Looking for Savings? Visit your Suppliers!

by Supply Chain

Visiting its suppliers is often seen as a luxury. These visits take time and cost. However, well planned, they help to consolidate business relationships, identify opportunities for improvement and better understand suppliers’ challenges and their impact on the value chain. Here are some guidelines.

The Preparations

To maximize the value of a visit, it is essential to clarify the objectives. Whether you are developing a category strategy or monitoring the compliance of the operations, the precise elements on which to focus may then differ.

The objectives will guide the activities to be carried out, the key people to meet as well as the collaborators to invite. It will also be possible to evaluate the projected duration of the visit. All preparatory activities must be done in concert with the supplier to ensure that both parties make this meeting a success. Let’s not forget that the supplier also wants to take advantage of the visit to communicate some messages and demonstrate its strengths (and sometimes hide its weaknesses).

The Main Elements to Explore

Visiting a supplier does not mean locking yourself in an office. The objective is to tour the operations. It is recommended that you follow the flow of a project or a typical order. Ideally associated with your business.

After the introductory meeting and the review of the objectives, it’s time to dive in. Here is a short list of key elements to explore in order:

Operations planning

  • Understand how the link between sales, order management, and the planning of operations.
  • See how exceptions and change requests are handled.
  • Evaluate how the supplier manages capacity and impacts on production resources (human and material).

The Operations

The very concrete dimension of the visit, how the jobs are run.

  • The preparatory activities.
  • The methods and tools used.
  • The layout of the workstations.
  • Movement and flow of materials.
  • Quality control activities.
  • The execution of logistics and shipping activities.
  • Inventory management.
  • The cleanliness of the premises.
  • Assessment of the apparent working climate.

Peripheral Activities

When possible, it is also very informative to visit the administrative offices, the IT installations, and even the cafeteria. A lot of relevant information can be collected and allow a better understanding of the supplier’s operations and issues.

The Post-Visit Work Meeting

Once the visit is completed, the return to the meeting room allows to explore key and specific elements…

  • What are quality policy and quality assurance activities?
  • How are environmental and safety issues addressed?
  • Why are these activities accomplished in this way?
  • How is the performance required under the contract documented?
  • How the supplier faces other issues?

This stage of the visit is concrete and allows to discuss specific questions with the appropriate stakeholders. All these discussions based on a better understanding of the business activities.

Concrete Impacts

In many cases, these visits have helped identify a series of joint operations improvement opportunities that have resulted in savings of up to 10% of the price paid, without negotiation.

What is important here is to evaluate how joint operations and decisions affect cost structures.

It is, therefore, necessary to see these visits as an investment that can pay off. Well-planned, they allow to explore and understand the operations of suppliers and highlight their expertise and challenges. By jointly exploring the impacts and consequences, they are often followed by the development of a list of potential initiatives. They will be measured in savings, improvement of performance or quality.

When combined with visits to other suppliers (from the same category), the effort becomes extremely rewarding. It then becomes easier to highlight key activities that create value and identify those to be eliminated. In this sense, these visits benefit both customers and suppliers.

Combining Strategy and Innovation

Combining Strategy and Innovation

Capturing the essence of our customers’ (or prospects’) needs and jobs-to-be-done (JTBD) enables us to develop new innovation opportunities. Combined with the transformation of our business models, this allows us to have maximum impact on value creation and the development of a competitive advantage.