Some months ago, I gave a presentation to a major electronics retailer in Minneapolis on managing suppliers in China and how to utilise third party supplier quality management companies effectively. They were having product quality problems and it was too late to cancel the purchase order, change the supplier, or send teams overseas to resolve the problems directly with the supplier. I found that many of these problems could have been avoided had the retailer been aware of certain fundamental principles about managing suppliers, especially those in China and Asia.
I’ve found this unawareness to be quite widespread among companies with overseas procurement programs so I’ve decided to give some tips on managing suppliers . Once you understand how suppliers operate, you’ll be better able to manage them and develop risk prevention strategies.
- Certifications are not an indication of the supplier’s abilities
Nowadays most suppliers have all sorts of certifications. Certifications can be obtained easily and are only good for advertising and marketing. They do not tell you anything about the supplier’s actual production capabilities.
Certifications are also extremely expensive to get. There are many small suppliers who are excellent at what they do but cannot afford to get the certifications.
Look first at what the supplier can do, not what it says it can do.
- Suppliers always say ‘yes’
The supplier is always quick to say ‘no problem’ to any concerns or worries you may have about quality or production. This is where you should get worried. To me, a quick ‘no problem ‘means that you ARE going to have problems.
- Your products could be coming from another source
Your agent claims that he represents the supplier and tells you all sorts of good things about the supplier. When you visit the supplier, you find that your products are actually coming from another place or supplier. This accounts for your quality and delivery problems.
Another common problem is that without your knowledge, your supplier subcontracts your work to other suppliers or uses unauthorised subcomponent sources. In such situations, you have no control or input into those suppliers’ quality management processes. An added complication is that these suppliers could be unregistered or are owned by some members and the CEO of the original supplier’s management team.
- Third party inspections are a must
You enter into a purchase contract with the supplier but you forgot to include a requirement that the quality of the products must be checked by a third party inspector before delivery is made. That’s too late. The delivery has been made and you’re finding lots of quality problems. Who is going to do the rework, the supplier or you? Who bears the cost???? Not the supplier. An order is an order and rework does take time. For the supplier, delivery to your door is 99% of the accomplishment of the contract.
- 80% of your supplier problems come from communication
Communication is the key to an effective relationship with suppliers and can be a particular issue if you’re using foreign suppliers. Especially in countries like China, Vietnam and Mexico, English-speaking staff are usually reserved for the marketing department and upper management, whereas the production staff will speak only their local language. This can create difficulties if you’re trying to work out technical or production problems.
- Suppliers are usually resistant to third party inspection companies
Suppliers will never be happy about you using a third party to monitor their quality, so don’t be surprised if there is a lot of resistance and later on complaints about what the quality inspection company is doing. That’s because suppliers do not like third parties poking around their production lines and reporting back to their customers. I have been in some extreme situations where the supplier even tries to lock out my quality management teams from the premises.
My overall advice for managing suppliers effectively? Maintain a constant presence at your supplier, always monitor what they are doing, and never ever take their word for anything.
By Frank Thomas, Senior Quality Engineer, AMREP North America. Frank is based in San Francisco and works mainly with electronic OEMs to design quality control programs for their suppliers in Asia.