According to the Harvard Business Review, 100 of the largest manufacturers in the United States distributed 48 cents of every dollar earned to buy materials in 2002. Now, 15 years later, manufacturers are spending more than ever on suppliers, so why is there so much discord in their relationships?
For starters, manufacturers are in search of the best products on the market, but at a fraction of the cost. And they’re placing the pressure on the suppliers to do whatever it takes to meet their pricing and expedited delivery demands. Unfortunately, attempts at reconciliation from both ends in an effort to strengthen broken relationships haven’t always been successful, although being on one accord definitely benefits both parties. So where do manufacturers and suppliers go from here?
Here are a few tips to forge or restore these damaged relationships:
1. Conduct research
Chances are you did your homework before selecting suppliers, but did you gain an in-depth understanding of how their in-house processes work? If not, now’s the time to do so to learn how they come up with their pricing structure for inputs, who the key players are in their organization and what factors delay or expedite manufacturing times. Through research, you may also identify additional ways to boost supplier efficiency.
2. Keep suppliers in the loop
As a manufacturer, one of your primary objectives is to deliver an irresistible product that captures the attention of your target market. But to be successful, you must beat the competitors to the punch, so it’s crucial that you keep suppliers in the loop. If they are aware of your intentions in advance through strategic meetings and training sessions, they’ll have an adequate amount of time to work their processes so their inputs not only meet your expectations, but are produced efficiently. Auto manufacturer General Motors now has a system to grade suppliers in two areas: business performance and cultural performance. The "prime" suppliers—highest scoring based on the aforementioned metrics—are rewarded with these opportunities in an effort to improve relations.
3. Provide managerial oversight
Letting suppliers steer their own ship might seem like a wise move, but it may not yield the results you’re after. A better approach: closely monitor your suppliers using a report card or some other evaluation tool like GM did. “[Toyota and Honda] don’t take a hands-off approach; they believe suppliers’ roles are too vital for that. They use elaborate systems to measure the way their suppliers work, to set targets for them, and to monitor their performance at all times,” notes the Harvard Business Review. And thanks to this hands-on approach, both Japanese automakers have been quite successful over the years.
4. Implement quality control procedures
Are widgets up to par or are there deficiencies? A one-size approach definitely does not fit all, so create a distinct set of quality control procedures for individual suppliers, based on your company’s specific needs. Apple Rubber, the leading designer and manufacturer of o-rings, rubber seals and custom sealing devices has quality control representatives conduct extensive reviews and tests before shipping out materials.
5. Solicit feedback
The relationship should not mirror a dictatorship where the manufacturer barks orders or submits requests while the supplier blindly fills them or acquiesces. Instead, there should be an open line of communication between both parties so questions, concerns or suggestions can be presented and addressed in a timely, but cordial manner. As with most other business matters, communication is key.
Allison Martin is a writer, financial mentor and business consultant to mommy-preneurs. Her work has been featured on ABC News, MSN Money, Yahoo! Finance, Fox Business, Credit.com and Money Talks News. When she's not writing away, Allison enjoys spending time with her family and traveling.