Supplier performance and management is one of the CRITICAL keys to prevent a recall or a withdrawal. Partnering with your suppliers and building a good working rapport enables successful business partnerships to be built based on trust, loyalty and respect.
Working together to be innovative and keeping costs at a minimum is the only way to do business in the 21st century. Lean is driving manufactures and keeping businesses competitive. With cost of doing business in Australia increasing rapidly due to taxes, labour costs and commodity prices we have no option but to operate with a LEAN mindset, LEAN behaviour and cut all costs where necessary to stay afloat and remain competitive.
One KEY business deliverable is management of raw materials. Purchasing raw materials, controlling storage and usage is imperative to ensure forecasts are met and orders completed. Depending on the volume of product produced will naturally depend on the stock inventory you carry at any given time.
In order to reduce costs of raw material management we need to ensure product specifications are documented and implemented, technical agreements are in place and a raw material inspection and testing protocol is implemented and validated on a regular basis.
Raw material management needs to include more than making purchases it requires a long term strategic approach and needs to ensure effective measures and continuous improvement is in place to assist moving into a more focussed and commitment business partnership between yourself and your suppliers.
Listed below are the five highly effective steps to manage supplier performance to prevent a $500,000 food safety incident occurring:
1) Inspection: All raw materials upon delivery need to be inspected. The inspection ensures the product being delivered meets specifications set in place. This allows an opportunity to return stock if it does not meet the set raw material specifications and avoids losing money further downstream in the process. It is also an opportunity to ensure any contracts and or technical agreements in place are not breached.
2) Review Performance: A business process needs to be set in place to measure frequently, supplier performance. The review should include measuring set objectives in place based on delivery, quality and performance. It is best to complete the performance review in house and share the results when you meet with your supplier’s one on one. If you deal with numerous suppliers then it is not feasible to meet with them all one on one so it is recommended you work out a plan that suits you based on volume purchased and delivered and risk classification of the product.
3) Rating: Develop a business rating for your suppliers and score them on a frequent basis. It can be a score out of 10, it can be a % or it can be a A, B, C or fail system. There is no right or wrong just work on a system that is most effective and beneficial for your business. This rating should also be shared with them when you meet with your supplier’s one on one.
4) Regular Meetings: Set frequent meetings with your suppliers to have a general catch up. This meeting enables each party to explain what is happening within each business group. Depending on your business needs you may need to meet monthly or can meet at least quarterly. This meeting also needs to include your highlighting their rating and their business performance review results. Should an incident arise between meetings then no doubt they will be notified of the non conformance(s) sooner.
5) Sharing Objectives and KPI’s: When raw material supply contracts and technical agreements are being developed and signed off we should consider how we can work together to bring innovation, innovative ideas and how we can reduce operating costs together within each business unit. This type of engagement and working partnership sustains long term benefits and a higher success rate of achieving set objectives.
The above effective steps will enable you to manage your supply base better, keep in control of your stock and its performance and prevent a $250,000 non conformance occurring.
Keep safe and yours in food safety passion Elevating Food Safety Pty Ltd.
Founder & CEO
Elevating Food Safety Pty Ltd