Survey finds few firms lend real resources to suppliers
By Anne M Porter -- Purchasing, 5/21/1998
It appears that supplier development--once the exclusive prov-ince of automakers and other large OEMs--may be gaining popularity at the grass roots level of corporate America. A recent Purchasing survey finds nearly two-thirds of purchasing departments claiming some type of supplier development activity.But peering beneath the surface, one finds little real depth of activity in supplier development. As written, Purchasing's survey asks if companies ever "work with suppliers to help them improve their manufacturing practices and other business processes." Nearly two-thirds respond in the affirmative, but their definitions of supplier development differ widely. Indeed, some classify the simple act of passing information as supplier development. One buyer-planner says his firm's development efforts consist of "communicating our needs and expectations for materials." Another buyer says "We give [suppliers] our part numbers so they can use them on packing slips."
While quite a number of purchasing pros say they lend technical support to suppliers for improving productivity or yields on existing manufacturing processes, other supplier development activities are more remedial. For example, companies--struggling to improve quality performance within their supply bases--say they often must provide suppliers with training in statistical process control (SPC) or other documentation procedures.
Only 18% of purchasing pros surveyed say supplier development efforts require their people to spend significant lengths of time residing at suppliers' sites. Only 14% say they bring supplier people in-house for extended stays.
What is more, it seems that many companies undertake supplier development only when it is absolutely necessary. In many cases, the mandate comes from customers--in particular, the automakers. The PA for a custom plastics house in Ohio says supplier development is conducted, "per our QS-9000 policy." Another PM says "due to QS-9000 registration, supplier development is imperative."
Others say they pursue supplier development only when facing limited sourcing options or prohibitive switching costs. One Atlanta-based PM says his firm works to strengthen suppliers that "provide key materials or services that can not be found elsewhere." The purchasing agent for a major medical equipment manufacturer says his company identifies candidates for supplier development "based on our dependence on the supplier--for example, unique product or sole source." Another PM lends assistance to suppliers that own "tooling specific to our product." The PM for a southern pump maker pursues supplier development "when patented technology is involved," or when "outsourcing in-house capabilities."
Only 11% of procurement people surveyed say their supplier development efforts have been codified into formal programs. Only 14% have taken development activities beyond their first tier of suppliers.
And for all the rhetoric about extended supply enterprises, Purchasing's survey finds that only 28% of companies who claim to be doing supplier development are expanding their concept to include financial support for new capital investments or process improvements at suppliers' facilities. The PM for one such company states: "The nature of [supplier] development begins with engineering assistance, tooling, production strategy, production control, and financial support." Another says his firm offers "both monetary and quality assistance" to suppliers.
Burchard (Burnie) Berry, purchasing manager for Sto Corp., Atlanta, Ga., says supplier development at his firm consists of "joint or sole ownership of tooling and/or equipment plus training on our finished products so suppliers can understand how their materials are used." The PA for a major medical equipment supplier says his firm occasionally provides, "financial support for equipment," but primarily supports suppliers "through our R+D and quality departments, especially to support our various documentation requirements."
The good news
Purchasing's survey does turn up some evidence that the returns on supplier development activities can be great. Indeed, among firms that have lent major assistance to suppliers, nearly two-thirds have been doing so for more than seven years. Some examples of their results: "An eight-week leadtime reduction and reduction in quality defects to zero," says one PM. "No rejections of our parts in 1997," says another.
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