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Whether it’s lead times for prototypes, uninterrupted supply of critical parts or access to capabilities and technologies, a dynamic supply chain plays a massive role in a company’s success. Add a healthy dose of geopolitical tension and a push to make more things in the U.S., and it’s easy to see that evaluating potential supply chain partners has never been more important.
It has also never been more complex.
Picking a supplier based on price is easy, but any manufacturer aiming for growth in a highly contested market needs to take a more considered approach, because you can bet that your toughest competitors are doing exactly that. But if not price-per-part, then what metrics are best to measure your supplier options?
Build Strategic Partnerships
There are dozens of ways a supplier can be evaluated and hundreds of different types of suppliers with different strengths and weaknesses. However, according to Andy Sherman, Vice President of Global Operations at Fictiv, there are a few foundational metrics that are applicable to the majority of manufacturers regardless of what sector they serve and what types of suppliers they need to bring on board.
Sherman has led teams to successfully qualify, vet, onboard and manage hundreds of manufacturing suppliers over his career. As such, he has developed core principles to apply in every evaluation and a few tricks to ensure he gets a thorough understanding of how a potential supplier performs against each of these fundamental criteria.
“Fictiv’s premium manufacturing network connects highly-vetted partners around the globe and we have a very active management process to make sure each delivers high-quality production consistently and that their strategic objectives as an organization remain aligned with ours,” says Sherman. “We want each one of those relationships to be a strategic partnership, not just a point solution to fulfill work orders.”
Whether you’re a small, medium-size or a large business in North America, it’s important to maintain that strategic angle with any supplier you’re planning on partnering with for any length of time.
Key Trait #1: Agility
Product development is always a highly iterative process, and it’s important to find suppliers that can move with speed and agility.
Sherman says a good way to start evaluating for this is to go through a request-for-quote (RFQ) process. Is the supplier able to provide end-to-end RFQ to delivery with a rapid cycle? That doesn’t mean quickly accepting the quote and sending a purchase order. Instead, look for a rapid time-to-quote and a rapid feedback loop for engineering change orders. Can the supplier show evidence of previous rapid lead times on production and rapid resolution when things go wrong?
“Ultimately, at the end of the day, if you're able to say one iteration or one learning cycle is seven days as opposed to 21 days, that makes a difference when you're looking at the Gantt chart for your entire product development life cycle,” says Sherman.
Key Trait #2: Guided Expertise
The early stages of product development are about learning, and often design engineers don't know what is manufacturable. They can’t always identify the cost and lead-time drivers in a potential product and don't always know what materials might be available for prototyping compared to production at scale.
“Working with a partner that’s able to provide guidance on design for manufacturability, cost and lead-time drivers prior to issuing a purchase order is another area that's highly valuable,” says Sherman. He says a good way to validate this is to use the RFQ process with a design that you know is not manufacturable in its current form.
“This test can show if the potential supplier has robust checks and balances and internal processes to provide that feedback loop. If they go ahead and are willing to just provide a quote and accept a purchase order without any feedback when you know something isn't manufacturable, that would be a red flag,” he says.
Not every supplier will have the capabilities to hit certain tolerances with consistency, based on its facilities’ process controls—and that’s perfectly normal. The concern is if they come back after already accepting an order and ask for changes as opposed to being able to identify issues and provide that feedback upfront, so you know exactly where you stand in the product development lifecycle.
“I'm not as concerned around the deviations required on tolerances after we have a relationship, unless that's a recurring issue,” says Sherman. “But if there's very obvious design feedback that should be provided because it’s not manufacturable, then those are the flags that I'd be looking for at that stage of evaluation.”
Key Trait #3: Reliability and Exception Management
No matter what manufacturer you work with, at some point things will go wrong. Evaluating a supplier is not just about finding a manufacturer that will perfectly meet your needs every time—what matters is quickly resolving problems, so they don't become recurring issues further down the product development lifecycle.
Sherman says a good way to measure this is to ask for data showing their on-time-in-full (OTIF) delivery performance and ask for documentation of continuous improvement investments the company makes to prevent recurring issues.
“When something goes wrong, how does that potential supplier prove that they have invested the time, energy and resources to investigate the root cause? What was the corrective action and what is the preventive action they implemented to make sure that doesn't happen again?”
Sherman says the policy at Fictiv is to send a corrective action report to the supplier for every OTIF delivery failure that wasn’t caused by an internal problem at Fictiv. “Again, no organization is perfect. We also hold ourselves accountable for completing that form within a very strict service level agreement. For every single failure there's always some supporting documentation for the analysis that went into investigating how we prevent a similar issue from occurring moving forward. Evidence of that is critical to look for in any supplier,” he says.
Tip: Choose Quality Over Price in New Product Development
Ultimately, the key starting point in any supplier evaluation for a mechanical engineer or design engineer is identifying your objectives and the stage of development or production. After that, the core functions mentioned above are a good stress test to see if a supplier can perform over the long term. Obviously, there are many other factors to identify a supplier that fits your needs, including location, company culture, sustainability and more. But there is one factor that many companies place high in their decision-making matrix that Sherman thinks is often given too much weight, and that metric is price-per-part.
“One area where I've seen many organizations getting too hung up on is part price during the early prototyping and product development stages,” says Sherman. “Often, they're not thinking about total cost of ownership and productivity of the organization.”
While price-per-part is crucial in terms of profit margins and mandate costs, he says a better way to look at this is to assess the opportunity cost associated with not getting a conforming part in hand within the required lead time. “Leaning more heavily on reliability, agility, guided expertise and looking at total cost of ownership is something that's more beneficial,” he says.
To learn how engineers and purchasers can use digital manufacturing networks to ensure they are working with vetted, managed suppliers, visit Fictiv.