Supplier Collaboration

Supplier Collaboration: A Critical Requirement

Supplier collaboration and the resulting improvements are critical requirements for implementing lean flow across the entire supply chain. Many companies recognize this, but question how to go about creating supplier collaboration, especially how to start the interaction. As with all the other sections of the fulfillment stream, the answer is to use standard work. Here are some effective action items to create standard work for supplier collaboration:

supplier collaboration

1. Define standard work parameters for supplier collaboration.

It's good practice to approach supplier collaboration and development as a process to be improved on an ongoing basis. The fulfillment stream leader put together a supplier-management team (consisting of material planners, buyers, and supplier-quality engineers), and developed a supplier collaboration strategy based on standard work. Asking certain questions to guide strategic planning can turn supplier collaboration into a process that can be standardized and improved:

  • Inputs: who needs to be involved in a supplier-development activities?
  • Procedures: How do we collaborate and help to develop our supply base?
  • Timing: When and with what cadence do we collaborate with suppliers?
  • Outputs: What positive results should we and suppliers expect from collaboration?

2. Select and evaluate suppliers based on specifications, capability, and commitment to lean.

Set expectations for lean thinking and continuous improvement when selecting new suppliers or periodically evaluating existing ones. This gives you the opportunity to learn a supplier's level of commitment to lean and collaboration. Lean teaches that quality at the source (getting things right the first time) prevents waste. Choosing the right suppliers up front is crucial for efficient supplier relations.

3. Hold an engagement meeting for supplier collaboration.

Nearly all of supplier collaboration steps involved significant adjustments in the traditional behavior of suppliers. You can ask them to change how much they ship (smaller lots), when they ship (more frequently), and how they ship (consistent documentation and packaging).

Lean fulfillment stream initiatives often fail prior to implementation because suppliers fear the consequences and immediately respond with, "How much is this going to cost me?" To fairly answer this question, your supplier management team should meet with all suppliers to discuss your company's lean vision and operational plan.

4. Collect accurate supplier measures.

Accurate and timely measurements of supplier performance are needed to identify and solve supplier problems. Suppliers must prove themselves daily. Too often performance data is averaged over long periods, usually a month or business quarter, which can lead to inaccurate assessment of suppliers.

Supplier PDCA

At LeanCor, we've found that struggling suppliers need day-to-day interaction to improve. The team uses collected data and a supplier-stratification plan to set the agenda for daily PDCA with suppliers. Ideally, if a supplier struggles with a fill rate on a Monday, we complete a root-cause analysis and implement improvements by Tuesday.

Day-to-day supplier engagement requires a high level of discipline:

  • Day-to-day (or hour-by-hour) visibility on supplier performance.
  • Standard work that provides suppliers daily feedback.
  • A standard problem-solving model based on PDCA (starting with the basic problem solving tools, such as a Pareto chart, cause-and-effect fish bone diagrams, and Five Whys analysis).
  • Standard feedback to suppliers on how processes were improving (or not).

Once you achieve real-time supplier performance visibility and regular communication with suppliers, performance of the supply chain will begin to improve. Suppliers that show stability in their operations are then ready for true supplier collaboration efforts to reduce total-system lead time and waste.

5. Collaboratively identify and eliminate waste.

While the ultimate goal is lead-time and cost reductions in the supply chain, it cannot simply come from forcing price reductions from suppliers. Waste in supplier relations exists because of behaviors from both the supplier and the customer. Both parties must agree to seek opportunities to uncover waste and take responsibility to remove it.

6. Create an external supplier forum.

Another tactic is to create an external supplier collaboration forum to encourage ongoing learning and improvement. All supply chain participants in the forum can discuss how individual company decisions affect one another. In this way, they educated each other about the waste they jointly create in the shared supply chain.

Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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