Engage partners and suppliers in the continuous improvement process

Is it sufficient for the company to have its partners and suppliers deliver products and services according to the requirements that have been defined in the purchase order and other specifications? What else can the company expect from the supplier and partner?

Usually in large contracts there are various provisions. For example, a provision about a commitment to continuous improvement and systematic cost reduction. How does the supplier interpret this provision? As an opportunity to “trick” the customer? After some time, the supplier usually lowers the price, but also lowers the quality. The customer quickly realizes this and starts looking for another supplier. The situation repeats itself from time to time, and suppliers are constantly rotating. In such a situation it is difficult to establish long-term partnerships.

So how to engage partners and suppliers in the continuous improvement process?

Expertise in new solutions and improvements

The company (customer) should not directly ask the supplier to reduce the price of a product or semi-finished product. But the customer should be interested in such supplier’s activities as new solutions, improvements, eg. Productivity and quality improvement, material flow, changeover time, failure time and quantity, reduction of variable and fixed costs.

Of course, information about the above-mentioned factors is a supplier secret, so it is very difficult to obtain. Nevertheless, it is worthwhile at a level of generalization to start discussions with suppliers on this topic.

A good tool for this type of analysis is Value Stream Mapping (VSM). The detailed mapping of a common value stream uncovers many potentials for improvement. VSM analysis can be a very good experience for suppliers. With an accurate representation of the customer’s value stream, the supplier is able to better understand the customer’s needs. And a better understanding of the shared value stream can benefit both the supplier and the customer in many ways.

Implementation of Lean tools

The next step after the VSM analysis is to help the supplier implement Lean tools. Often – especially in small companies – Lean tools are still unknown. Therefore, it is worth requiring suppliers to improve their work culture by implementing Lean. By doing so, they can reduce waste, i.e. everything that the customer has not paid for and should not pay for.

If a customer analyzes a joint value stream with a supplier, it may come across many unnecessary processes that the supplier performs in the belief that they are important. Therefore, a joint analysis can be an opportunity to establish new requirements that are not burdened by the seven types of Lean waste. It is important for suppliers to improve by thinking about both their own development and the development of their partners.

Active participation in customer process improvement

Suppliers often make the strategic mistake of assuming that the more (in quantity) they sell to the customer, the better. This applies to things that are supposed to have some longevity. There are two sides to this process: one is the supplier, who wants to sell as much as possible, and the other is the customer, who wants to buy as little as possible and consume as little as possible. Therefore, the customer will be looking for better solutions all the time. And the role of the supplier is to offer better, more durable products for the sake of the customer’s quality of service. Otherwise, the customer will simply look for competitive solutions.

When providing products and services, one should not only focus on the specifications of the order sent by the customer. The supplier should actively participate in the search for solutions that will improve the customer’s production process. A good supplier is one who constantly proposes something, who constantly tests something, who introduces solutions proven elsewhere. Provisions in contracts for annual price reductions are actually intended to introduce new, cheaper and improved solutions.

A good platform for the supplier to improve its offerings is technical cooperation between the customer and the supplier. Conversations between customers and the technical services of suppliers and partners can bring many benefits.

SCM supply chain collaboration

Close collaboration in SCM (Supply Chain Management) is another opportunity for continuous improvement. If suppliers, especially smaller ones, buy materials for products and semi-finished goods from the same suppliers that you (or your other suppliers) source from, it makes sense to link supply chains. It is also possible to pool all suppliers to help them negotiate better prices. The supplier market is unlimited and undiscovered. Therefore, the customer can share its supplier base and identify further SCM improvement opportunities for a particular supplier.

Customer-supplier relationship

Lean tools, specifications, technical and SCM knowledge are important, although knowledge alone is not enough. A good customer-supplier relationship is essential. Without this, the continuous improvement process won’t be effective, the supplier won’t show the customer its technical know-how and won’t be eager to discuss supply chains. Building positive relationships with suppliers and partners affects all aspects of cooperation and is a fundamental driving force.

The relationship is also affected by the level of customer service. If customer service is not good, the relationship quickly becomes negative. Contrary to appearances, a good relationship can be built through professional handling of customer complaints. By resolving the complaint, the supplier can show its value. A supplier who responds promptly to a customer’s problem can build and maintain a good relationship, ensure the possibility of further cooperation. The supplier should cooperate with the customer, but not fight.

Ethics and integrity

One of the most important foundations for engaging in continuous improvement for suppliers, partners and customers themselves is integrity and ethics. A supplier or partner must comply with the law and communicate existing problems.

Good relationships are hard to build with someone who, for example, has no respect for employees, doesn’t follow health and safety regulations, or works against the environment.

In summary, the commitment of suppliers and partners to continuous improvement should be based on mutual trust. Trust is earned primarily through honest and ethical behavior. We build good relationships on trust. With good relationships, we can start the conversation about continuous improvement.