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Manufacturing Extension Partnership MEP


Warning Signs That Your Supplier Is a Problem

Why performance evaluations are critical

Published: Wednesday, March 9, 2016 - 17:04

Whether it’s for performance management or for risk, it’s important to know who your suppliers are and have a close business relationship with them.

It’s a given you should already have a strong relationship with your key suppliers, but how often does your supplier request the following items?
• Cash
• Urgent price changes
• Sending payments to a different address
• Check pickup
• Funding for capital expenditures
• Requests to purchase materials on supplier’s behalf
• Inventory buy-back
• Accommodation agreement (i.e., a loan)
• Delay of cost reductions
• Resourcing all or some of the components it supplies
• Lengthening delivery times

If your supplier frequently asks for these things, then it’s time to reevaluate what other ways your supply chain is being put at risk.

Warning signs that your supplier is causing problems

• Past-due debt
• Lower responsiveness to new requests for price and order acknowledgment
• Complaints of nonpayment from sub-tier suppliers
• Creditor committee documented missed or late debt payments
• Changes in top management
• Lack of equipment maintenance
• Unplanned downtime resulting in loss of critical business
• Problems with lenders
• Breach of banking covenants
• Changes or turnover of supplier contacts or representatives
• Sporadic adoption of dynamic discounting offers
• Reduced involvement of legal representation in negotiations

Ways to leverage supply risk management

A basic supply management principle is to know the supplier. One way to do this is to measure the supplier’s performance with an evaluation to highlight areas where the supplier can improve. Set up a few basic key performance indicators (KPIs) to identify how the supplier has overcome performance issues.

Supply-chain risk management tools can range from the technology you already have or new software to leverage your supply chain strategy. For more ways to leverage what you already do to manage risk, download the Ivalua white paper.

Perhaps your supplier is the problem, but there are other factors in your supply chain that also involve risk. Take a few minutes to self-assess your organization’s strategy with this supply chain vitality quiz.


About The Author

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Manufacturing Extension Partnership MEP

The Manufacturing Extension Partnership (MEP), part of the National Institute of Standards and Technology (NIST) and a program of the U.S. Department of Commerce, works with small and mid-sized U.S. manufacturers offering services and resources centered on technology acceleration, supplier development, sustainability, workforce, and continuous improvement. MEP has more than 1,400 technical experts located in every state to connect manufacturers to public and private resources for increased competitiveness and profitability, and to identify opportunities for growth. Visit MEP’s Manufacturing Innovation Blog online.