A high functioning business team can disrupt an industry by creating value via developing new products that contribute to new growth for an organization. A company’s supply base is similar to building a talented business team in that it takes time and resources to identify, qualify, and engage world class supply partners that can contribute to co-creating value for the organization. A robust process and the supporting systems for identifying, qualifying, and engaging suppliers can create a competitive advantage for companies and allow them to out innovate competitors. Those companies that make a conscious effort to institutionalize supplier identification, qualification, and engagement in their organization will align with the best global supply partners to co-create value through continuous innovation which will lead to profitable growth.
The many competing supply chain demands result in less dedicated resources to execute best practices and processes for supplier management. Large amounts of big data, specifically supplier identification, qualification, and engagement information, has become overwhelming to track. Many companies rely heavily on the tribal knowledge of their most experienced supply chain professionals to store supplier information in their head. As millennials enter the supply chain workforce a knowledge gap can cause supplier identification and qualification challenges from a lack of experience working with suppliers. The pace of technology evolution for many commodities is rapidly reshaping industries which further complicates supplier management as critical suppliers are emerging, merging, and closing. In the dynamic global economy today, suppliers underlying operational and financial metrics can quickly shift resulting in a needed counter response in procurement strategy.
What is Supplier Identification & Qualification?
Supplier identification and qualification are the first two steps in the supplier management process within procurement. Companies define their unique supplier identification and qualification criteria needed for each supplier to become a supply partner. World class supply chains must continuously identify and qualify suppliers to maintain a healthy supply base to account for normal and unforeseen events of preferred suppliers. High-growth technology companies often find they must identify and qualify new suppliers in order to meet the needs of new technology components. Established companies with preferred supplier lists often find that continuous maintenance, removing under preforming suppliers and added new suppliers is a key enabler for maintaining their supply base. Software tools today are allowing supply chain professionals to automate the process of identifying and qualifying suppliers to free up time to focus on engaging suppliers.
Below is a step-by-step plan for identifying, qualifying, and engaging world class supply partners.
Step 1. Identifying Supply Partners That Are the Right Strategic Fit
The value created by outlining company strategy is similar to outlining the definition of an ideal supply partner. A teams’ past employers and collective experiences can cause variances in the definition of an ideal supply partner so taking the time to outline ideal criteria is key to success. Specific supplier identification criteria could include; quality certifications, capabilities, and location. Ideal supply partner criteria can vary depending on the specific commodity: for example, capacity might be more of a criterion for metal stampings than for plastic injection molding. There are several shifts taking place regarding the transition from traditional supplier identification resources such as trade shows to newer software technology tools. It is often more efficient to leverage industry expert resources or software technologies to develop a list of potential suppliers for new emerging technology commodities.
Step 2. Qualifying Supply Partners Efficiently & Effectively
Once you have identified suppliers it is important to outline supplier qualification criteria to select which leading potential supply partners you want to engage. Supplier qualification criteria could include: requests for information, technology reviews, and plant audits. Many companies conduct detailed assessments of supplier company operations or onsite plant audits to further de-risk supply. Plant audits should include detailed reviews of processes, facilities, and equipment for high value supply opportunities. A team’s collective knowledge working with suppliers should also be leveraged via a planning meeting to share tribal knowledge to create lists of potential supply partners. Third party validation using services firms, supplier rating websites, and software tools can further institutionalize supplier engagement information tracking to refine the list of potential supply partners to engage.
Step 3. Engaging Supply Partners to Quickly Build Credibility
As you start to engage suppliers take the time to explain your company, the why, what, and how to expediently win supplier executive support. A company overview presentation deck that highlights the specific supply opportunity and win-win relationship you hope to establish is a must. Make a diligent effort to exude professionalism, meet on time, respond promptly to messages, and clearly communicate sourcing next steps as suppliers have many options today. Promptly communicate supplier selection information, no news is bad news, but communicating that a supplier wasn’t selected to receive a request for quote is ok with a prompt explanation. It is important to set and communicate realistic timelines and supply opportunities to establish trust. If a timeline or technical specification is still in development transparently communicate the status.
As with building a talented business team, there are many small steps that added together can make a big impact in effective supplier management. Supplier identification efforts are emboldened when company’s outline the definition and criteria of an ideal supply partner. New technologies are expediting the way leading companies are conducting supplier qualification, both in maintaining their supply base and identifying new suppliers. Once suppliers are identified and qualified effective supplier engagement can convert suppliers to supply partners that will co-create value for your organization. Our experience has demonstrated that continuous dedication to identifying, qualifying, and engaging suppliers leads to enhanced commercial results and improved company performance in the short and long term.