How to make supplier management easy-002?

(002 – Vendor assessment, complete system)

 In the previous article 6 essential supplier development skills for foreign trade people, we focused on the overall thinking of the supply chain, which will help us to rethink the future of competition. From this article onwards, we will focus on the implementation aspects of supplier management.

When we develop new suppliers through various channels, we can set up certain dimensional options to filter them after the initial investigation, and eventually, we will select one or more suppliers with high overall scores and interest. These suppliers we feel interested in, we generally need to conduct on-site visits. Then the “supplier evaluation” in the end should be how to do, in order to effectively achieve the purpose of our visit?

1. First, we must identify the qualities that a so-called good vendor should have.

1.1 Good business leaders

The height of one’s thinking determines one’s way out, and the height of a company’s leader’s thinking determines the company’s way out. If the supplier leader’s thinking is a narrow, short-sighted, low pattern, even if the company’s products can be, the road to future cooperation must be rocky. In addition to looking at the leader’s thinking, pattern, we should also try to find a way to understand its character, of course, it is impossible to ask each other directly, such as indirectly and the supplier cooperation, cooperation in the industry peers or supplier company in the first-line employees, etc…

Once we have demonstrated the supplier leader’s thinking, pattern, and character, what else do we need to focus on? I also generally pay special attention to the focus of the leader, especially if the supplier has been in business for many years, which is relatively important. Generally speaking, where a company’s leaders are focused on is where the results are likely to be. In this day and age of information, there are so many opportunities and temptations to make money, especially “quick money”. If the leader of a supplier can not focus on his own field, too many ideas and scattered, it will not only cause internal management problems or bankruptcy but also in the future may directly cross the line one day not to produce the current products. (Formerly the richest man Huang Guangyu, after the Jin Li mobile phone Liu Lirong ……)

1.2 Highly qualified management cadres

When it comes to negotiating contracts and other important aspects of the business, the leaders of the company may generally be in charge, but when it comes to executing the contract, basically the people we interface with are the management executives of the company, such as those in charge of sales, technology, quality control, production, and so on. Why is the quality of the management executives of these suppliers important? Because these people directly or indirectly affect the delivery time of our orders, quality, service and so on.

In the foreign trade industry in these years, I have encountered suppliers FK (integrated industry and trade) factory director private and a lot of salesmen that can fly single, and even their own many years ago with others registered in partnership with the same industry and the same category of products running the factory; encountered supplier factory quality control leadership and work related to the department of female employees have an affair and other kinds of management cadres involved in the quality and ethical problems. Ultimately, such supplier factories must be internally chaotic, with either untimely deliveries or frequent quality problems that remain unchanged for years.

1.3 A more stable employee base

The development of professionals in many industries is lengthy, and companies often need to invest years of continuous resources in a single professional in order for them to grow, for example, in R&D, process, technical and other positions. If a supplier has a high employee turnover rate, in addition to being prone to inconsistent and often delayed deliveries at its capacity, it can also lead to inconsistent and often substandard quality of the products it produces. A supplier’s employee turnover rate can usually be justified by obtaining certain information from communication with leaders and managers, and then from communication with front-line employees. In addition to employee turnover, we can also go on to capture some details, which is pretty much based on our respective years of experience.

If  you are a person who loves to learn, think and capture details, you can study the facial expressions of your supplier’s frontline employees and this detail may open a new world to you. If you see that most of the employees are unhappy and not very willing to greet you, it basically means that there are a lot of problems within the company, because this emotion will definitely affect their work performance. On the other hand, if the majority of your employees are happy and would like to greet you, this mood will also affect their working conditions, but often in a positive direction, such as increasing motivation and productivity.

The main skill utilized in the facial expression analysis above is the study of facial expressions in psychology. Paul Ekman, a leading American psychologist, is at the forefront of excellence in the study of facial expressions. In addition to conducting research on the eyes and mouth, he and his research team also discovered that eyebrows may be more important than the eyes, which you can learn on your own when you’re empty and may be able to use in the future when negotiating with customers or suppliers.PS: If you need an effective disguise, be sure to cover your eyebrows! (That’s why I usually like to wear a hat to cover my eyebrows when I talk about important things now, hahaha~~)

1.4 More stable machinery and equipment

The brand, quantity, newness, oldness, purchase price, service life and maintenance condition of the equipment (production equipment + inspection equipment) directly affect the supplier’s capacity and quality.

We can through the investigation of the supplier’s production equipment and inspection equipment, to initially judge whether the supplier’s production capacity and product quality can meet our procurement needs. On this basis, we also need to predict the supplier’s ultimate production tolerance range (acceptable minimum and maximum output) in case of emergency orders, so that we can make an effective forecast for later order arrangements.

1.5 Better Management System

Most of the small and medium-sized enterprise management mode is to use “people management” mode, no management system or management system, so often because the communication link is not smoothly leading to blocked management channels, thus reducing the efficiency of work, often appear skinning, shirking the situation. The establishment of a sound management system can mobilize the enthusiasm of the staff, so as to protect the quality of the product, supplier service is high quality.

An enterprise can run normally, certainly not lack of professional management system, whether professional in fact with this professional or functional aspect of the normative standards, processes or procedures, rules of control, inspection, rewards and punishments and other factors combined, in many occasions or circumstances, rules = norms + procedures.

So what management systems do we typically need to look at in a supplier? The company’s organizational structure, functional divisions, job responsibilities, workflow, management forms, and other documents, for example, I usually look for work instructions or cards on the production line when I visit a supplier’s factory. For example, when I visit a supplier’s factory, I usually look for operating instructions or cards. This is both a risk and an opportunity. When I share supplier performance appraisals and how to improve supplier performance, I will focus on theoretical methods and case studies to give a hint.

1.6 Better Interaction

Whether it is the initial negotiation or the later cooperation process, more or less there will be a lot of unknown problems, in the process of handling these problems, if there is no good interaction between the two sides, it will make both sides feel tired, inefficient, and even friction and distrust.

On this point, I send you very important words: “treat the supplier as a customer”. If you can think this sentence thoroughly and change the original treatment of suppliers, will let you in the supplier management side of the taste of a lot of sweet, N case proves my point.

2. Five core criteria for supplier evaluation

2.1. Business management

22. Quality control

2.3. Staff quality

2.4. Contract enforcement

2.5. Financial situation

3. Process and rules for supplier evaluation

2.1 Collection of supplier information

Procurement will typically conduct an upfront survey to get an understanding of the supplier before going to the supplier site to evaluate them. Typically the supplier information we will have procurement gather includes.

① Company profile of the supplier

(e.g., geographic location, registered capital, nature of the company, size of the company, export experience/ratio of domestic and foreign sales, etc.)

② Relevant certification data of the supplier (quality certificate)

(e.g. ISO, CE, RoHS, REACH, FDA, 3C, CSA, DIN, BIS, HALAL, C/A-tick, etc. certifications or factory inspection reports from well-known major industry customers).

BTW, if this vendor is an Alibaba Gold Enterprise user, there are third party certification materials and videos.

③ Employment of suppliers’ personnel

(e.g., number of production employees, number of technical employees, number of quality control employees, number of managers, number of hours worked per day, number of hours worked per month, etc.)

④ Relevant production capacity of suppliers

(e.g., brand, quantity, newness, purchase price, age/condition, repair/maintenance, non-standard customization requirements, etc.)

⑤ Self-evaluation and initial feedback from suppliers

(e.g., have the supplier provide a brief explanation of their company’s strengths and market advantages, as well as feedback on requirements related to working with our company)

⑥ Preliminary SWOT analysis of the supplier

(e.g., by analyzing the initial strengths and weaknesses of suppliers to identify areas of complementarity and whether the supply chain can be pushed in the direction of deeper cooperation)

3.2 Establishment of assessment panels

If it is an ordinary supplier, procurement staff can participate in the evaluation. But if it is more important suppliers, our usual practice is to set up an assessment team, the group’s members in addition to procurement, there will be technical, quality control, process, production and other departments of the relevant personnel, the participation of other positions can not only more effectively help the procurement staff to analyze, test the supplier’s ability and product quality, but also to promote communication between the team.

I now generally choose procurement, quality control, technology/production three departments of relevant personnel to form an evaluation team, because the three are usually in a company in the cross “hostile” state, it is difficult to be suppliers at the same time the sugar-coated shells get. (domestic suppliers of that set of reception of domestic customers ISO process you know, why Dongguan before so hot …..)

If you are a foreign trade company and the company does not have a few people, certainly not so many functional staff, then how to do? Then, depending on the local conditions, the boss + salesman + order follower / third party inspector together. Why look for third-party inspectors, because if you do not have quality control, suppliers will naturally blind you, if the boss or salesman to act as this role, would not tell the supplier directly to your company’s small size, even the quality inspectors are not. If your boss is neither willing to spend money to recruit quality inspectors and not willing to invite third-party inspection, it can not be helped.

3.3 Supplier site visits

Usually, before we go to a vendor site visit, we may ask them to send samples, and once the samples are approved, we will need to conduct a site visit to them. With regard to vendor site visits, I generally focus on the following points for your information only.

① Managerial level

The quality, work experience and competence of the management staff.

② Specialized technical skills

The quality of technical personnel, design capacity, research and development capacity; key technical personnel are all well-trained assessment system and records.

③ Equipment

Name/specification/brand/years/performance/maintenance of equipment.

④ Material supply

Whether the supply channel of materials is smooth and stable.

⑤ Quality control capability

The quality/experience of quality control personnel, quality control process, quality control system, standardization of use and maintenance of testing equipment/apparatus, non-conformity handling process and records.

⑥ Financial credit status

Quarterly output value, sales volume, cooperative customers, credit history, etc.

⑦ Management standard system

Whether the management system is systematic, complete, strict and documented.

The points I listed above are certainly not the most complete, because different industries, different companies, different stages of the situation are different, we can only serve as a reference, do not completely copy. When we finish the supplier site visit, we need to statistic and analyze the relevant information and data as soon as possible, and then form a supplier inspection report.

Through the initial investigation of the supplier audit, sample testing and site visits, we can basically determine the supplier who can start cooperation. Why do you think there are always so many problems with suppliers? Perhaps now you’ll understand a little better than others think and do far more than you do in this section on choosing a supplier.

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