Join Eddie Davila for an in-depth discussion in this video Choosing a supplier, part of Supply Chain Management Fundamentals.
- Let's say you work for one of the finest restaurants in the city. Customers love your restaurant because of the fresh, locally-sourced, organic ingredients. They come to you not because the prices are low, but because they want something that tastes great and fits their values. As a procurement executive for the restaurant, your job is to find suppliers. What are you looking for in your supplier? The typical knee-jerk reaction is to say "low cost." But if you just went with the lowest cost, would you be working to make the customer happy? Probably not.
When you go out and find suppliers, you need to remember those ingredients aren't being bought for the owner or even the chef. They're being purchased to make the customer happy. When they come to your restaurant, the customer wants consistent-tasting meals made with high-quality ingredients. They want meals that are available whenever they come to your restaurant. Customers don't want to hear that certain menu items are not available today. And while we may advertise fresh, local, organic ingredients as a way to entice high-end customers, perhaps local suppliers with excellent ingredients not only make customers happy, perhaps they make our company happy.
If they are really that good, they may actually make our supply chains better and more predictable. Food's one thing, but how about electronics? Suppose it's your job to find a battery supplier for your company's next-generation cell phones? Cost, supplier location, and ethical business practices may or may not be on your radar for these batteries, but you are definitely interested in issues like battery technology, longevity, and reliability.
High-quality phones need high-quality batteries. You're also interested in the shape and design of the battery. Can batteries be made that will fit our phone design? Another thing to consider is production capability. If we plan on selling one million of these phones, can they produce one million of the batteries, all on time, all at the highest quality? Can we trust them not to share information about our new secret phone? Are they committed to improving that battery so that two years from now, we can make an even better phone? What would happen if your company decided to just go with the lowest-cost supplier? Would you feel confident putting the fate of your innovative phone in the hands of a cheap, low-quality supplier that delivers late and gives away your intellectual property? Choosing a supplier is a huge responsibility.
Is their link in your supply chain a strong one or a weak one? That brings us to one more issue. Just like we count on our suppliers to keep us reliable, our suppliers are counting on their suppliers. So more and more, we are finding that supply chain managers who are responsible for partnering with great suppliers, are asking prospective suppliers about the reliability of their suppliers. It really does begin to demonstrate that in the world of supply chain, we really are all in this together.
So here's what I want you to do: Think about a big, brand-name company that's sold you something rotten or cheap, something that didn't work, something you either returned or just threw out. Were the materials in that item what caused that item to fail? If so, think about how that company put their brand's name in the hands of a poor supplier. They lost you as a customer, probably lots of other folks too. Why? Because they chose a poor supplier. The next time you choose a supplier, ask yourself, "Will this supplier help us be a better company? "Will they help me make my customer happy?" If not, maybe it's time to look for another supplier.
- What is supply chain management?
- Working with SCM in different industries
- Developing good relationships with buyers and suppliers
- Manufacturing products
- Delivering products
- Integrating the entire supply chain
- Creating ethical and sustainable supply chains