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Want to keep production flowing and make sure customer deadlines are always met? You need good supplier management!
Have your suppliers ever let you down?
If they haven't yet, know that it can happen at any moment. After all, when it comes to the supply of inputs, unforeseen events are natural — and they can interrupt the production flow.
But just because unexpected situations can happen doesn't mean we should let the risk of running out of items become routine, right? To prevent that, we need to implement a very important practice in the manufacturing routine, one that helps minimize the risk of one or more suppliers failing to deliver materials: supplier management.
Shall we take a closer look?
What is supplier management?
Supplier management is simply an administrative practice that consists of managing the relationship and service quality with the partners responsible for supplying raw materials and inputs.
This control involves actions such as careful supplier selection, performance analysis, delivery monitoring, and contract management.
Since every company has its own business ecosystem, the practice can be adjusted and carried out based on the company's own characteristics. What really matters is that it is applied and delivers the expected result: keeping production continuous and ensuring customer satisfaction.
Why do supplier management?
Your company certainly has a production flow, with any number of different stages to manufacture and finish its products.
At the very start of that chain sits the purchase of the inputs needed for the manufacturing process to begin and for the chain of activities to proceed as planned.
What happens when inputs run out?
We already know the answer: the entire production flow has to stop until the items are received into stock and the company has enough materials to manufacture the final products.
Up to this point, one might think it's fine to stop the production line every now and then, but many problems can arise from that pause (and they are highly damaging to the company):
- Deadlines agreed with the customer may be postponed, resulting in dissatisfaction and loss of trust.
- Operating costs may increase, with a direct impact on profitability.
- Machines and equipment may be underused, wasting time and resources.
In other words, supplier management needs to be part of the manufacturing routine, because it deals with the most important source of supplies for manufacturing products, meeting deadlines, and fulfilling demand: the suppliers.
READ ALSO | Production planning and control (PCP): what it is and how to implement it in manufacturing
How to do supplier management
As mentioned, supplier management can be adjusted based on the company's characteristics and needs. Still, there are a few steps the Useall team recommends including in any management strategy:
Mapping and selection
Here we identify all potential suppliers and evaluate them against criteria such as product quality, competitive pricing, and reliability in meeting deadlines. Screen them to select only those that best align with these standards.
Negotiation and contracts
At this stage, we should formalize agreements by defining clear clauses covering delivery times, payment terms, and penalties in case of failures. Well-written contracts help us align expectations and protect our company against potential problems.
Performance tracking
Here we monitor the punctuality and quality of each supplier's deliveries. It is important to define performance metrics, such as delay rate and return rate, to evaluate each partner's consistency based on hard numbers and data, not assumptions.
Continuous evaluation
Whenever possible, we need to reassess supplier performance to make sure they are maintaining the same standard over time. This evaluation can include annual or semiannual reviews to adjust the contract as needed — or, in some cases, to replace suppliers that no longer align with the company.
Contingency planning
Unforeseen events can and will happen at some point, so we must also have a backup plan in case a supplier fails or is affected by an external event. Keeping a list of secondary suppliers, for example, can be a good idea.
How to optimize supplier management
Because it involves several steps, we know that doing everything manually can be exhausting and error-prone. But don't worry — there are ways to optimize supplier management by following just a few tips:
- Centralize information: use management systems, such as an ERP, that concentrate all supplier data in one place. This makes information easier to access;
- Automate monitoring: set up automatic alerts for important dates, such as delivery deadlines and contract renewals;
- Analyze the data: review supplier performance data to identify patterns and areas for improvement. Based on this information, you can anticipate problems and act preventively to keep production always flowing;
- Keep communicating: establish a direct communication channel with suppliers to align expectations and resolve issues quickly;
- Review and update processes: periodically revisit your supplier management strategy to make sure it stays aligned with your demands and needs.
The role of automation in supplier management
Automating supplier management is a strategy we use to add a layer of intelligence to the process.
With an automated system, the company becomes able to monitor supplier performance in real time, check deadlines, analyze item quality, and even anticipate potential production bottlenecks.
This visibility contributes to better supplier management and also makes it easier to make decisions about partners and any unforeseen events that may arise.
Another important point: automation frees managers to focus on more strategic tasks, such as analyzing new partnership opportunities, developing risk mitigation plans, and continuously improving supplier relationships.
In other words, instead of wasting time on repetitive, manual activities, they can make better use of their time analyzing data, expanding their strategic vision and business intelligence.
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Originally published in Portuguese at useall.com.br.