Supply Chain Solutions No.26 – Downstream Supplier Management
Do you only evaluate the supplier shipping or delivering the goods to your door or do you manage the full supply chain to reduce risk and build brand integrity? Understanding the whole product chain of custody through the supply chain reduces compliance and delivery risk that better services your customer.
Management of downstream vendors can have its level of complications. Where the supplier is nominated, thoroughly evaluated and stipulated as one of the vendors that must be used for any given raw material or service, the risk is dramatically reduced. But, where the downstream vendor is a non-nominated vendor there will always be a non-compliance danger, and a due diligence process must be followed.
Contracted suppliers at the top of the value stream must be responsible for all product compliance across raw materials and services provided regardless of nominated or self-sourced and appraised. Ultimately the contracted supplier is responsible for all levels of social, ethical and chemical compliance and meeting all quality and service directives specified in the buyer’s supply, quality and memorandum instructions.
The buyer must clearly state the vendor’s obligation in a code of conduct or in the business terms and conditions to ensure the vendor understands their level of responsibility across all stages of compliance deemed necessary in the supply of that product to the designated end market. Business regulations, brand level and destination market will be the key factors regulating what the level of compliance needs to be.
Throughout the chain of custody of downstream vendors, there need to be clear milestones actions in the development and production process that ensure the conformity through internal and external quality assurance. It is the vendor’s responsibility to ensure the downstream vendors comply with this requirement, but it is the buyer’s responsibility to ensure key milestones actions are signed off, and the finished product meets the markets and brands requirement.
The licensor of licenced product may require all vendors regardless of their position in the chain of custody to be thoroughly evaluated by their nominated third party inspection authority to ensure compliance is met to business and brand expectation. Similarly, nominated vendors need to go through the same evaluation process, this process of assessment and approval can be lengthy.
Nominated vendors are an excellent way to control the chain of custody, increase brand integrity and reduce cost by having approved vendors make speciality components, technical materials or shared services. But there is still a risk something can go wrong and when it does you need to be prepared to manage the situation between all parties involved to ensure a bottleneck does not form. Likewise, nominated vendors are a great place for supply chain fraud, like all vendor evaluation processes ensure the proposed nominated vendor goes through a comprehensive assessment and approval process.
Where downstream vendors are at high risk due to a social, ethical or chemical compliance regulations or to ensure brand integrity, due diligence dictates these vendors must be thoroughly evaluated before been approved for use by the finished goods vendors.
Understanding and managing your supply chain, and the entire chain of custody across downstream vendors through the development and production process will help ensure success in delivering customer and brand expectations. Managing suppliers are about relationships, mutual understanding and due diligence to ensure both parties are on the same path of understanding and goal achievement.
Are you getting what you ordered from your vendor? Regardless of your current vendor evaluation process, are you getting a compliant, fit for market product at a value price?
ID Global Concepts has been involved in numerous vendor evaluations for raw materials, components, finished goods and services for consumer goods. We can add value to your sourcing operation either through consultancy or management contract to ensure your business is using a vendor that is the right fit for your business and meets your value expectations.