Suppliers are one of the most important relationships to maintain in manufacturing. A supply chain can become highly streamlined or remain stagnant based on relationships with your vendors. With less-than-perfect supplier communication, incorrect parts are shipped, with delays resulting in shortages for your business, and missed targets.
Eliminate temporary solutions such as expediting materials, minimize the impacts of shortages, and avoid overstock which all can be quite costly and frustrating for organizations. Here are 3 steps for improving communication with your suppliers to strengthen your relationship with enhanced end-to-end collaboration.
3 Ways to Build Better Supplier Relationships
1. Clearly Define and Communicate Expectations, Reporting, and Performance Goals
Every manufacturer has systems in place for reporting, order management, and supplier performance management. Without consistency, we’d all go a little crazy! But if your business regularly bounces from one shortage report format to another, or implements a new supplier portal every month, efficiency and effectiveness take a steep dive. Establish a clear plan for how to communicate with suppliers at the very beginning of a new relationship. This ensures an effective business partnership–fewer shortages, more on-time deliveries, less rush shipping costs, and best of all, fewer headaches for you. That’s not to say there is no room for upgrades, but this will ensure that all of your updates are thoughtful. From the beginning, set expectations for the data you need from your suppliers. Once you have that, provide a consistent platform in which your supplier can carry out those expectations. You should be able to update statuses and communicate back and forth at a part level. This makes for status updates that are easy to edit and track. A good supplier communication tool can be a powerful way to operationalize effective communication. It should:
- Be easily accessible for everyone
- Be simple to use and easy to get new users up and running
- Contain all important data both parties need to see
- Feature built-in collaboration tools, like in-project commenting
- Allow for simple, trackable communication
- Let you roll up results to see business value across all suppliers
2. Automated Supply Chain Inventory Management Processes
When you call or email a supplier, it is important to have your questions ready. What PO number do you need to discuss? Is it a VMI part? Does it have a minimum order quantity? What is the lead time for the part you are expecting to expedite? When working with supply chain leaders and practitioners, there is always a sigh of relief at the prospect of reducing unnecessary email volume. Not only does this create an easy 2-way supplier communication flow, but it cuts down on the number of messages that can pile up. Make sure you know everything you can about products you need to discuss before you call or email.
Sounds simple, right? This gets more difficult, however, with complicated ERPs and thousands of part numbers. There are tools out there that provide a window into ERP systems, and make important information easily accessible. Everyone benefits when you know everything you can about the parts you need to discuss. This will ease the discussion and eliminate the risk of the two of you discussing two different parts without realizing it. (We all know it happens!)
3. Establish Key Data Metrics to Track the Information that Matters
In addition to setting expectations for the information you need from a supplier, it is helpful to set standards for how you measure that data. Many companies report on and communicate these metrics with supplier scorecards—created by the manufacturer and shared with the supplier on a regular basis to track performance. Each manufacturer will have specific needs, but tracking these key metrics will help ensure success:
- On-Time Delivery Performance – the ratio of on-time deliveries to total deliveries scheduled in a month
- Inventory Under Min Performance – the percentage of the supplier’s items that are under the Min level, calculated with respect to the total number of items on Min/Max (not the total number of items in general).
- Inventory Over Max Performance – the percentage of the supplier’s items that are over the Max level, calculated with respect to the total number of items on Min/Max (not the total number of items in general).
- Cost Performance – the percentage deviation from the standard costs for all items supplied by the given supplier. The calculation is: (Units Received *Receipt Price) / (Units Received *Baseline Standard Price) = Cost Performance %.
- Quality Performance – the Defective Parts Per Million (DPPM) based on the defect percentage (number of defects / total number of individual item receipts)
Tracking supplier quality performance metrics helps identify areas to improve communication with vendors
Your ability to create higher vendor satisfaction will positively affect your bottom line. Half the battle is remembering the golden rule–treat others the way you want to be treated. From there, be prepared and knowledgeable. When you know your parts and are consistent in running your business, you create a system of supplier communication that is more manageable and measurable. With the above tips, you can improve your relationship with your supplier in no time.
Discover how you can streamline communication with your suppliers by utilizing a unified platform for response planning analytics, operational project execution, real-time inventory management, and actionable material optimization insights.