Maximising value through early supplier involvement

By Charles Nyika | 6h ago

EARLY supplier involvement has recently been hailed as a strategic imperative by those procurement departments that are determined to achieve significant savings for their respective organisations across the globe.

The concept of early supplier involvement is highly regarded as a leading-edge business activity, which recognises that suppliers have more to offer to organisations than simply producing an item according to specifications late in the product development cycle.

The main objective of the early supplier involvement strategy is to maximise the benefits that are likely to be harnessed from a supplier’s intimate knowledge of the “design, testing, manufacturing, tooling capabilities and product knowledge” within the supplier’s specialised industry.

This will bring the vision of future trends and supplier’s innovative solutions at no cost to the business.

Given the high costs of research and development, suppliers make huge investments in time, money and effort in developing innovative products.

Supplier-driven innovation stresses the importance of consistently looking beyond the obvious. Tapping into the wellspring of practical knowledge from the supply chain community should be a staple for all industries.

Suppliers are not just any other entities. They are a pulse of supply chain management. The optimal use of suppliers’ special skills and processes is achieved to good effect when suppliers are consulted well on time prior to the actual purchase of the required item.

Suppliers and their personnel can contribute a major role in the development of new products where specifications are clearly spelt out and submitted on time. The biggest opportunity for cost savings is usually built in product specifications.

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The logic behind early supplier involvement is a no brainer. Preferred suppliers, working directly with cross-functional teams could be regarded as sources of expert knowledge, which can be leveraged upon to provide insight and expertise into the production processes required to support an organisation’s requirements.

Procurement professionals can work with suppliers to identify products that can be produced efficiently given a supplier’s production capacity and capability since technical knowledge on raw materials normally resides with suppliers.

Early supplier involvement enables the potential discovery of new raw materials and novel technologies that could easily be used in designing products.

Early supplier involvement could also be used as a window of opportunity for the early discovery of potential flaws on the design manufacturing interface.

In the old days, the procurement department only got to know about the company’s new products at the tail end of the development process when the production department had submitted its requisition for purchasing to action.

However, most organisations are slowly realising that early supplier and procurement involvement can easily reduce the product development cycle time.

In some companies, it takes as long as five to 10 years to develop a new product on the market. However, with the assistance of its own suppliers, a company can easily shorten that period to half the time hence saving a lot of time and effort, which can easily translate into early profits.

Bringing the right product to market first and faster than a competitor can result in higher earnings and market share while providing an opportunity to develop first mover customer loyalty.

Modern organisations are now taking new strategic directions where early supply chain involvement has resulted in supply chain professionals and their supply partners proactively contributing suggestions and ideas before the product is finalised and brought to the market.

Where procurement personnel accords suppliers a place on the executive planning table as an equal partner, the end result will be quality product outcomes and cost-effective designs.

Early involvement of suppliers has an added advantage in that it allows a supplier to anticipate and begin pre-production work which will ultimately reduce production related bottlenecks.

Procurement personnel can, therefore, work with engineering teams early on “to establish raw material component tolerances to improve process capability ratios and facilitate easy manufacturing process flows”.

Early supplier involvement can also be leveraged to ensure that cost reduction, cost avoidance and cost minimisation are achieved by critically reviewing specifications together with user departments.

Often times, specifications are never critically analysed in line with developments on the supply market. Some raw materials and/or components parts are often fixed on a product not because the customers wanted them but mostly because the design engineer or production manager thought it was necessary.

Early supplier involvement and cross functional collaboration takes away the need for challenging user departments specifications altogether since they will have been developed in consultation.

It should be highly regarded as the key to getting cost reduction built into product design and manufacturing processes hence taking away unnecessary costs and waste.

Supply chain professionals can leverage on supplier’s experience, expertise, product and manufacturing knowledge to enhance the functionality of the product designs.

Organisations can also take advantage of aligning their product designs with supplier’s capabilities and being mindful of supplier constraints right from the onset.

This will obviously reduce the use of future costly design changes driving cost optimisation through the alignment of collective and shared inputs from the supply chain community.

Early supplier involvement has also been credited for contributing to an increase in product quality. The concept offers considerable strategic promise for contributing towards the production of quality products where suppliers are treated as extensions of the procurement department.

Suppliers are generally knowledgeable much more than the buying organisations when it comes to the quality of raw materials that are complementary to what they supply.

Since suppliers work with different customers at every turn of the handle, they are likely to be sources of objective recommendations for suppliers, who can provide complimentary products and/or sub-contractors.

Suppliers are, therefore, readily available to assist in pointing out what has worked or what has failed in other related or competing supply chains.

The pace of modern innovation is relentless. Getting comfortable with technology and innovation is a must. It is always important to have the latest technologies in your strategic arsenal.

Suppliers should be regarded as valuable sources of product and process innovation, driving growth in an ever-evolving market. Supply chain professionals are required to leverage the reservoir of the latest technology resident in the supply chain community.

Their knowledge and production expertise across product categories can be leveraged to enhance product design and user experience.

Suppliers can provide sources of alternative materials to produce state of the art goods and services with durability and functionality in mind.

In order to stay competitive in today’s crowded business landscape, state-of-the-art products must be aligned to the market demands and user expectations.

Product innovations are normally fostered through supplier expertise and knowledge, enhancing time-to-market product acceleration.

Without early supplier involvement, there is a tendency to rely on a siloed approach, which could easily lead to communication gaps and potential increase in risk of errors and or rework.

Late involvement of suppliers could lead to the use of expensive product designs, which can lead to budget overruns. It can result in missed production targets and deadlines. The supply chain community is capable of providing valuable insights into production models with the potential to provide cutting-edge competitive advantages.

Suppliers will always possess a deep appreciation of supply market dynamics, and such knowledge will assist the business in the identification and mitigation of risks, such as geopolitical instability and potential raw material shortages.

It is important to bring supplier involvement from the get-go, bringing a host of benefits that ripple across your supply chain.

The process of early supplier involvement can also identify and assess how a product will minimise its impact on the environment while at the same time maximising resource efficiency.

In countries where the government is very particular about the environment, companies can spend a lot of money paying fines unnecessarily due to lack of attention to detail with regards to environmental related issues.

Early supplier involvement will, therefore, encourage most companies to analyse the product and possibly come up with better environmental suggestions and improvements prior to the production and or launch of a new product.

Early supply chain involvement will significantly enhance compliance with regulatory requirements, which will in turn result in the reduction of potential legal and reputational risks.

Apart from implementing the concept of early supplier involvement, there is need for organisations to promote the concept of early procurement involvement. This is an extension of the early supplier involvement in that it encourages user departments to let the procurement department know well in advance what they will require.

This will enable the department to do their homework on time so that they do not start running around when the product is now required at the shop floor level.

Requisitioning at short notice may force the procurement department to source the product in a hurry hence failing to get the best value for money.

Where the procurement department is given ample time to buy a certain product, they will employ their expertise to source the best of what is available in the most cost-effective manner, creating a ripple effect for positive change.

In conclusion, it must be noted that early supplier involvement will assist organisations to navigate the whirlwind of the volatile business environment, creating a lasting legacy for meaningful change.

The cumulative experience from the supply chain community will certainly offer distilled wisdom from the triumphs, failures and discoveries done over the years while dealing with various customer segments.

The supply chain community is where vision meets hustle since suppliers will oftentimes prepare supply chain professionals to expect the unexpected.

Bringing supplier knowledge in procurement conversations is, therefore, key to weathering future storms. Whenever supply chain professionals implement prescribed solutions, according to the rulebook from the supply chain community, such solutions could easily turn out to be your sleeping tablet.