How To Solve 5 Common Sourcing Problems
Even the best-run plant can be crippled by procurement problems.
Even if every single process has been calculated, critiqued, and re-created for perfect efficiency, sourcing problems will throw a massive wrench into the system and make all those improvements useless.
A smooth, seamless procurement system is the foundation on which all else is built, and it is especially critical in the context of Lean and Just In Time manufacturing.
Procurement problems, ranging from internal inadequacies to human mistakes to unreliable suppliers, must be anticipated, identified, and resolved.
Standardizing procedures within your procurement division, and cultivating best practices within it, is crucial to your overall business plan. The ultimate goal: a dependable procurement system where speed, accuracy, efficiency, and cost are all optimized.
Because procurement is so essential to the overall performance of a plant, it’s important to take a long-term, holistic view of your relationships with suppliers. As attractive as short-term cost savings are, long-term efficiencies and reliability are paramount. Treating strategic supplier relationships as partnerships, grooming them to meet your needs, and keeping lines of communication open will help ensure that sourcing problems don’t overturn all your efforts at improvement.
Here are five common sourcing problems and tips for solving them.
Source Fails to Fulfill Promises
If you’ve been burned because a supplier failed to live up to their promises, you need to increase your due diligence. A Supplier Assessment should be a routine part of onboarding any supplier. Develop a form which covers all the elements you require for a successful procurement relationship, and conduct an exhaustive evaluation before bringing them on. Google “Supplier Evaluation Form” for examples, and make changes to the form over time as you become aware of any factors or metrics necessary to avoid those unhappy surprises.
Source Performs Unevenly
To promote consistent performance by your source, establish and clearly communicate the KPI’s (Key Performance Indicators) that matter to you. Make your standards very clear about variables such as purchasing price, delivery speed, compliance rate, defect rate, PO cycle time, PO accuracy, invoice accuracy, etc. Then monitor these KPI’s and communicate any shortcomings to your supplier, along with your expectations about improved performance.
Exclusive Focus on Cost
While cost is a critical factor in supplying, we all know that a failure to deliver, or defective deliveries, can be extremely expensive. Buyers should take a longer-term approach and recognize that low piece price shouldn’t govern every decision. Carefully evaluatine suppliers, monitor KPI’s, and consider the implications of quality, lead time, delivery, freight cost, compliance and more.
Doing Business without a Contract
Engaging a supplier without a contract is an invitation for trouble. While creating contracts can be time consuming, they are critical in every business relationship. Regardless of how small the supplier is or how short you may expect the relationship to be, a contract is there to protect you. This is especially critical when a language barrier may interfere with successful verbal communication.
Shipping is imperfect. Between the time when parts leave your source’s factory and arrive at your plant, weather, politics, accidents and disasters can interfere. Communicate with your supplier about a Plan B should delay, loss, or damage interfere with a successful delivery. Cultivate a good relationship with all logistics partners, and procure security certifications from customs authorities to minimize delays due to cargo inspections.