Identifying New Direct Material Suppliers
At APD, we’ve learned that details matter when you are conducting a search for new suppliers of direct materials. Starting a search without having consensus on what you are looking for is a recipe for wasted effort and prolonged search times. So what are the details that matter?
First and foremost, manufacturers need to define the capabilities they need in their suppliers, starting with the critical attributes that any new supplier must have. These are the technical competencies and company aspects that are deal-breakers for doing business with your company. Common examples include:
- The right manufacturing processes to support your needs
- Experience with the specific materials used for the components you are buying
- Quality performance and/or relevant quality certifications
- Financial health of the company
Some capabilities are important but not deal-breakers – attributes that you desire but may be able to concede if other attributes align nicely. Some examples include:
- Experience in your specific industry
- Factory locations
- Minimum order lead times
- Annual revenue from the commodities you’ll be buying
- Willingness to accept your preferred payment terms
After supplier capabilities, the second aspect to focus on is their willingness to win your business. Key factors are:
- How does your company compare relative to their ideal customer profile?
- Do they want to grow their business with the product mix and volumes you are looking to source?
- Are they able to achieve your target costs while meeting their margin needs?
The third – these days very important – aspect to consider is their available capacity. Do your potential new suppliers have the right capacity, at the right time, to take on your business? Are they willing to invest to grow their capacity as your needs increase over time?
Getting consensus on what is desired vs. what is acceptable in a new supplier is an important first step to launching a search for new direct materials suppliers. Complete this step up front, and your search will be productive and efficient. In our experience, waiting until after you’ve began reaching out to potential suppliers to define what you are looking for is a recipe for wasted effort and delayed decisions.
Click here to learn more about how APD helps identify, qualify, and quote capable suppliers.