So, it’s time to evaluate a potential or existing supplier for your manufacturing business.
And while you know analyzing and assessing suppliers properly is key to developing long-term relationships that support the growth of your company, it is a task that can often seem much easier said than done.
To that end, we’ve compiled a three-point program below to help set you on the right path.
Begin with a system
It’s a common—if understandable—manufacturing industry mistake to focus evaluations and assessments on prospective suppliers or around contract renewal dates.
Unfortunately, a lack of awareness of vendor quality and practices can leave your business exposed to greater risk.
The simplest way to reduce this risk is to consider the risk profile of your own manufacturing business then put together a schedule for vendor and supplier evaluation that suits it.
The frequency of your evaluations will, of course, be unique to your business. Remember that evaluations take time. It’s a trade-off between that resource and the benefits that the evaluation brings. There’s no one exact picture here; it’ll vary from business to business.
Metrics and what-ifs
It’s critical that your performance reviews are based around hard data and meaningful, easily defined KPIs and metrics. This way, you’ll be able to not only gauge when a supplier or vendor—be it an existing vendor or one you are considering working with—either meets, exceeds, or falls short of your expectations, but why.
And while it may be tempting to keep this information to yourself, it’s better to communicate your practice and expectations with the other party. This provides an opportunity to measure their response: If they’re confident and efficient, they’ll welcome the chance to prove that competency to you. If they’re poor at their job, they may find ways to avoid a discussion.
What should I assess?
Once again, it’s best to stick to hard data that you can quantify and review easily. Fortunately, there are a set of common metrics and KPIs used for evaluations which you can borrow for your own process.
Be sure to tie each of these metrics into a solid, precisely defined set of supplier expectations. The more specific you are, the better the result for both parties.
Capacity: One of the most critical KPIs for most manufacturing businesses. If a supplier can’t meet your needs today or for your forecasted growth, they’re not suitable–unless a discussion around improvements can be reasonably had.
Quality: Although it can be tricky for a manufacturing business to define what quality means in terms of products and suppliers, it’s still important to do your best in defining it for your evaluations. If you’re struggling, consider elements such as industry certifications, which can help indicate minimum standards.
Environment: It’s good to consider the environmental impact of your supplier’s operation. This is not only important for the well-being of the environment itself, but also for how sustainable your supplier’s operation is in the long term.
Any issues you uncover here could indicate that the supplier in question is not operating to reasonable standards or that of industry or certification standards. This poses a risk to the relationship that should be addressed quickly.
Next steps
If you need a bit of a funding assist to get the working capital necessary to evolve your manufacturing business, a small business loan or business line of credit can help make your vision for tomorrow a reality today. Idea Financial, for example, offers up to $250,000 in working capital with a quick, hassle-free application and same day approval.
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