The relationship a firm creates with its suppliers requires a substantial level of trust. Without the control that comes from complete vertical integration, there are always going to be elements of supply that are out of your control. Appropriately evaluating the suppliers of your components is the key to being able to rest easy on that trust. In many ways, you are looking for the same qualities in a supplier that you would in a new employee. You need to evaluate their abilities, yes, but there are also simple marks of professionalism that can demonstrate a great deal. These are three badges of a solid-performer that you should be looking for.
Suppliers should communicate thoroughly and promptly.
Finding a balance between keeping someone informed and giving them superfluous information is always tricky, but in a component supplier relationship, information flow should be ample and reliable.
Assembling components from a variety of suppliers to produce a final good can be an extremely complex task, especially in the high-tech industry. A good supplier will be aware of this and aim to never let anything fall through the cracks.
Any questions or issues that might arise in production will be addressed honestly and upfront. Terms to contracts will be clear and ready for questions, especially with regard to intellectual property.
As an aside, intellectual property rights are one area of your supply chain and business that you should always aire toward the scrutinous side on. If a supplier has both of your best interests in mind, they will not hesitate to field questions in this area and will be open in their response. On the other hand, if you feel your questions are met with some amount of hesitancy, you might be facing a major red flag.
To quickly boil this issue down, your suppliers should be keeping you well-informed enough that checking in on your orders almost feels redundant. That being said, check in on them.
Suppliers should be punctual and respect your time.
If you are going to meet your delivery goals, you are going to need suppliers that meet their own.
There are countless interruptions to productions that can crop up. Material availability, natural disaster, and transportation delays all come with the territory of manufacturing. In the same way that you should be accounting for these things in your in-house processes to ensure that production keeps moving forward, your suppliers should have contingency plans together that allow them to keep their agreements.
Though a minor delay might be excusable, if well-explained and handled with respect, recurrent delays or quality problems almost always indicate the existence of larger problems. Don't deal with suppliers that hinder you from meeting your own goals.
The following concept will help link and solidify these two previous points.
Suppliers should be transparent.
Supply chain processes are one area of your business that can be extensively quantified and optimized based on data. These metric based analyses provide excellent quality control and insurance against waste in the process. They are also crucial to preparing for the future and ensuring that problems are expected and dealt with well in advance.
Your suppliers should be keeping just as tight a control on their processes as you are and making this information readily available to you. If a supplier is unwilling to give documented proof of the controls and metrics they have in place, there is a good chance that they are not appropriately controlling their manufacturing. The waste that this might generate in their own value stream could substantially impair your margins or slow your ability to scale.
The transparency, or lack thereof, with which a supplier operates, in any area of their business, could be the perfect measuring stick for exactly how much they are trying to hide. As much as hiding something from a friend usually doesn’t indicate anything good, neither does it when coming from a supplier.
In vetting potential suppliers for your operations, professionalism should be one of their paramount virtues. If they communicate well, meet their deadlines, and are steadfastly transparent with their reporting, you may have found a partner worth keeping around.
As a closing note to consider, these three benchmarks are also concepts that you should be applying to your own business. Are you delivering your products on time? Are you communicating with your vendors consistently and promptly? Finally, are you making as much nonsensitive data available as possible?
Professionalism isn't all about reputation. It's a mark of competence for those that can maintain it.