The best suppliers get involved with their customers
By Albert Genna -- Purchasing, 11/19/1998
Buyers of packaging usually evaluate their suppliers on the same sort of criteria they'd use on suppliers of raw materials and other goods--quality, on-time delivery, and customer service. But buyers also ask for high performance from packaging suppliers in specific areas. Delivery accuracy, quick turnarounds, and quick responses to sudden or emergency packaging needs all are near the top of buyers' wish lists.Despite fairly standard criteria, buyers say that many packaging suppliers--the good ones--will go even further than suppliers in other areas to build strong relationships with their customers. Perhaps it is part of the highly competitive nature of the packaging business, but still many packaging companies appear eager to assist customers.
Good ones need no prompting
Buyers do look for certain traits in packaging suppliers--such as management that is customer orientated, ISO 9000 certification, high quality control, and suppliers who are willing to visit customers frequently. But the most important overall factor is that suppliers are ready to get involved--and often initiate involvement.
"We have several packaging suppliers that have achieved top-level status," says Clarice Johnson, manager of purchasing services at Organon Inc., an ethical pharmaceutical manufacturer in West Orange, N.J. "Those that do achieve [top-level status] have a proactive style of management." This proactive idea is echoed by others. Buyers don't want to force suppliers unwillingly into design meetings and have to figure out cost-reduction opportunities all on their own. The best suppliers can often come up with the good ideas without prompting.
Service and quality control are key in the packaging business. "The best suppliers have great service levels, no non-conforming product issues, and an eye for cost reduction," says Doug Carswell, purchasing manager at Vermont American in Fountain Inn, S.C.--a division that produces consumer hand tools. "Our best suppliers stand out as able to perform with short notice," says Johnson. "They will call us if there is any slippage in the schedule. This is crucial, and some suppliers don't do it."
How to make them better
There are a host of things buyers can do to help improve supplier performance. The most important factor is to involve them in the process. Especially with packaging, it is extremely beneficial to let suppliers know intimately what buyers need and want--and good suppliers regularly offer cost-savings ideas.
"We generally involve suppliers at the start of new product programs, and include them in the packaging design process," says Johnson. "We also have regular meetings with suppliers and we recognize and use both their technology and their expertise." The process of finding cost savings and a better way to work doesn't succeed unless the two parties are actively willing. "It takes both the supplier and purchasing working together to reach a good service level. There needs to be teamwork on cost reduction," says Carswell at Vermont American.
Involving packaging suppliers at the point of design can avoid costly mistakes. Suggestions by suppliers on what type of packaging to choose or how designs can be modified often result in significant cost savings down the road. "Our suppliers are in on design," says Johnson. "If we need a new container, we bring them together with our packaging engineers. The best packaging suppliers are always offering new ideas."
But the basics should not be overlooked. Suppliers need to be told how they're doing. "We hold periodic audits and give suppliers our audit reports," says a purchasing manager at a California battery manufacturer. "We also ask them to visit us for meetings to discuss how to improve performance."
Flexibility and going further
It is often the most flexible supplier that can best handle customers' needs. "The biggest thing our packaging supplier has done is to help manage inventory," says Carswell at Vermont American. A big issue for many manufacturers is inventory management. No matter what the form, JIT or something else, supplier responsiveness to inventory concerns is important. "Our supplier for corrugated boxes, packaging tapes, and chipboards allows us to buy at a volume level of our annual business--but they hold the inventory," says Carswell.
With the inventory level low, the company saves money and doesn't have cash tied up in stock. "The packaging we use should be in and out in the same month," he says. "Packaging should be just passing through." Vermont American will place an order based on annual volume and get that volume discount. The supplier does add a charge for holding the material, but it still winds up cheaper for the buyer.
Vermont American's business doesn't allow any leadtime from their customers. This means their suppliers often don't have any either. "We need our suppliers to be flexible enough so that we can pick up the phone and ask for boxes today," says Carswell. "They will bring us what we want on a daily basis--if needed."
Quick turnarounds can be critical. "Our supplier has helped us get creative about how to get boxes in and out quickly," Carswell says. Another option Vermont American uses is to buy boxes on a consignment basis. "We buy a quantity of high-volume items, but we only pay for them as we use them. There may be 20,000 boxes on the floor--but we only pay for what is being used," says Carswell. "It would be terrific to get all suppliers to do this, but you can't. It takes time to build relationships with people."
Who does best and what goes wrong
In packaging, buyers cite suppliers of certain materials as the most frequent good performers. Suppliers of packaging components such as labels, inserts, or seals often excel. Packaging carton suppliers are also named as high performers.
Suppliers that are willing to help their customers at every turn are the most respected. "If we need help and it's not a part of our supplier's business, they'll assist in finding us companies that can help," says Johnson. It takes work for supplier relationships to succeed, and buyers say they can sour. Suppliers sometimes lose their standing. The most common reason: A change in supplier management.
According to buyers, the most trouble comes from blister packaging, clamshell box, and glass container suppliers. "If the incoming reject rate is high, we can't do business with them," says one buyer. "The worst suppliers are unable to meet delivery schedules even with annual forecasts provided to them."
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