by Renaud Anjoran
Last week, I was happy to moderate a seminar organized in Shenzhen by the European Chamber. The three speakers, who were kind enough to come and expose their supplier development programs, represented very diverse organizations:
After looking at my notes, I noticed that a supplier development program follows logical steps:
I am going to describe each of these building blocks.
Oberthur pays a lot of attention to the type of suppliers they work with. Here are two of their supplier selection criteria:
The manufacturer needs to understand the buyer’s expectations, and the development of customized products can take a long time.
Is is how Altra Industrial Motion develops their new suppliers:
If a supplier cannot reliably deliver products that satisfy the buyer’s quality standard, the priority is to push them to get their quality under control… or to stop the relationship.
But how to push a supplier to improve its quality, without spending a huge amount of work?
This is at the heart of Kingfisher’s supplier development program. They want more suppliers to “self-inspect”. The objective is to avoid the cost of third-party inspections.
So they focus on their high-volume suppliers with low quality performance (see below chart). Their approach is: “we are going to pay for a program that will make you more competitive in the long term”. If the supplier’s boss is interested, they go ahead.
Most Chinese suppliers have a lot of room for improvement. But they are not always aware of this situation.
The buyer can help the supplier pick the low-hanging fruits by apply a gentle mix of pulling and pushing.
For example, Oberthur has pressure to decrease prices on certain products every year. So they ask the supplier for a roadmap to reduce costs in the coming years (with details on how he intends to achieve these targets).
Another example: Altra Industrial Motion helps decrease the scrap rate once a production is under way (their suppliers do a lot of metal machining, so rejects and scrap are always a problem). This way, less material is consumed. The supplier’s cost is lower. And price increases are less justified.
Altra’s representative said something interesting: “our best suppliers are the ones we visited the most over the last 7 years”.
When a supplier is willing to work on improving his operations, and does not work for direct competitors, it makes sense to help him re-organize production for better results.
This step is comprized on several sub-steps that cannot be skipped:
This fifth step is all about lean production. It offers impressive results when done the right way. But it is not the first step in a supplier development program.
Do you agree?