Supply Chain Solutions No.34 – Supplier Onboarding

Sourcing and on boarding new suppliers is a process that needs to be systematic to ensure all requirements exist to be able to ahieve all key business deliverables and future business success.

But, at times companies are faced with a sudden need due to capacity, product category expansion or real supplier risk. A temptation can become apparent to expedite bringing a new vendor on board to for fill customer, category or market demand; the key is to ensure all steps are maintained to reduce long-term risk and ensure new partners understand your business needs.

If there are intermediates involved in the process, agents or trading companies, the systematic evaluation process needs to be performed with all downstream suppliers to ensure “ALL” partners understand your business need, process and meet compliancy needs.

The following steps should be considered mandatory in the following order;

1. Supplier Pre-Evaluation

a. Sign confidiality agreement & Supplier Pre-Evaluation Information / form
b. Raw Material / Product Pricing Evaluation (Benchmarking)
c. Existing Product Quality Evaluation
d. Supplier Risk Assessment

Confidentiality Agreement example please refer to; http://wp.me/p7z4o2-s7

Supplier Risk Assessment guideline please refer to; http://wp.me/p7z4o2-fy

]

a. Assess Management Team and Individuals that will manage the account, experience and ability to influence outcomes to achieve required service levels
b. Development capability, machinery, process and capacity
c. Production capability, machinery, process and capacity
d. Quality assurance and control process, raw material, product, development, pre-production, work in progress and finished goods
e. Review value added services including what innovation the vendor can bring into the business
f. Social Compliance Pre-Evaluation
g. Business Code of Conduct, Terms and Conditions, signing off all and any business agreements signifying the business vendor partner accepts all business conditions necessary including intellectual property

Terms and Conditions example please refer to; http://wp.me/p7z4o2-ti

Code of Conduct example please refer to; http://wp.me/p7z4o2-sD

3. Supplier Quality Evaluation (Quality Team 2nd Visit)

a. Evaluates quality assurance and control process, raw material, product, development, pre-production, work in progress and finished goods
b. Educates the supplier on the current quality process and need.
c. Establishes all corrective action requirements, responsibility and time line for corrective action

4. Supplier Social Compliance Evaluation (Compliance Team 3rd Visit)

a. Evaluates the supplier and all key downstream raw materials suppliers as necessary to ensure they will pass the appropriate social compliance level for the business or businesses customer
b. Establishes all corrective action needs, responsibility and time line for corrective action
c. Manages with sourcing team all requirements for 3rd party compliance auditing and future corrective action

Ethical sourcing supplier assessment format please refer to; http://wp.me/p7z4o2-ng

5. Finance Evaluation

a. Verify supplier’s business, tax license and other relevant certifications
b. Verify bank account for payment is verified as the vendor’s registered account
c. Establish Suppliers in ERP system so purchase orders can be raised

The following audits should be considered situational evaluations;

1. Suppliers credit evaluation when there is a concern of ownership and liquidity, I recommend Dun & Bradstreet http://www.dnb.com
2. MOU, minutes of understanding where there is a heightened requirement for understanding on process, intellectual property, royalties or any other conditions not outlined in the Code of Conduct or Terms and Conditions
3. Individual market product compliance and certification
4. Sustainability and traceability compliance
5. CT-PAT / Anti-Terrorism audit

Memorandom of Understanding example please refer to; http://wp.me/p7z4o2-oB

CT-PAT additional Information please refer to; http://wp.me/p7z4o2-gs

The audit/evaluation timeline depends on the businesses need to make it happen, while it is preferable to conduct audits at the same time as other vendors so you can benchmark and compare, at times there will be needs to expedite. When expediting a vendor evaluation, it is critical to ensure all steps are maintained and ensure there is no impropriety through the process.

Management of corrective action needs is an important process to educate and bring a vendor up to the expectation and needs of the business to ensure the product is fit for the designated market level. Corrective action management can be seen as an essential development process of a Quality Management System QMS that is ongoing. It is important that a management team is established from sourcing and QA to manage the critical path process with a continual improvement view rather than qualified or not qualified.

Once a supplier is certified and bought on-board, a gradual production build-up must be viewed as paramount to ensure suppliers are educated in business needs and corrective actions drive the total quality management system need. Utilising tools like supplier matrixes for; supplier levelling, category allocation and capacity management will ensure vendors are bought up to speed at a level suitable for the supplier’s capability.

ID Global Concepts are experts in supply chain management. We add value to your supply chain through consultancy or management contract to ensure the business has the best practice systems that are the right fit for your business, customer and meet your value expectations.

If you would like to learn, please email us at info@idgc.co or visit our website www.idgc.co

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: