Let's start by asking "What is the purpose of a supplier development program?" At a minimum, a supplier development program should be aimed at achieving the following:
- Lower supply chain total cost
- Increased profitability for all supply chain participants
- Increased product quality
- Near-perfect on-time-delivery at each point in the supply chain
Most supplier development programs do not do enough to meet these goals. Auditing suppliers once per year to determine if they've met certain on-time-delivery and quality goals will not actually fulfill the purpose of a supplier development program. One could call this type of work "supplier checking and verification" rather than "supplier development." Supplier development requires much more work than auditing and checking does.
Supplier development is actually developing suppliers in much the same way employees are developed. How should an organization develop its employees? Well, this question might open an entirely different can of worms in that many organization don't do a very good job of developing employees either. However, those companies that do well in this area provide the training, tools, and incentives that will make them successful. In short, they invest in their employees because they know that great employees are what make companies great. It should come as no surprise, then, that great suppliers make supply chains great.
Thus, a supplier development program must be aimed at improving suppliers performance, not browbeating them into charging less or simply auditing and rewarding them. Instead, supplier development is all about providing suppliers with what they need to be successful in the supply chain. Two of the most important functions of a supplier development program are:
- Providing information about products, expected sales growth, etc. Poor communication is one of the biggest wastes with a lean supply chain. Lack of information translates into additional costs (usually in the form of just-in-case inventory). Suppliers need to become extensions of their customers.
- Training in the application of lean and quality tools. Asking suppliers to drop their price without giving them the know-how to lower their costs through lean implementation is not sustainable long-term. In other words, this will drive suppliers out of business, which goes against the purpose of supplier development.
If suppliers had more information about the entire supply chain and had a true lean transformation underway, they would become more profitable and provide a better quality ane lower-cost product on-time.