8 Strange Phenomena in Supplier Management!

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Some procurement department leaders adopt a policy of exerting pressure on three parties: suppliers, subordinates, and themselves, believing that procurement performance is achieved by applying such pressure. However, relying solely on pressure will not create a future; without professionalism and proper management skills, it is likely to lead to many strange and unusual situations. Let me explain it to you slowly... 1. Suppliers with high scores but low capabilities: When choosing a supplier, companies usually visit them and conduct evaluations. Many companies opt for a comprehensive supplier evaluation form designed for high-quality, wealthy, and attractive suppliers; this form covers aspects such as the quality management system, organizational structure, technical capabilities, hardware facilities, staff qualifications, lean improvement practices, and 6 Sigma, offering a thorough and all-encompassing assessment. Doing so seems perfectly reasonable, and even admirable! When using such a table for evaluation, it is naturally those \"high-end\" suppliers that score high. In actual cooperation, these suppliers tend to have poor cooperation levels when faced with purchase volumes that are not attractive enough for them; when you put forward certain requests, they often respond by saying, \"Our company has its own procedures, so it’s impossible to act according to your requirements.\" This is the strange phenomenon of \"high scores with low specifications.\" Tip: When choosing a supplier, it’s not about selecting the best one, but rather the most suitable one – one who is willing to work with you and stay by your side for as long as possible. Only suppliers with high prices are considered professional; it is only natural for companies to look for those who offer lower prices. But sometimes the problem lies here as well: when you send the technical specifications and drawings to the supplier, a low-quality supplier doesn’t analyze them carefully, thinking it’s very simple, “So easy!” and thus quotes a very low price. Professional suppliers, taking into account the strict requirements for the products, as well as the necessary manufacturing processes and testing, offered a price that barely covered their costs, with only a meager profit. However, the quotes from professional suppliers are still significantly higher than those from lower-tier suppliers. When you arbitrarily choose a low-quality supplier, troubles follow one after another. At such low prices, suppliers simply cannot operate; moreover, suppliers with limited technical capabilities often fail to meet the requirements of the products. Tip: When evaluating a supplier’s quote, be sure to find out whether they have conducted thorough analyses of the manufacturing processes and materials used 3 There’s an excuse for waste; it’s up to you to save money. A common phrase used by supplier managers towards their suppliers is: “We’re under huge cost pressures; we must save money. It depends on you – please!” ” However, as soon as these supplier managers got a bit bored in the office, they would book flights to the suppliers’ location, have a drink or two, have a brief chat in the meeting room, and then head straight to a five-star hotel, under the pretense that they had phone meetings to attend! ” I keep traveling to the supplier’s place from time to time; sometimes there are a whole bunch of people accompanying me. Often, before the supplier even understands the purpose of their visit, those people have already arrived at the factory. Tip: When we ask suppliers to improve costs, we should set a good example ourselves by planning our visits effectively to increase efficiency. Otherwise, it is difficult for suppliers to willingly comply with cost reduction demands. 4 I practice lean manufacturing, while you keep inventory. Many companies adopt lean production methods in an effort to achieve zero inventory, but they are also worried that a shortage of raw materials could disrupt production. Therefore, the supplier must maintain sufficient inventory so that they can deliver goods as soon as an order is given. Such behavior is undoubtedly a form of inventory transfer, rather than an actual elimination of inventory. From a supply chain perspective, this does not add value; it is a form of waste in a sense, as the supplier’s inventory products cannot be made available in a timely manner, increasing the likelihood of them being scrapped. Tip: Lean is a working approach to eliminating waste. Simply transferring one’s own inventory to the supplier is a formality rather than a practical approach. 5 Make the promises less extravagant. This refers mainly to supply chain management (procurement) staff who, when visiting suppliers for the first time, talk non-stop and make excessive promises! ”Hearing this, the supplier believed that as long as they entered into a partnership, they would be lucky enough to reap great profits. After cooperating for a while, the supplier realized something was wrong – the purchase volume wasn’t as high as it had been claimed before. So, the supplier gradually changed its attitude and became less enthusiastic! But can we blame the supplier for this? Tip: When first discussing matters with a supplier, do not overstate the prospects for future cooperation. 6. Overreaching behavior: Supplier managers, believing themselves to be major clients, ignore the rules in the supplier’s factory; for example, if the factory requires safety helmets, they refuse to wear them ； It is stipulated that smoking is not allowed in the conference room, but he insisted on making an exception. More typically, at the end of the year, a list of deductions for defective items over the course of the year is sent to the suppliers. The suppliers feel aggrieved, thinking, \"I want to see the person responsible, alive or dead.\" They had never seen or been informed about these defective items, yet at the end of the year such a list of deductions is sent to them. May I ask, is this considered an act of forcing one’s will on others? Tip: When defective materials are detected, the supplier should be informed promptly; this also helps the supplier make improvements! 7 The three tactics to bring down prices: pressure, coercion, and substitution. First, apply pressure on the supplier to lower the price; if that doesn’t work, use coercion by saying it’s an order from management and they must lower the price. Forcing things didn’t work, so they started looking for new suppliers, preparing to switch. After switching, I found that, uh, it’s not as good as the previous supplier! Tip: In the process of managing suppliers, it is very important to establish long-term cooperative relationships with them and work together to make improvements! With 8 people involved, it’s a busy situation; supplier managers, when dealing with suppliers, are still customers after all, and over time they tend to become a bit spoiled. At the slightest dissatisfaction, they would just quit their job and switch to another one. As a result, personnel changes in the procurement departments of many companies are as frequent as traffic flow. In comparison, the staff at the supplier has become much more stable. As a result, a procurement project lasted for half a year, yet the company’s supplier management staff were all newcomers with no knowledge of the project’s history. On the contrary, the supplier’s staff know the project extremely well! In this case, who is guiding whom? Tip: “The world is so big; I want to go and see it!” ”To maintain stability in the supplier management team, it is necessary to provide them with enough freedom to work. At the same time, team leaders should set a good example by being down-to-earth and not being overly delicate, thus creating a positive team atmosphere