This blog discusses an auditor’s criteria for supplier qualification and selection, including proximity, technical expertise, size, etc..
I suppose there are a lot of possible answers to this question. I would avoid answers like, “because that’s who we’ve always bought ‘widgets’ from.” “Grandfathering” suppliers is a VERY BAD IDEA! I’m sure I’ve made this analogy before, but I’ll repeat myself anyway. Would you keep an employee that was totally unqualified for their current position just because they were qualified for the job they were hired for initially?
Please don’t answer that question. I’m afraid that some criminally stupid manager might say yes. I am a strong proponent for fairness and training people, so they can be promoted from within. Unfortunately, sometimes people just can’t keep up with the growth of the company. This happened to Charlie’s Dad in the movie Willie Wonka, and it can happen to the genius founder and CEO of a growing company.
If I have an employee that is not qualified for their job, I start by retraining them. I love to teach, so I probably spend too much time trying to train someone that might not have the aptitude. I like to use the approach of training people until they get it right or they quit. “Quitting” doesn’t necessarily mean leaving the company. It could mean applying for a different job. It could also mean some out-placement coaching from a consultant. No matter what, I try to make it work first—then I terminate. When I terminate, I do so with kindness, compassion, legally and with ample notice.
Suppliers should be handled no differently. You should re-evaluate your suppliers on a regular basis and terminate your contracts with unqualified suppliers. This will probably require the same level of diplomacy (e.g., – retrain them, identify an alternate, and negotiate a transition plan that is reasonable for all parties).
Another stupid answer is, “because they were the lowest bidder.” There’s an old government contracting joke about this strategy. I think it sounds something like this, “a million mission-critical parts, designed by engineers that have no clue what the real world is like, built by the lowest bidder, and inspected by a bureaucrat that can be bribed with a bottle of wine and some prime rib.” Personally, I tend to discount the quality of the lowest bidder every time. I always wonder what they forgot to consider when they bid on the job.
If you have read my previous blogs, you already know that ISO certification is not an important criterion for me. I include the thoroughness of a supplier’s questions as one of my semi-quantitative criteria for selection. Another factor I like to use is proximity. I believe there is great wisdom in developing a partnership with your supplier. It’s a lot easier to achieve that kind of relationship with another company if they are located close-by. Another thing I look for is a supplier that is better than my company. I would much rather learn best practices from my supplier than spend my resources teaching them to become better.
Same Size Supplier
Finally, my favorite criterion is size. I prefer a supplier that is approximately the same size as my company. If we are the same size, then problems should be equally important for both of us. If my company is bigger, we might tend to bully the supplier and the supplier might have difficulty growing with us. If my company is smaller, our problems might not receive the attention they deserve.
There are always other considerations, such as the desire for “one-stop-shopping” to increase your bargaining power. Unfortunately, this approach tends to result in sub-optimal decisions and it makes it more difficult to terminate relationships. Technical considerations are also important, but I rarely find that a good supplier does everything well. It’s sort of like hiring an employee with the perfect resume. They should be a qualified candidate—on paper. Unfortunately, the fit of an employee with a company is equally important. For example, if your engineers are sloppy when it comes to writing a specification, you don’t want to qualify suppliers that will build whatever you ask for—no matter how stupid it sounds.
My SIMPLE advice…Qualify suppliers based upon the intangibles AND the technical details.