I think that there are always gauges for determining who is the strongest supplier. Natural disasters are one of those such indicators, some of the companies in the Japan region may not recover. Of those that do, some will recover slowly, causing lag for their customers. Then there will be the few strong companies that recognize they still have customer demand and spring back into action. My advice would be not to show any kind of sympathy, a company strong enough to deserve you as a customer will be in the handful that get back to work.
Thanks for the feedback. Knowing that even the best of suppliers may be impacted, do you recommend anything on the demand side to try and ease the impending shortages, i.e. prioritizing allocations, splitting customer demand?
Thanks again, Bill
I read recently in the Chicago Tribune, that Scott Alden, Automotive Research Center, thinks there may have potentially been too much consolidation of suppliers, shared parts across platforms with little regional supply. Do you think this is a potentially similar issue for the Semi-conductor industry or at Intel?
Here's a link to the article: http://www.chicagotribune.com/business/yourmoney/sns-rt-business-us-autos-stre72s7cl-20110329,0,3940121.story
When I first read the byline I chuckled. But immediately I know the serious nature of the idea.
Contractually the type of catastrophe facing Japan is covered in contract terms and conditions as Force Majeure, which in general protects the supplier from being in breach. But it doesn’t change the buyer’s perception of the supplier. We all know “perception” can be 9/10ths of the law.
What doesn’t protect the supplier is when there is no Force Majeure; they just fall flat and don’t meet timing. The most important metric to me is that they meet timing and remain at or below budget. If we agree that the lead time is 6 weeks, I would expect the supplier to have a delivery in six weeks, barring engineering redesign or general quality issues.
I have sympathy for the supplier when they are caught in the middle of disaster that in no way they could have prepared for; particularly if they are small and have few resources. Not all companies have many divisions to call upon to get back on their feet. Our role in supply chain & purchasing is to have a plan B for all parts and commodities we are responsible for.
There is little sympathy for over promising and under delivering.
Just came across this article on P&G's first-ever supplier environmental scorecard: http://www.greenbiz.com/news/2011/04/07/procter-gamble-scorecard-puts-supply-chain-notice
From the article:
Suppliers get scored based on their year-by-year results, and P&G will publicly reward "exceptional performance," Hughes said. Rewards will also go to those that bring in innovative ideas. When suppliers score poorly, P&G will develop improvement plans to get them on track.
I think this is just the beginning of the sustainability and "green" components being incorporated into supplier scorecards.