Supplier Partnership

An organization spends a substantial portion of every sales on the purchase of raw materials, components, and services. Therefore, supplier quality can substantially affect the overall cost of a product or service. One of the keys to obtaining high-quality products and services is for the customer to work with suppliers in a partnering atmosphere to achieve the same quality level as attained within the organization.

Customers and suppliers have the same goal—to satisfy the end user. The better the supplier’s quality, the better the supplier’s long-term position, because the customer will have better quality. Because both the customer and the supplier have limited resources, they must work together as partners to maximize their return on investment.

There have been a number of forces that have changed supplier reltions. Prior to the 1980s, procurement divisions were typically based on price, thereby awarding contracts to the lowest bidder. As a result, quality and timely delivery were sacrificed. It is stopped because price has no basis without quality. In addition, single suppliers for each item help develop a long-term relationship of loyalty and trust. These actions will lead to improved products and services.

Another factor changing supplier relations was the introduction of the just-in-time (JIT) concept. It calls for raw materials and components to reach the production operation in small quantities when they are needed and not before. The benefit of JIT is that inventory-related costs are kept to a minimum. Procurement lots are small and delivery is frequent. As a result, the supplier will have many more process setups, thus becoming a JIT organization itself. The supplier must drastically reduce setup time or its costs will increase. Because there is little or no inventory, the quality of incoming materials must be very good or the production line will be shut down. To be successful, JIT requires exceptional quality and reduced setup times.

The practice of continuous process improvement has also caused many suppliers to develop partnerships with their customers.

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