April 23, 2014

A good supplier fulfills your requirements in an excellent manner, and does so time after time.  What is specifically required for “good” depends upon your particular circumstances.  One of these is whether you need a supplier for the long term or for a one-off situation. In either of these situations there are several important supplier qualities that matter greatly.

Proficient Sourcing [link] exists to help you, the buyer, find excellent sources for your custom manufacturing requirements without either cost or risk.  We believe our recommended suppliers have the attributes of an excellent supplier.  What follows is our view of what are the most prominent of these attributes, and we would most certainly welcome your views [blog]

Price and quality are vital. Everyone recognizes the need for competitive pricing. On the other hand, the buyer either asking suppliers to cut prices on everything, or paying slowly, may find suppliers losing interest.  In particular, OEM’s demanding a percentage price reduction every year evidently assume the supplier has padded the price unnecessarily.  That may well become true if a supplier anticipates such an annual demand.  The really good supplier will incorporate cost improvements when they occur, and that’s unlikely to be an annual event.

One of our favorite quotes about quality came from a Procter and Gamble engineer, who noted that price problems can be worked out, but quality is forever.  A supplier who delivers parts or assemblies with quality problems should not get future opportunities if these are not fixed immediately.

Supplier stability includes management with long tenure and a history of on time deliveries.  One article we found noted that early shipments can be a sign that the vendor is short on orders and needs to accelerate cash receipts.  This seems a dubious conclusion, since from the supplier perspective, early shipments can also be a sign of eagerness to please the buyer.  If early shipments create a problem, or even a suspicion for you, surely it can be easily negotiated.

All things being equal, we believe a local, handy supplier has an enormous advantage, especially for new or development projects.  If your supplier need involves a mature product, distance may not be so important.  But the ability to dash over to the supplier to resolve a problem or work out design issues is a big advantage, and why we try to recommend nearby suppliers whenever possible.

The size of your business to a supplier, along with future potential and the scarcity of the supplier’s service, determines leverage.  If you are a large and growing percentage of a supplier’s business, you can be sure you will get attention for any issue you have.  Likewise, if the supplier knows they are the only source for some service, they have a leverage advantage.   The wise buyer and supplier recognize the value in not exploiting a leverage advantage if a long term relationship is valued.

An excellent supplier needs a stable employee base with skills appropriate for your needs.  This may be observable via a visit to the supplier.  Another clue is a supplier’s experience with similar projects.  In most cases the supplier will be happy to share such data, perhaps even supplying references.  A good supplier will welcome your visit and encourage interaction with key employees.  If the supplier does not seem willing to accommodate your requests for these, you may need to seek an alternative supplier.

If you choose a small company supplier, communications over time can become a problem.   In one case we observed a supplier who’s key communicator also had important line functions for day to day operations.  That meant it was often difficult to connect with that person when the buyer needed information.

These are supplier characteristics we believe important for success. We would welcome your additions, corrections, or other comments.  So far, we have been successful in connecting suppliers with the above characteristics with buyers in need of custom manufacturing.  But if we are missing something important, please let us know.  We are always interested in improvements.

About the author 

Charlie Harte

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