Purchasing is an incredibly important and vital component of a highly functioning company. However, sometimes companies do not look at their purchase decision making criteria often enough to make improvements that affect the bottom line of the company. Gone are the days of only looking solely at price as a way to gauge effectiveness of a purchasing strategy. It is now more important than ever to examine where you stand and find ways to improve. Below, we will talk about a few areas to consider to refine your decision making criteria and improve the quality of your purchasing decisions. This is done through Supplier Led Competitive Advantage, Risk Management and Cost Management. Below we will breakdown these three categories into their components and list some questions to ask yourself and/or the prospective supplier to ensure you are partnering with the best supplier for your next project.
Last month we discussed Supplier Led Competitive Advantage. Through evaluating market need versus technical requirements, design for manufacturability, and production expertise, there are a few areas that can be improved: sales or market penetration, reduce time to market, improve first time quality, maintain compliance, improve profitability, and reduce total cost of ownership. In today’s day and age, innovation can’t only come from within your organization. Is your supplier checking your design for manufacturability? Are there dimensions deemed as critical that really aren’t that are increasing the cost of your quality checks? Can they meet your time to market requirements? Ultimately you want to find a supplier that is as invested in your vision as you are an has ideas on how to improve YOUR competitive advantage not THEIRS. Your suppliers win when you win and should be dedicated to making that happen.
There are quite a few risks in sourcing new suppliers that it is important to pay attention to. Contractual and supplier qualifications, scheduling and on-time delivery, performance of the part, reliability, and sustainability. In molding components for medical devices, it is common for the customer to require their suppliers be ISO 13485 certification. Does your supplier have the proper qualifications for the job? Can your supplier meet your scheduling or time to market needs and give you consistent on-time delivery? Can your supplier manufacture a part that meets performance, reliability, and sustainability requirements? It is important to understand how your supplier intends to mitigate these risks. If these are not discussed, you will increase the risk for your organization and might get stuck in an unpleasant situation that was unexpected.
The last piece of the puzzle to consider is cost. Every purchasing person has at least some focus on the cost. It is the most noticeable way to measure a win. There are four main areas to examine when examining the cost of a project: unit/materials, transaction, logistics, and full lifecycle. The overall cost of a mold and the piece price is usually the first thing that a company might look at. Less looked at is the cost of the material used, transaction costs, and logistical costs. Can one supplier get the material cheaper than another? Which supplier has the lowest transaction costs? Can they handle blanket orders? Can they deliver as often as needed? Can they create multiple parts for you and assemble them to save you the need of multiple suppliers and having to assemble them at your location? Will they proactively keep you up to date with standards and product changes? Having a focus on cost is important, but it is much more than piece price and tool price. It is imperative that you have a handle on all the costs involved.
Finding the ideal partner is key in having a successful project. Focusing on how your supplier will help you with Supplier Led Competitive Advantage, Risk and Cost will ensure that you have minimal unexpected hiccups during the quoting and production process. There is an old adage “Good things aren’t cheap and cheap things aren’t necessarily good.” It is often the buyers’ job to find the happy medium. In many cases asking yourself and your suppliers these questions can give you added peace of mind that you made the right decision.