Friday, August 29, 2008

Vendor Management

Those of you who have done business in China for any length of time know that the marketplace is fluid, to say the least. Companies rise and fall, reinvent themselves, destroy themselves, and exchange key staff at a dizzying rate. If you're dealing with a tier one automotive supplier, you will probably disagree with my observation, but if your volumes are smaller, like mine, then you've dealt with these small, rapidly morphing companies.

Most of my experience has been in and around Ningbo. In such a rapidly developing area, company changes are accelerated. There are many great companies in Ningbo, but a technique is needed that will help make sure the company you're doing business with today is the same one you started doing business with yesterday.

Most of you are familiar with vendor management programs. Larger companies have formal vendor management systems that rank all vendors on such things as delivery accuracy, on-time delivery, number of identified defects, number of outstanding non-conformances, etc. For smaller companies, it's still important to have a program. In fact, it's so important, that you should take the time to develop a procedure, just to remind yourself on occasion to spend a few minutes thinking about your vendors. For the purpose of this discussion, let's assume that you have already performed an initial audit and vendor qualification.

Here are some ideas to get started, and to use as the basis for a procedure:

1. For every shipment from a vendor, it's likely you perform some sort of source or receiving inspection. Put a copy of the results in a vendor file. Make note of any non-conformances.

2. In the vendor file, maintain a copy of any non-conformances. Be sure to pay special attention to any non-conformaces for which the vendor hasn't completed corrective action.

3. For every shipment from the vendor, make a note about requested delivery dates and quantities.

4. Make sure you capture any price changes throughout the year.

5. Dust off your initial audit form. Take the time to do a quick survey of the company, paying special attention to any findings made during the initial audit.

6. Set an appointment on your calendar to take a quick look through your vendor files at least annually. Take corrective action on any areas of concern you uncover.

7. If you haven't personally visited that vendor in several months, take the time to swing by. Now is a great time to bring along your audit form and do a quick survey. Have lunch with the owner, and remind him how much you value his company.

In a market changing as quickly as China, especially in second and third-tier cities, it pays to have a vendor management program. Do you have one? What else do you measure?

As a quick aside, when I audit companies, I always see what kind of vendor management program they have in place for their suppliers. This helps reduce sourcing risk, by making sure your vendor is dealing with the best possible suppliers.

No comments: