Supplier-delivery performance was poor.
There was also an average of 10-20 parts shortages weekly. The cost of production downtime and shortages was enormous.
Suppliers were not motivated to improve their performance. They didn’t know the full cost to the manufacturer or the manufacturer’s customers of production downtime. Moreover, there were no programs in place to build relationships with suppliers.
Objective:
To improve on-time delivery to 98% and to implement a zero-tolerance program regarding parts shortages
Possible solutions: Adjust schedule of deliveries to customers to account for late delivery from suppliers; change suppliers; increase inventories of parts that consistently were short.
Solution:
- Annual Supplier Forum:
Instituting an Annual Supplier Forum and invited the suppliers to attend. At the forum, the team spent two days educating suppliers on the importance of on-time delivery, and its effects on the customer base. - Supplier Development Programs:
introducing three programs that would be implemented within the year:
Supplier Scorecard Program:
A quarterly scorecard is to measure suppliers on price, delivery, quality, cost and service.
The suppliers, who helped create the metrics, must obtain a score of 98% per reporting period. Each quarter, the suppliers are given their score, calculated from the feedback created by the internal surveyors within the company. After the publication of the quarterly scorecards, the suppliers are brought in for a scorecard review with the procurement/quality department. The suppliers who fall below the 98% metric have to submit a recovery plan and the team must review this plan and have a close monitor to their recovery plan.As for the suppliers who do not have performance improvement after submitted the recovery plan, the purchasing team may consider to re-audit or change supplier.
Supplier Chargeback Program:
Under the supplier-chargeback program, suppliers are charged back for non-conforming shipments/late shipments that shutdown production lines. The purpose of this program is not to make money, but to create accountability within the supply chain. Besides, this will help the company to recover that lost through supplier debit memos and supplier full-payment.
Supplier Development Manual:
Supplier Development Manual (can be web-base or printed hard copy). This is not only meant for the existing suppliers but also the new approved or potential suppliers.
Each chosen supplier shall understand and comply with their customer’s needs and requirements.
As if the company is registered as ISO company while supplier might not be ISO registered. Hereby, both parties may not be talking at the same channel.
Therefore, company’s requirements and etc must be clearly stated in the manual.Supplier on-going education is the recipe for success.
