Do you manage your suppliers, or do they manage you?

The best way you can stay in the driver’s seat is to make sure you have an organized plan of attack for working with suppliers, one that lays out your expectations and  emphasizes quality.

There are three areas to focus on that’ll help upgrade your relationships with suppliers:

1. Most companies treat poor supplier quality as collateral damage, part of the price of doing business. Here’s a painful stat: The cost of poor supplier quality (COPQ) take take a 10% bite out of an organization’s revenue.

It’s more than just faulty materials or goods. There’s a ripple effect — rework, slowed production, extra freight costs, warranty expenses when customers complain, and recall expenses when you have to ship it back from those customers.

So the first step — which many businesses don’t do now — is to track supplier quality, by logging to the bad (and the good), and what it ends up costing your company.

2. Once you’ve done your homework, you can approach suppliers about recovering the cost of poor quality supplies. In this case, many companies charge back the goods to the supplier. When enough product starts flowing backward, suppliers will take notice.

Experts point out that the bulk of costs stemming from suppliers providing poor goods is NOT the materials. It’s that collateral damage that really rings up the dollars. Finding a way to quantifying these costs will show suppliers just how deep — and costly — the problem is.

3. Finally, the best way to formalize your approach to solving these problems is to design your own supplier scorecard. Not only will you create a running evaluation of each supplier, it’ll also provide a solid framework of your expectations for these suppliers.

It strengthens your hand considerably when you sit down at the table with a supplier if you have a written list of problems and the costs incurred, along with a clear explanation of your expectations.

Tags: cost, quality, suppliers