Why a Robust Supplier Qualification and Onboarding Process is critical for Quality Management
The automotive industry is credited with pioneering the concept of an extended supply chain. According to a study conducted by McKinsey, over 80% of the product value of a car comes from external suppliers. In a typical CPG company, over 70% of the product value comes from suppliers. According to Toyota, a single car has over 30,000 parts including some smaller parts like screws. The majority of these parts come from a wide range of external suppliers. Even in pharmaceuticals, an industry which has traditionally been vertically integrated, the percentage of value outsourced to suppliers is 40 to 50%.
The reason companies rely on a network of suppliers is straightforward; High-quality parts require specialized research and development efforts and an enterprise is better off procuring these components from companies that specialize in a particular domain. For example, a brand like Toyota would rely on a range of suppliers for its steering gear, its brake lining, seatbelts, wheels, and windshields, to name a few components.
It is important to note that companies are constantly innovating and working on new offerings for their customers. A car manufacturer may want to add telematics and electronics-based components to enhance the customer experience. It may have to cater to new emission norms, which may require additional parts. Irrespective of how evolved your supply chain is – supplier qualification, re-qualification, onboarding and continuous improvement (CI) are critical elements of supply chain management. Qualifying and on-boarding right suppliers is fundamental for your supply chain success.
The key is to automate the entire process, ensuring your ecosystem of suppliers meets your “clearly defined” expectations. What do you think is the first step to doing that?
Read on, to find out more.