What is the best
supplier portfolio?
How do you build a big supplier list and keep your buying
power with core suppliers?
You know how sometimes
you get a short lead-time order and all of the sudden it seems like all the suppliers
who called you day and night are busy right at that time?
In a perfect world we
would have a long list of qualified suppliers that one of them will always be ready
to take your order at a competitive price and ship it on time.
But in this world we
have cost, production control and buying power consideration that push us to
reduce our suppliers number. In addition, we de-prioritize finding new
suppliers so we have more time to solve issues with pending orders.
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There are two
dilemmas we constantly deal with:
One is how to divide our time between solving burning issues with pending orders and developing future suppliers. The second one is how to divide our orders volume between our core suppliers and suppliers we want to keep as backup and keep relationship warm.
One is how to divide our time between solving burning issues with pending orders and developing future suppliers. The second one is how to divide our orders volume between our core suppliers and suppliers we want to keep as backup and keep relationship warm.
There is a cycle we
have to break. Lack of options (suppliers) reduces our flexibility, which
increases the amount of time we need to solve problems. If we spent less time
solving problems, we could use that time developing our supplier network.
So the first step is
to secure a certain amount of time to developing our supplier network. It can
be as low as 10%, but these 10% have to be highly prioritized.
Before a new
supplier becomes an option, it has to go through a qualification process. For
as long as our supplier list is not as long as we want it to be, we should have
new suppliers in the beginning and end of this process.
Such a process can
be time consuming. But if designed right, the front line sourcing and QA teams
screen out suppliers that don’t meet threshold requirements, and the sourcing
manager can focus on the strong candidates only, and keep the time spent within
those 10%.
The second challenge
is to keep our buying power with core manufacturers and at the same time increase
amount of optional back up suppliers.
Our job, as the sourcing
managers, is to manage qualified suppliers expectations.
This can be done in
several ways. One way is to explain what it takes to qualify as a core
manufacturer and until then it is about waiting for the right opportunity. Until
that opportunity arrives, the sourcing manager and team, have to keep in touch
with the suppliers, update them with exciting things that are going on in our
company, and at the same time update ourselves about the supplier current situation.
If done right, we
will maintain our buying power with core suppliers, and have backup suppliers
that are looking forward to enter our core suppliers list.
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