If you asked a food manufacturer 20 years ago
how they selected an ingredient supplier, they would have likely said
it was based on price, flavor or the supplier location and preference.
However, as government and industry put a stronger emphasis on food
safety and quality, evaluating and selecting the right supplier today
has become much more critical and complex.
Selecting the right
supplier may seem like an onerous process for your supply chain. While
having a more simplistic supplier selection process may be helpful for
some smaller supply chains, a more involved process of selecting the
right suppliers can help many food and nutrition companies meet or
exceed regulatory standards, drive customer demand and build a strong
brand reputation of quality products.
Quality and safety of our
ingredients, products and packaging are paramount to our success at
Abbott Nutrition, so choosing a good supplier is a critical business
decision. Consequently, our supply chain team has identified six steps
for choosing the right supplier, as well as several best practices in
the industry.
Reflect back to your last home project. Your focus
was probably to keep costs low. You may have used a lower quality,
cheaper material to save money, and upon completion, were satisfied with
the result. Unfortunately, over time, the project did not look as nice
as it did at first. Similarly, if you used the same criteria when
selecting ingredients for your manufactured food products, it’s possible
that the produced food would look good when it was first manufactured,
but it may not meet shelf-life expectations. In addition, if you needed
to go back to the supplier for replacements, they may not have the
specific materials, or in some cases, they may no longer be in business.
At this point, you are probably thinking, “If I had used higher-quality
materials from a reputable supplier, my finished product would have met
my expectations.”
Selecting the suppliers who can meet your
consumers’ demand for higher quality ingredients may bring some initial
costs, but it will pay off over time through consistent, high-grade
materials. However, the process to find the ideal supplier is often not
easy and requires discipline and hard work.
STEP 1: Identifying a Supplier
Before
selecting your supplier, it is important to gather the opinions of
stakeholders and define the criteria for the selection process. This
list of stakeholders may include members from research and development,
purchasing, marketing, quality assurance and any other area of your
organization that touches the supplier selection process.
During this
time, it is important to identify a few suppliers to assess their
capabilities and compare pricing. The supplier selection team should
work with the potential suppliers to establish specifications. For
example, they should explain how the supplier’s materials would be used
in your products and within the manufacturing process. Keep in mind that
the ultimate goal is a win-win situation for the supplier and
manufacturer; therefore, open and transparent communication is extremely
important. A key criterion in selecting the right supplier is value.
Cost should not be the lone driver; you should instead look at the total
cost of ownership, which looks at the supplier’s:
• Customer service
• Delivery commitments
• Reliability and responsiveness
• Resource savings (hard and soft)
STEP 2: Measuring Supply Performance
Another important step of the supplier management process is developing an audit and assessment program.
Best-in-class
supplier programs conduct audits throughout multiple stages of the
manufacturer/supplier relationship. You should always conduct an audit
before the contract is signed to confirm that the supplier does not have
any significant compliance or quality system failures that could affect
your ability to produce top-quality products. Another reason to conduct
the audit beforehand is to understand the supplier’s strengths and
weaknesses before the relationship becomes official.
Even after
the contract is signed, you should continue auditing, basing the
frequency of the audits on the criticality of the supplier. To determine
the frequency, all suppliers should be categorized into a level of risk
or importance. This prioritization will help you be smarter and more
effective with your resources and place a higher focus on your
important, high-risk suppliers, while continuing to monitor second-tier
suppliers.
Beyond an established audit program, you should
continuously monitor and assess each supplier’s performance. You can
track positive or sustained strong performances, as well as negative
trends.
STEP 3: Gaining Supplier Feedback
Another tool
you can utilize with suppliers is a self-assessment questionnaire. The
supplier self-assessment can be used to identify performance gaps, as
well as discover how the supplier understands their own operation.
In
addition to audits and assessments, it also is beneficial to monitor
informative metrics that direct value to the business. You should
discuss and select the appropriate metrics with suppliers to receive
their input and understanding of purposeful measurements. Examples of
these metrics include rejected lots, perfect shipments and documentation
errors. The metrics selected should measure the total cost of
ownership, as well as improve performance toward the maximum finished
product performance.
STEP 4: Achieving Certification
As
your supplier relationship grows stronger, and both parties feel they
are receiving positive performances, the supplier may be able to achieve
a certified status. This occurs when you establish a set of selected
criteria to be met by your suppliers. Certification must be obtained
with sustained successful performance and can be lost with poor
performance or a negative compliance outcome from an audit.
As the relationship continues to grow, the supplier also will become more integrated into your manufacturing process.
STEP 5: Developing Partnerships
Ultimately,
the manufacturer/supplier relationship is at its best when a strategic
partnership is formed, allowing full knowledge of the source of
materials and ensuring high quality.
With a stronger business partnership, a supplier is more likely to:
• Anticipate what is needed from the manufacturer and begin to take the leadership role in communication.
• Notify the manufacturer if problems occur that limit production availability, or a quality issue is identified.
• Communicate production delays when downtime or maintenance is required.
This
type of partnership allows for an increased understanding and mutual
benefits for both parties. It cultivates stronger commitments and
encourages a greater interest in success for the material and finished
goods. This type of relationship is your ultimate goal.
However,
there are risks associated with forging this kind of partnership. Trust
in both parties becomes paramount, and both entities must ensure no
potential or real conflicts of interest occur. When both parties become
more reliant on each other, if there is a breakdown on either side or
the relationship dissolves, there is much more to lose.
STEP 6: Ensuring Quality for Consumers
Depending
on the number of materials and ingredients needed, developing a
supplier quality management program can be a complex and upfront
investment.
However, once you choose to build strong
relationships with reliable suppliers, you will have peace of mind,
knowing you’re delivering high quality to your consumer.
The
benefits are realized when your supplier quality team is focused on
issues other than material quality, and your satisfied end-users have
confidence in the products you provide.
Source: Food Safety Magazine
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