Ever since the automotive industry pioneered the concept of the extended supply chain, building a network of suppliers, and establishing strong relationships with them, has become extremely important for companies all over the world. Building a robust supply chain with a deep focus on quality, cost, and delivery (QCD) has become the norm.
Irrespective of the type of product your enterprise manufacturers – from automotive and aerospace to life sciences and medical devices – a large percentage of the raw materials and components come from third party suppliers. According to data published in McKinsey Quarterly, over 80% of the product value of the car comes from external suppliers. This comes to around 70% for CPG (Consumer Packaged Goods) companies and 40% to 50% in pharmaceuticals.
The reasoning behind this is well-understood by business leaders. Companies are focusing on their core competencies, allocating resources for R&D in specialized areas. For other components, raw materials, or parts a company needs, it relies on suppliers.
One of the key focus areas from an overall quality perspective is supplier quality. OEMs serving the end-customer take it upon themselves to ensure quality across the supply chain. A collaborative quality process between manufacturer and supplier is a no-brainer in today’s context. And, this quality is going to come only by having a ‘partnership mindset’.
ComplianceQuest’s Supplier Management System, part of its EQMS, plays a key role in automating and digitally transforming key supplier relationships and supplier quality workflows. In this post, we focus on five common challenges faced by supply chain and quality leaders, and how a collaborative and data-driven approach to supplier quality management is the only way forward.
Challenge #1: Supplier Risk Management
The first step in supplier qualification and onboarding is to ensure that there is clearly defined success criteria. This helps both the supplier and the manufacturer have a documented (and detailed) understanding of the expectations from each other.
Once this is done, it is a good idea to categorize suppliers by risk level. The most critical and high-risk suppliers are extremely important to your company’s value chain. Clear strategies must be put in place to collaborate and build a longstanding relationship with these suppliers. Often, suppliers in these two categories have very little competition and are critical to your overall success.
Challenge #2: On-going program and performance management for key suppliers
Delayed shipments or faulty products can post big challenges to a manufacturer. They erode brand loyalty, resulting in financial loss while making it difficult to get the supply chain back on track.
A data and metrics-driven program and performance management to ensure the highest levels of supplier performance is imperative. Using a data-driven approach also helps the supplier optimize for the key metrics that matter.
Challenge #3: Flexibility of supply chain based on demand cycles
Using data and predictive analytics to understand demand cycles can play an important role in building partnerships between supplier and manufacturer. This will help the supplier plan their capacity and utilization better.
One of the key factors here is to treat your supplier as an extended arm of your company. Provide the data visibility needed to make sure that a supplier is not surprised by a sudden increase or decrease in demand.
Challenge #4: Reduce supply chain turnover
Once you have a trusted network of suppliers, it helps to plan for a lasting partnership. It enables predictability and offers a win-win situation for both parties. For this, transparency and easy flow of information from the manufacturer to the supply chain is crucial.
Challenge #5: Reducing friction between suppliers and internal parties
Rapid changes to product design, manufacturing and delivery schedules or quantity can cause friction between suppliers and internal parties. Having a long-term relationship can help the two parties understand each other better. Trust and confidence in each other can play an important role in reducing any friction.
For each of the challenges mentioned above, having a modern, cloud-based supplier management system will help. A data-driven approach supported by a collaborative platform that enables a seamless flow of information and data visibility is critical.
ComplianceQuest has been used by companies in over 1000 locations across the globe to manage ongoing supplier partnerships and enhance supplier quality metrics.
The supplier management modules in CQ have been developed after understanding, in detail, the common challenges faced by quality and supply chain leaders. The following solutions truly help in building strong supplier partnerships:
- Document Management
- Qualification & Requalification checklists
- Data-driven supplier quality management, on an ongoing basis
- Collaborative RCA & CAPA
- Continuous improvement
- Einstein Analytics / Predictive Analytics to help with demand forecasting and planning
- Embedded Artificial Intelligence to drive prioritization, automatic issue categorization and risk assessment
To learn more about our Supplier Management module, click here.
To request a demo, write to us at [email protected]