirements, using agreed-upon metrics and key performance indicators (KPIs).

3. Follow Up and Measure Improvements

   To ensure customer satisfaction, always schedule a time to follow up with your suppliers and measure improvement. Part of successful supplier relationship management is communication – making sure everyone is on the same page not just in the short-term, but over the long haul as well.

   If after mentoring the supplier you find that things aren’t working the way you expect, revisit the conversation and make adjustments. If things are wildly different from what you planned, you may need to find another supplier.

A clear process that uses a systematic approach with all suppliers makes it easier for procurement teams to spot problematic suppliers and those that are worth investing in.