Jun 20 2014
Supplier Assessment — It’s The Gut That Counts Says Nobu Morita | Pat Moody
“Beyond Report Cards, Beyond Balance Sheets? When Evaluating Suppliers, Why It’s Your Gut That Counts.
What’s the best way for supply management and manufacturing pros to evaluate current and potential suppliers? And is there only one “best way?” There are hundreds of supplier assessment tools, books and checklists, but there is no single standards committee that absolutely dead nuts certifies what’s out there, especially when your supplier is located two continents and three oceans and four hand-offs away!”
Source: sites.google.com
- Data, and preferably raw rather than cooked into metrics by recipes unknown to me.
- Direct observation of production.
- What people tell me, which may or may not agree with the data and what I sense on the shop floor.
I don’t see Morita as disagreeing with this, but I think we must be careful about basing decision on a “gut feel,” which may be no more than the expression of prejudices you didn’t even know you had.
Still, when your gut feel tells you that something is not quite right, it often is. I wouldn’t base my decision on it, but I would take it as a signal that further investigation is needed.
June 20, 2014 @ 6:34 pm
I’ve worked for many years for an organisation that had “Best Practice” supplier assessment systems and processes. Yet we also had our fair share of supplier disasters, whether from large Tier 1 or small Tier 3.
One initiative we did take was to use senior executives as mentors and coaches for these suppliers we were either unsure of (in spite of good assessment results) or had performed well below expectations.
As part of this process, we came up with 2 “questions” we would ask the executives and senior managers:
“If you were at the end of the month, and were below your sales target, had creditors threatening action, and you had a large batch you knew was faulty, would you still deliver it?”.
“What is your strategy to ensure your business is sustainable over the next 5 years?”.
We realised that it was not about the “definitive” answers, but rather the face to face reactions, what the body language really said, and most of all, how we felt from the response.
If readers are interested, I can share some “classic” responses I collected over the years!!!
June 21, 2014 @ 7:36 am
By all means, please do share these responses.
June 21, 2014 @ 10:59 pm
By request of Michel, I’ll share some of these “gems”! I’ll point out that we were dealing with the “not so good” and a few “critical cases”, so there will be no Best Practice:
Question 1
“This is an unfair question – you are trying to trick us into promising to be saints when the reality is we are all sinners! You guys coming from large corporations have the luxury of being holier than the holy, whereas we small businesses have our creditors guns to our heads”.
“It would make me physically sick to deliver poor quality under any circumstances” said the CEO, whilst the Quality Manager looked like he had seen a ghost: we were there because they had delivered several faulty batches that could cause a possible product recall! It seemed the Quality Manager hadn’t quite given an accurate report to his CEO!!!
“If ever that happened, I’d sack my Quality Manager on the spot” said the CEO as the Quality Manager looked on with a cynical smile! When I asked the CEO “But why would that be the Quality Manager’s fault?”, he had a panicked look, then mumbled “I was joking, anyway that would never happen in my company!”. It did 3 months later…
“Look, we have a very practical view of quality, unlike many of these idealistic companies that are obsessed with specifications and standards. At the end, we want to keep our customer’s happy” said the CEO, with the Quality Manager nodding approvingly. So we asked “surely customers can’t be happy if what you deliver is not to specification, not to standard”. The Quality Manager replied “when you buy a loaf of bread, you as the customer are not going to test it for the presence of every material that’s on the label. As long as it looks OK, it should be right, even if some ingredients may not be all there”. Our Quality Manager, by now getting very agitated said “so what you’re saying is that specifications and standards we set are not as important as what you thinks is OK?”, to which their Quality Manager replied “exactly, that’s my point”. They were very disappointed when we told them that we could see them as a viable supplier!
Question 2
“We are a small business. We don’t have the luxury of gazing at our navels to figure out a long term plan. We make money by working our butts off so we can make next month’s rent”. This was an honest, hard working group of guys who built their plastic moulding business from two machines in a backyard shed. But they were bankrupt 8 months later.
“We have secured a good line of credit from a reputable finance broker, so we are sustainable” said the CFO. So we asked “Yes, great, but how are you going to service this loan?”, to which the CEO replied “Well, if you keep screwing us for lower prices, we never will”. We were there because they had refused to met the contracted price down in spite of a 23% higher purchase volume. We parted ways within the nest 6 months.
“We have a 5 year plan which was developed for us by a highly reputable consulting firm” said the CEO. We asked “could you share some aspects?”, to which the CEO said “hang, I’ve got it here somewhere”, then pulled a impressively large folder from his filing cabinet. It was indeed from one of the top consulting houses, looked comprehensive…and was 7 years old!
The lessons learned from all these experiences is that whilst a comprehensive assessment is a mandatory pre-requisite, a face to face conversation with the supplier’s leadership team is crucial, including going to Gemba. We have all experienced in our own businesses that when the “talk” far exceeds the “walk”, the reality is walking down that path is a journey to a possible train wreck. The same applies to suppliers.