This is a groundbreaking interview with Sherry Gordon, a recognized expert on supplier performance management and author of Supplier Evaluation and Performance Excellence:  A Guide to Meaningful Metrics and Successful Results.

This interview contains 67 minutes of valuable information that  you need right now to manage your suppliers.  In this interview, you’ll learn:

• Why you should measure supplier performance
• How to figure out what to measure and how to develop Key Performance Indicators (KPIs)
• Examples of commonly measured areas (e.g. cost, quality, time, technology)
• Why you need to use leading indicators, not just lagging indicators….with examples
• Why supplier risk has become so critical and ways to address it
• How to segment your supply base to help you decide which suppliers to measure
• Common sources and types of supplier information (e.g. scorecards, audits), along with the pros and cons

The podcast with Sherry Gordon is in the Current Quality Library….you can gain access here.

For the past few weeks I’ve been working with joint compound used for taping sheetrock and I noticed that each pail had a drastically different consistency requiring me to add more or less water to correct the consistency.  This reminded me of an actual situation that occurred in the workplace.  

I was working for a company that used to develop color samples in a lab that would later become a standard.  Every time an operator would follow the formulation to duplicate the standard, the color was either noticeably lighter or darker, which required the operator to custom color match the order.  This took a lot of time, which delayed the order and it would drive our costs up because we would end up using more pigment which generated waste coating.  

I started to look through the certificates of analysis (C of A) for the lab samples used to create the standards and compared them to the same pigments used for the scale up runs and noticed a tremendous amount of variation….the pigments from the lab samples were on the lower end of the specification, while the scale up pigments were on the higher end of the specification.  The only way that we could duplicate the standards without having to customer color match was to require our supplier to deliver pigments that were closer to the low end of the specification.  

Use your C of A’s to analyze the variation of your suppliers raw materials and to help you understand what your needs are so that you can communicate that information to your supplier….creating a win-win situation.

Just yesterday I went grocery shopping and on my list was a particular brand of energy bar that hasn’t been available since the peanut butter recall.  Even though I’d been buying the same brand for several years and considered myself a loyal customer, I found myself buying a sampling of other brands to try out ….which really made me question how loyal I really was….odds are if I’m able to find an adequate substitute , I’ll probably stop looking for my ‘original’ favorite because I’ll have a ‘new’ favorite.  It makes you wonder how many other customers feel the same way, creating a loss of revenue for the manufacturer that may take years for them to recoup…or even worse, they may never rebound and go out of business.

Let’s learn from the peanut butter recall and take a look at ways to better manage our suppliers….  

1. Identify Secondary Suppliers - Always make sure that you’ve identified and qualified secondary suppliers….especially for raw materials or services critical to your business.  This way if something happens to the primary supplier, your business will be uninterrupted.
2. Audit Your Suppliers – Periodically you should audit your suppliers to make sure they’re compliant and are in control of their processes.  If you’re constantly dealing with issues regarding a particular critical supplier (e.g. you reject their raw materials, order delivery is late), then you should do a physical audit and not just a questionnaire audit.  It could be a warning sign of a much larger issue….think of the peanut butter recall.  
3. Follow-up On Outstanding Corrective Actions – Stay on top of your supplier corrective actions to make sure the issues are addressed on-time. Otherwise, your supplier will quickly realize that corrective actions for your company aren’t a priority and they’ll spend time on other companies that demand action. 
4. Analyze Your Supplier’s Certificate of Analysis – Analyze the data on the certificate of Analysis for all in-coming raw materials….I’ve seen suppliers send material that was outside of their own (the supplier’s) specifications.
5. Communicate Status- If you experience a recall or any issue for that matter, it’s very important that you continually update your customers on the status….even if you don’t have any new information….otherwise you take the risk of losing your customers forever.

Ask yourself this question….How loyal would your customers be if you had to recall a product and you couldn’t tell them how long before you could begin production?….I think we know the answer. 

Take care,
Sandra