Manufacturers have always been only as good (or bad) as their suppliers. Some vendor errors and delays could be overcome, but problems in the supply chain usually rippled downstream, damaging quality or delivery. Manufacturers soothed irritated customers, and that was the end of it.
And then the world changed.
Today manufacturers are held responsible for the practices of suppliers, by both customers and governments. Supply-chain traceability rules, such as those affecting food and beverage markets (e.g., FDA Food Safety Modernization Act) and the high-tech industry (e.g., Conflict Minerals) are increasingly common — and will soon encompass EHS and corporate governance issues.
With so much regulatory enforcement and scrutiny, you might think that manufacturers are taking aggressive steps to manage their vendors.
Not so much.
A full 60% of manufacturers have limited or no real-time tracking of supplies and products at their immediate suppliers. And 15% of manufacturers have no real-time tracking even in their own plants.
Looking for a customer order? Forget it. But looking for trouble? You’ve found it.
As government, customer, and public pressures mount for manufacturers, supply-chain traceability will become an immense competitive differentiator. Some executives recognize this, and are already developing supply-chain processes that improve performance, ensure compliance, and minimize corporate risks. You can, too:
Identify your expectations of suppliers. What do customers and regulators demand today — and what will they likely require tomorrow?
Establish well-defined supplier criteria — governing quality, timeliness, component and material specifications, EHS adherence, corporate governance, financial stability, etc. — and incorporate them into purchase agreements.
Monitor suppliers to ensure adherence to criteria, sanctioning suppliers that fall short (e.g., discounted payments, contract cancellations) and rewarding vendors that meet or exceed expectations (e.g., bonuses, more contracts).
Do you know what your suppliers are doing right now?
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