Supply chain management emphasizes the importance of making decisions not purely on the basis of cost, but rather on a number of considerations with supplier quality being one of the critical factors. With the trend among global electronics manufacturers toward smaller approved vendor lists, there is more reliance on open market partners to provide thorough vendor screening as an essential first step in quality control. Manufacturers use careful vendor screening to develop manageable vendor lists, and Smith & Associates provides open market access to a broad base of well-qualified suppliers.
Suppliers and manufacturers must be considered as a “macro organization” to bring mutual benefits to all parties involved. Design Chain Associates Senior Vice President Tom Valliere says today’s disaggregated supply chains make it more important than ever to establish confidence in suppliers. “Manufacturers are no longer vertically integrated,” says Valliere, “…since supply chains and manufacturing structures have become more fragmented, the risks are greater.”
As a result, OEMs and EMS providers have become increasingly stringent with their vendor qualification processes. According to Purchasing & Supply Chain Management (Monczka, Trent, Handfield, 3rd Ed.), the key criteria when evaluating potential suppliers include:
- Management capability: determine if management is customer-focused and committed to continuous improvement.
- Employee capabilities: measure employees’ overall skills and abilities, and the degree to which they are committed to total quality management.
- Total quality performance, systems, and philosophy: evaluate the vendor’s quality system (management commitment, safety, training, and facilities and equipment maintenance.)
- Environmental regulation compliance: assess the supplier’s performance involving the disclosure of environmental infractions, hazardous and toxic waste management, and recycling management
- Financial stability: examine the financial stability of the vendor.
- Sourcing strategies, policies & techniques: understand the supplier’s suppliers. By evaluating the sourcing strategies, approaches, and techniques of the supplier’s first tier vendor, the supplier can gain insight about its second-tier vendors and so on.
- Longer-term relationship potential: examine the supplier’s willingness to move beyond a traditional purchasing relationship for products or services where a longer-term relationship might be beneficial.
Valliere says smart manufacturers qualify independent distributors early, so that when supply problems arise they can source on the open market with confidence, rather than turning to unscreened brokers in a pinch.
Purchasing Magazine’s Jim Carbone recently wrote “In times of shortages, buyers often scramble for parts and may buy components from a source they would not normally consider if the parts were not in short supply. In other cases, buyers make opportunistic purchases for components priced at or below market value.” (Purchasing, June 14, 2007) The title and key message of the article was Know thy Supplier.
Smith’s Open Market Screening
Maintaining a manageable (i.e., smaller) vendor base is an objective in most sourcing plans, but supply chain flexibility is also critical. With manufacturers and distributors holding leaner inventory positions, it is critical to have access to vast supplier networks in order to support alterations in production schedules, engineering changes, or interruptions in normal supply channels. With nearly 25 years’ experience in sourcing electronic components, Smith has developed an extensive global vendor base. With online part search sites and distribution channels emerging in developing countries, vendor screening is increasingly complex – and increasingly important.
Smith & Associates selects suppliers based on their ability to provide product and meet service levels required by Smith’s end customers. In order to meet these objectives, suppliers are selected, qualified, and continually evaluated. Every transaction that Smith completes with a supplier results in an update to the vendor rating system based on the vendor’s performance on that transaction. Smith buyers review supplier ratings and performance history as a part of each purchase decision.
Smith & Associates’ vendor screening process begins with collection of vendor information through a standard application. Based this initial screening, a vendor rating is established if the company meets certain minimum standards. Smaller and less well-known vendors may be set up on a probationary basis. Unrated vendors are graded after successful completion of a probationary period, or in some cases are removed from the approved list if performance standards are not met. Vendors are also downgraded based on poor performance and monitored more closely to see if performance can be improved. In some cases Smith will conduct on-site audits of key vendors to address concerns or to confirm that a vendor can be upgraded to a higher status.
While Smith & Associates continues to refine inspection, testing, and qualification methods on all incoming shipments, vendor screening is the vital first step in Smith’s QualityFirst process. “In today’s electronic components market, it is easy for anyone to advertise parts available for sale online,” says Layla Wright, one of Smith’s senior purchasing managers “maintaining the knowledge base on thousands suppliers and engaging only with the best is a much more challenging proposition.” Partnering with Smith allows broad access to the open market; providing supply chain flexibility without the difficulty of maintaining a large and less frequently used global vendor list.
For questions about Smith’s vendor screen process, or to share ideas on this topic with Smith, contact Layla Wright (