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The New Supplier Site Visit: A Better Way
"Youve got to see it to believe it." Perhaps this was the philosophy that first drove early supply management professionals to pay visits to supplying organizations. Supply management professionals used terms like verification, auditing, or "checking up" on outputs to justify trips to the suppliers site. In these "swim with the sharks" days, the supplier placed great value on these visits as opportunities to condition its customers by creating, changing, and managing customer expectations. The supplier would often make statements about productivity and efficiency to create an image of capability to meet customer needs, point out in-line automated quality inspection stations to create the impression that it delivers high-quality goods and services, and make statements about its ability to be competitive to create the perception that the customer can expect good pricing. Because both the buyer and the supplier had expectations of the visit creating trust and comfort, opportunities to answer questions, instigate new ideas, and, above all, spread knowledge of how the buying and supplying organizations can each make improvements that benefit the value chain were often missed. For the supply management professional wanting to achieve best practice, it can be helpful to look at how traditional supplier visits fall short, what supplier-visit activities are appropriate for various types of relationships, and how to use the information gained during a visit to ultimately achieve process improvements.
Methods of Supplier Investigations
One tool that can help supply management professionals approach supplier investigations that will maximize value is the matrix commonly used to classify different expenditures. The chart below depicts four quadrants, among which purchases are classified based on amount of expenditure and market difficulty involved in sourcing and obtaining the material or service. Market difficulty is defined as the ease of purchasing the good or service. A difficult market can be created by either internal or external forces. Some examples of external forces are a limited number of suppliers, patents, or technological innovations that one supplier has over another. Closed specifications, tight tolerances, and specified suppliers are examples of internal forces that make a market difficult.
Tools to Assist In the Supplier Visit
Understanding which type of expenditure you are dealing with — acquisition, critical, leverage, or strategic — is very important. Based on that, supply managers will determine where they can focus their efforts for improvement. For example, as detailed earlier, leverage purchases are a prime candidate for cost reduction focus; strategic purchases can focus on cost reduction, innovation, and new activities that will create value. In most instances, the supply manager will perform a cost analysis of a suppliers cost and learn about the suppliers operations in order to look for ways to improve. The supplier site visit allows the purchasing organization to obtain much of this information and further validate conclusions that it may have come to based on other research.
Linda P. Michels, C.P.M.
Linda Michels is global operations director for ADR International, a consultancy specializing
in purchasing and operating business units in the United States, United Kingdom, Germany,
and South Africa. She has held positions with Gould Electronics, KMS Advanced Products,
Smith Corona, and O&S Manufacturing, giving her experience in sales and marketing, appli-cations
engineering, manufacturing, and research and development. Ms. Michels received a
bachelor’s degree in electrical engineering from Syracuse University and is a member of
NAPM—Metro Detroit, Inc. She has presented at several conferences, taught workshops,
published articles, authored a book for Macmillan Publishers, and served on review boards
for published works.
Traci J. Eckardt, C.P.M.
Traci Eckardt is a senior consultant for ADR North America. She joined ADR with eight years’
experience in management consulting, purchasing consulting, and purchasing, and has
worked in the food, energy, steel, packaging, and automotive industries. Her areas of expertise
include evaluation of purchasing people, processes, and practices; tactical and strategic nego-tiation;supplier relationships; cost reduction and containment strategies; and reengineering
purchasing processes. Ms. Eckardt holds a bachelor’s degree in purchasing and operations
management from Michigan State University and a master’s in business administration from
Michigan State’s Eli Broad Graduate School of Management. She is a member of NAPM—
Metro Detroit, Inc.
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