You're Only as Good as Your Worst Supplier – Tips for Vendor Management

Meagan Douglas
Fri, Oct 9, 2015
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A jet-engine manufacturer had to work around damaged and dirty parts.

Manufacturers need raw materials to make products. If a supplier misses a shipment, is late or sends the wrong materials, an entire business could screech to a halt.

A recent news story from The Wall Street Journal examined a company that adjusted plans due to supplier problems. This example demonstrates why manufacturers need to have clear terms with their vendors, be ready to check shipments and find the supply partner that can meet their needs.

Building Engines Without the Right Parts
Pratt & Whitney, a jet-engine manufacturer, had to slow production on a new fleet of products because of shipping errors in summer 2015, according to The Wall Street Journal.

The company invested $10 billion into a new generation of jet engines as Pratt wanted to increase production from a few dozen units per year to more than 500 by 2018. The innovative designs are fuel-efficient and call for specialized parts to manufacture.

Pratt made a deal with the United Parcel Service Inc. to deliver the 7,000 orders the manufacturer had on backlog. Once the supply chain began moving, however, problems were detected immediately. UPS opened a new supply center in 2014 and Pratt was a victim of its implementation struggles. Engine kits arrived at production plants with damaged, dirty or incorrect parts. Manufacturing workers had to use supplies from multiple shipments to have enough correct pieces for one engine. This severely limited manufacturing productivity and interfered with the new production goals.

This is not the first time Pratt & Whitney had trouble with engine material suppliers. In 2014, Business Insider reported the manufacturer sued one of its vendors for misrepresentation of titanium quality, which caused Pratt to suspend delivery on military contracts.

Pratt & Whitney belongs to United Technologies and accounts for $65 billion of its annual sales. Greg Hayes, United Technologies' chief executive, stands by the products Pratt assembles, but has concerns these kinds of shipment troubles could severely hinder the business.

"The technology, I'm very confident we've got that right." Hayes said to WSJ. " But you're only as good as your worst supplier. When you've got 8,000 parts in an engine, one of those parts aren't there, you're not building an engine."

Preparing for Supplier Problems
Preparation prevents problems with material deliveries. Manufacturers need to find a partner they can trust. It's important to define clear terms at the beginning of the relationships, create assurances for quality and then supervise supplier performance.

During initial agreements, suppliers and manufacturers must design shipping schedules based on common needs. Managers should be aware of their production facility's demands. Daily information built on real-time automated data collection procedures is the best way to gain insight into the speed and performance standards of manufacturing plants and warehouse management. A business should find a supplier that offers insurance on inventory problems, and plans to make amends when internal issues delay shipments.

When drawing up a contract with a vendor or shipping company, a manufacturer must account for every possible factor that could affect supply quality. To prevent damage, Inbound Logistics suggested companies in a supply chain should agree on how suppliers package goods. Containers should prevent excess movement and safeguard against unique obstacles for certain materials. The same goes for labeling. Suppliers and manufacturers must share consistent terms and procedures for marking products.

Quality Control
Clear labels, especially ones outfitted with tags that deliver details to mobile data collection devices, make it easy to check supplier materials. Managers must know the condition of each product received in shipping. Pratt returned to its normal schedule because it caught the errors immediately, and executives took the problems straight to UPS. 

A mobile enterprise application platform can provide any company software user with visibility into receiving activities when properly implemented. The second materials arrive from a supplier, workers can scan the containers. Once employees open the packages, they can report any problems to a central software solution using mobile data collection devices.

A consistent record of supplier activities helps managers communicate problems to the companies responsible for the errors. Entrepreneur said addressing suppliers with hard facts about material quality, price and schedules are paramount to a productive relationship. Managers should record the details from each interaction with suppliers so every software user can see how actual performance matches up to promises.

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