Lean is by no means a subject that can be done behind closed doors. It includes all links in the product life cycle and the lean of the entire supply chain system. Improving the supply chain's quality, efficiency, and delivery competitiveness through lean management has become a top priority for enterprise development. It can be said that only by ensuring a high level of management in all aspects of the supply chain such as raw materials and parts, can we ensure the competitiveness of the final product and meet customer needs.
Due to the inherent subjective perception of the front and back ends of the supply chain, people tend to ignore the attention and support of the front end of the supply chain, that is, the supply side. Paying attention to and helping suppliers improve their management is very effective in improving the supply chain's competitiveness. There are four reasons:
First of all, by controlling and improving the quality of raw materials and components of suppliers, the possibility of harm to the quality of final products due to poor suppliers can be reduced, and customer satisfaction with products can be improved.
Secondly, the stability and high quality of the supplier can also eliminate the waste of failure costs such as returns and repairs in the entire supply process, and improve the profitability of the entire chain.
Thirdly, it can improve the response speed of the entire supply chain, shorten the delivery cycle, and better meet the requirements of customers for fast delivery.
Finally, it can promote mutual understanding and mutual support between the supply and demand sides and then form a solid mutually beneficial, and win-win partnership, which will play an important role in facing the crisis together.
1.Supplier management, what's wrong?
However, so far, many domestic enterprises still have misunderstandings or wrong practices for supplier management.
Some companies are unrestrainedly driving down the unit price of purchases. In the composition of manufacturing costs, raw materials or components generally occupy a high share. It is reasonable for corporate executives to pay attention to the cost of raw materials or components. However, managers will unknowingly focus on the purchase price of raw materials or components, and expect to improve their own cost competitiveness by reducing supplier prices indiscriminately.
The consequences of uncontrolled lowering of the purchase unit price, or suppliers being forced to stop supplying because they are unprofitable, or suppliers shoddy in order to survive. It can be seen that the expectation of infinitely lowering resource prices to obtain cost advantages not only deviates from the lean management idea, but also may pay a heavy price for the enterprise.
For suppliers, people tend to have too much audit supervision and too little coaching support. Many companies complain that their suppliers are incompetent, and that quality and delivery are always failing to meet the requirements. In the face of problems, many managers think that they can achieve their goals by strengthening audit supervision and even adopting heavy penalties. As for the coaching of suppliers to help improve the management level, there is no awareness or little action. As a result, the ability of suppliers has been improved slowly, and assessment and punishment will also increase the distrust between the supply and demand sides, so that there is a phenomenon of mutual shirk.
Some enterprises believe that being able to default on payment for goods is a commendable ability of purchasing managers, and use this to assess the work performance of purchasing managers. As a result, companies find ways to default on payment, and often find fault (for reasons such as poor quality or delayed delivery) not paying or paying less. The consequence of this is that the corporate credit and image are seriously damaged. An entrepreneur friend told me that he no longer wants to do business with a big domestic company because the other party is not only domineering, but also has poor payment credit.
Switching suppliers is a snap for some businesses, as there are too many SMEs waiting to be their suppliers. In the process of constantly switching suppliers, these enterprises can really benefit from it. However, the disadvantages of doing so are also obvious, that is, it does nothing to improve the overall capacity of the supply chain, lacks accumulation, and will suffer great losses in corporate credit and image.
These misunderstandings and wrong practices are not conducive to the improvement of the overall capability of the supply chain, and hinder the process of enterprises moving towards lean.
2.How to manage effectively?
Practice 1: Respect each other and build a fair trading platform
Mutual respect is the premise of building a fair trading platform. To achieve mutual respect with suppliers, we need not only advanced supply chain management concepts, but also a low-key and humble corporate culture as support. The president of Ricoh in Japan often warns employees to put down Ricoh's shelf at work and learn to use his personal ability and influence to communicate with suppliers. In order to prevent employees from arrogantly facing suppliers, the company adopts necessary institutional measures to try to understand suppliers' evaluations or complaints about their own employees and managers. At the end of each year, a supplier conference is also held to entertain supplier representatives, in recognition of their improvements in quality, efficiency, delivery, etc. and their contributions to supply chain construction. These requirements and practices have a profound impact on changing employee attitudes and regulating employee behavior. The establishment of a fair trading platform ultimately makes suppliers an important cornerstone of Ricoh's success. Where some "smart" people seem really unsavvy, it is one of the most important strategies for their success.
Approach 2: Negotiate pricing to ensure reasonable profits for suppliers
The result of highly market-oriented competition is that prices gradually become transparent. Therefore, based on the principle of mutual benefit and win-win, the two parties negotiate and determine the purchase unit price, so that the supplier can maintain a reasonable profit. The benefits of doing so are obvious. The two sides can enhance mutual trust, promote exchanges and ensure a win-win situation. When determining the purchase unit price, excellent manufacturing companies such as Toyota and Ricoh also use a tool called price estimation (totalize the material cost, processing fee, management fee, and profit, etc.) to make a logical calculation of the purchase unit price. And use this as the basis for negotiated pricing between the two parties.
In addition to this, they also allow and accept reasonable counter-price requests from suppliers in order to ensure that suppliers are always on profitable terms. The so-called counter-price requirement means that suppliers can reasonably request to increase the unit price based on the fact that objective factors such as raw material price increases have changed.
Approach 3: Selfless help to improve supplier management level
This kind of complaint is often encountered because the supplier management level is too low, and the company cannot achieve zero inventory and JIT (just-in-time). There are two biases in this perception. On the one hand, they believe that zero inventory and JIT are a reality that Toyota has achieved. In fact, zero inventory, JIT is not a reality, but the principle and pursuit of lean. On the other hand, it would be quite wrong to make the lack of supplier capability a condition for abandoning the pursuit of lean. The correct understanding is that helping suppliers improve is one of the important improvement activities for enterprises to become lean.
Companies such as Toyota and Ricoh have made useful explorations and effective practices in helping suppliers improve. The so-called source stream improvement is to extend the improvement to the supplier's activities. The specific method is to divide the personnel of the inspection department in the past into three parts, some of them stay in the company, and at the same time formulate and maintain quality standards, implement fast and even personal services for quality complaints on the production line; the other part of the personnel They are dispatched to suppliers to conduct business trip inspections on the parts to be shipped by suppliers according to the delivery plan, eliminating the previous multiple wastes that need to be returned due to defects after arrival inspection; some personnel have undergone professional training. Assigned to suppliers to implement free improvement counseling for suppliers to help suppliers improve their management level in terms of quality, efficiency, delivery and safety.
The benefits of doing so are obvious, not only can it help suppliers improve their management level in an all-round way, but more importantly, it can cultivate a supply chain with sufficient competitiveness and strong cohesion.