Bringing Underperforming Suppliers Up to Speed

This is an excerpt of the original article. It was written for the January-February 2011 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2011

No question about it, we have a lot of sophisticated and veteran supply chain professionals who read SCMR. Certainly, over the course of their careers, these individuals have demonstrated a knowledge and mastery of the fundamentals of our profession. But interestingly, every time we run an article that covers the basics of supply chain management—or conduct a reader survey of topics of interest—we’re pleasantly surprised by the overwhelmingly positive response the “fundamentals” receive.There’s got to be a reason for this counterintuitive result. I haven’t put it to deep analysis yet, but it’s logical that information on the basics…

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What happens when a supplier repeatedly falls short on product quality or delivery deadlines? What if that supplier is important to an emerging market strategy?  Or if there simply are no other vendors that can consistently produce to higher standards?

This is the very real world of the supply chain when doing business with vendors in developing countries. Typical problems include parts and components that fail to meet strict specifications in areas such as precision sizing, corrosion protection or rigidity, or an inability to deliver on time. The outputs from sub-standard suppliers are what throw a wrench in production plans, depress quality ratings, add to inventory and rework costs, and generally cause disruptions in production areas and headaches among supply chain managers. “Firefighting makes up two-thirds of the daily work for my team,” is one verbatim complaint we’ve heard recently.

The challenges are becoming more critical. Globalization puts many more low-quality, low-cost suppliers on procurement sourcing lists. It also heats up competition, urging more innovation in less time—just when more and more corporations are struggling to find the skilled talent they need. And shareholders are looking for far fewer negative surprises and more predictable profit growth based on more reliable data about demand and supply.

Those factors combine to explain why there is now more interest in finding systematic, assertive ways to help low-cost suppliers elevate their performance. In this article, the authors describe a range of supplier development initiatives that have demonstrated significant results. Indeed, the same kinds of initiatives can create opportunities as well as respond to challenges. Companies that can improve the performance of relatively immature low-cost suppliers will gain a “best of both worlds” advantage over time.

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