Top suppliers get awards, business
Purchasing's latest survey finds that purchasing groups are seeing the benefits in rewarding the most cooperative suppliers.
By Tom Stundza -- Purchasing, 11/16/2006 7:00:00 AM
Manufacturing companies have found that cooperative business relationships with suppliers have improved the ability to respond to changing business conditions. Such relationships have led to lower costs—even in the face of commodity pricing spikes—and have translated into higher quality, greater productivity and shorter product design and delivery times.
According to the results of a new Purchasing survey, while the vast majority of companies track supplier performance, only about half recognize superior performance with top-level supplier recognition salutes, awards or appreciation gatherings. Many companies say they give their best suppliers additional business. However, telling suppliers how much they mean to their customer companies appears to have become passé—or has never even begun.
The poll also finds that many manufacturing firms continue to dole out supplier appreciation honors somewhat sparingly, saluting less than 10% of their suppliers with awards. Our surveys show that only as many companies this decade as last are saluting their silent supply chain partners for ideas, quality, and supply dependability even though the supply base is demonstrating remarkable compliance with ever-stricter supply requirements.
At the same time, there are some long-standing awards programs that manufacturers look to as models—from Lockheed Martin's Star Quality Preferred Supplier Award to Intel's Supplier Continuous Quality Improvement award.
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What it means to buyers: • Talk rationally and logically during performance reviews focusing on continuous improvements in technologies, practices, quality, service and total cost. • Reward good performance by giving suppliers more business. • Reward good performance with awards, citations and plaques. It helps. |
One buyer says that even his annual review of 'A list' suppliers includes recommendations for further improvement. Another purchasing manager notes that “additional business is the (only) reward” given to suppliers that meet the manufacturing firm's supply requirements. One purchasing manager lets an industry association give out supplier awards. Yet another procurement director says that only those suppliers with 100% on-time delivery and zero-defects quality for an entire year “are placed in a pool that's used to determine supplier-of-the-year recognition.”
Suppliers need confirmation
Purchasing's survey shows that supplier rating systems continue to track product and service quality, on-time deliveries, customer service efforts and cost-control programs. While almost 85% of the purchasing organizations polled maintain a bank of supplier information, only slightly more than half (52%) use their report cards to develop programs that lead to problem elimination or improvement in supply chain performance.
Suppliers typically are responsible for the majority of a complex end-product's content. Generally speaking, suppliers account for 50-80% of a major product's value. Perhaps more importantly, much of the technical innovation incorporated into new products comes from the suppliers. In fact, almost 60% of the buying groups polled audit the participation of their suppliers in new-product and new new-technology development programs. That's one key reason that supplier-salute programs exist in the first place.
Cisco Systems has presented Excellence in Technology Alignment awards at 15 annual supplier appreciation events keynoted by the network equipment producer's CEO. “Cisco's supplier appreciation awards are our way of recognizing those suppliers who have proven to be an integral part of our supply chain team,” explains John Kern, vice president of global commodity management for the San Jose, Calif., company.
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WEB EXCLUSIVE Companies are expanding diversity award actions The hospitality, food and beverage and other consumer-oriented industries are being recognized more often for their commitment to overall supplier recognition and supplier diversity programs. “Realistically, we are not able to do business with every company that provides goods and services in the communities in which we operate,” says J.W. Marriott Jr. CEO of Marriott International. “But, we welcome the opportunity to build strong, rewarding relationships with high-quality, diverse suppliers and service providers.” General Motors honors its top suppliers each spring with its Supplier of the Year awards. This year, GM awarded 85 suppliers from around the world with this top honor. “We expect every supplier to have superior internal culture and organizational capability and a strong competitive advantage,” says Bo Andersson, vice president of global purchasing and supply chain. Participants in GM’s Supplier Diversity Program “are held to the same standard as all suppliers” Andersson says, “and we find that our diversity suppliers outperform the rest of the supply base in areas such as quality, delivery and cost.” GM was the first automotive company to establish a supplier diversity program and has spent nearly $57 billion with minority-owned businesses since 1968. GM purchased $5.6 billion of direct and indirect materials with U.S.-based minority suppliers in 2005. This past June, the automaker announced plans to recognize women-owned at the annual conference of the national Women’s Business Enterprise National Council. So, this year, GM has expanded women-owned business representatives in its mentored supplier program and on its Supplier Diversity Council. And, the company now is tracking and reporting spending with women-owned businesses, including spending between Tier 1 and Tier 2 women-owned businesses. Sixteen businesses have won Supplier of the Year designations from the National Minority Supplier Development Council, says Harriet R. Michel, president, who presented the certificates at the group’s national conference last month in San Diego. “Successful minority-owned firms meet, and often exceed, the most exacting standards of corporate America,” notes Michel. That’s why the group’s award aims to fete high-performing firms that compete for business opportunities based on performance and value. The winners are divided into four classes according to annual sales, ranging from $50 million or more to less than a million. |
Pelco of Clovis, Calif., a manufacturer of video security systems, says it requires a lot of work by several top suppliers, which are recognized annually, says Leo Labbe, vice president of procurement. “Our criteria isn't easy,” he says, as the suppliers selected for this award “must show a high level of service, product availability, ease of doing business, Internet information and ordering function, breadth of product line, delivery logistics, next-day delivery capabilities, and support from prototype to production.”
Systems on Silicon Manufacturing Co. (SSMC) in Singapore is a joint venture between Royal Philips Electronics, Taiwan Semiconductor Manufacturing and government-owned EDB Investments. “We hold our suppliers to very rigid standards,” explains Robert Kuan, vice president of operations. So, only one award is made annually to a supplier meeting overall management commitment, quality, comprehensive cost reductions, productivity, delivery and safety criteria. Varian Semiconductor Equipment Associates of Gloucester, Mass., a supplier of ion implantation systems, was presented this year's award during SSMC's recent Supplier Day “for exceeding even our high expectations,” says Kuan, “and delivering the highest levels of service and support among all our suppliers.”
Swiss fungicide company Syngenta Crop Protection created its first-ever supplier award, the Syngenta Purchasing Award 2006 (presented during the ChemSpec chemistry trade show in Geneva this past June) to reward suppliers for eliminating major supply bottlenecks. Mark Peacock, head of global supply operations, and Hans Elmsheuser, head of global purchasing, determined the grand prize winner from firms providing outstanding services in supplying raw materials, intermediates and active ingredients.
Taste of success
Not surprisingly, quality and quality improvement programs rank high as criterion for suppliers cited by Hormel Foods of Austin, Minn., which only awards its best supplier partners every five years. Just recently, the third Hormel No. 1 Award was presented to 22 firms for products and service delivered in 2001-2005. “Since our suppliers are vital to our business,” says James Snee, director of purchasing, “the Hormel No. 1 Award is only given to those partners who exceed our expectations.”
To qualify for the award from the maker of consumer-branded food products, suppliers must show a five-year supplier rating index equal to or greater than 98% and be a recipient of the firm's annual Spirit of Excellence Award for a minimum of four out of the past five years. Suppliers must also show no slippage or an improvement in five-year supplier performance to providing evidence of growth in internal quality improvement programs.
Intel this year awarded Preferred Quality Supplier (PQS) awards for outstanding commitment to quality and performance excellence to 26 suppliers that excelled at meeting and exceeding high expectations and tough performance goals. Another dozen received the Santa Clara, Calif., company's most prestigious award for suppliers, the Supplier Continuous Quality Improvement (SCQI) award, which recognizes outstanding commitment to quality and performance excellence.
“This year's recipients have demonstrated commitment through outstanding performance in their respective industries and have contributed to Intel's success,” says Gidu Shroff, vice president and director of materials at Intel. “These suppliers show their commitment to continuous improvement and total quality, which is highly valued by Intel.”
The PQS award winners consistently surpass Intel's expectations in technology innovation, quality, affordability, and customer satisfaction, according to Jai Hakhu, Intel's vice president and general manager of technology manufacturing engineering. SCQI award winners attain outstanding levels of total quality excellence in their capability and performance.
“The commitment to world-class performance, innovation and outstanding results these select suppliers have demonstrated will enable our continued success and growth in the worldwide digital economy,” says Robert J. Baker, senior vice president and general manager of Intel's Technology and Manufacturing Group.
Johnson Controls recognized 32 top-performing suppliers at a celebration event held recently at the automotive company's technical center in Holland, Mich. “These awards are designed to honor the innovation, commitment and outstanding work completed during the past year by the top companies in our supply base,” says Terry Nadeau, vice president and general manager of North American purchasing. “It's very important for us to recognize suppliers who have helped Johnson Controls to exceed our customers' expectations.”
Johnson Controls' Supplier Performance Awards are presented annually for performance encompassing four key business areas of quality, commercial, material and logistics, and service and engineering support.
Now in its eighth year, the Lear Hall of Fame Supplier Awards annually are presented to 10 suppliers that demonstrate excellence in quality, delivery, service and competitiveness based on outstanding performance determined by using the Lear Supplier Rating System. “A superior supply base is an integral part of Lear's success with its own customers,” says Bob Rossiter, CEO of the Southfield, Mich. producer of automotive interior systems and components. “Lear's operating philosophy is based on consistently delivering the highest standards of quality. Our Hall of Fame suppliers were all exemplary in quality and they are to be truly commended for their outstanding performance.”
Sun Microsystems has an awards program for its “best of the best” suppliers that recognizes a limited number of suppliers (this year it was six) for their contributions in supplying silicon, memory chips, printed circuit boards, information technology and logistics and other products and services that help technology companies boost end-product quality. Kurt Doelling, vice president of supply management, says Sun Microsystems specifically fetes “only those suppliers who show a high level of innovation and commitment that help us exceed our demanding performance and production goals.”
Boeing's annual premier supplier award ceremony back in March found 11 companies being named Boeing Suppliers of the Year. The aerospace giant has more than 5,200 suppliers in nearly 100 countries so awards are presented in the 10 categories of avionics, major structures, purchased outside production, propulsion, common aerospace commodities, interiors, aerospace support, non-production, technology advancement and small business.
“The best of the best suppliers are chosen by product teams,” says Norma Clayton, vice president, global sourcing effectiveness.
How award-winning suppliers are rated
| Source: Purchasing survey |
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| Quality | 83% |
| Delivery | 78% |
| Service | 44% |
| Cost | 39% |
| Value-add | 22% |
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