I agree with you. However we are an outsourcing company and we are receiving some inquiries regarding this. Before we can go ahead and start rolling this out to the customers we need to completely understand the same. We have got some of the documents but just wanted to see if there are any flow charts or process related documents before we can roll this to the customer.
Any suggestions
OK
Here's the deal as I see it.
Almost everything hinges on the original supplier approval process.
I advocate different processes for different suppliers based on any or all of these criteria (not a compete list):
- custom made or off-the-shelf?
- large stable organization with long history and good reviews from others (I do NOT mean ISO registration here)
- common product available from many suppliers or sole [or limited] source?
- product critical to customer's process?
- will supplier use customer's materials or tooling?
- does supplier need governmental license or registration?
- what's the worst that can happen if supplier delivers: late? nonconforming goods? partial shipment?
Depending on the answers to those and other questions, the customer can make contract provision for any or all of the following:
- short notice audit to view work in process
- instant reclamation of material or tooling (lots of reasons for this provision)
- tickler system to check on license/registration status
- split order between two suppliers, each with knowledge of the other
- create safety stock backup (maybe offsite in neutral warehouse - to avoid triggering payment prior to actual need) - in practice, product is delivered to warehouse and FIFO to customer, maintaining sufficient safety to continue production in case of ANY problem with original supplier delivering conforming goods on time.
Note: my method is to cover as many contingencies as possible before entering into a contract by working very hard on a smooth, efficient approval process. Then, to make the contract contingencies (safety stock, alternate supplier, etc.) as open and transparent as possible so no one gets into finger pointing when the supply chain hiccups.
All issues can then be resolved WITHOUT punishing or penalizing a supplier or arguing over whether the hiccup is due to blame or "act of God."
There are plenty of consultants around who can help an organization craft such a process to assure as smooth a supply chain as possible. It is a very small part of my own practice, but I frequently work it into an overall business strategy for client organizations. I'm sure many other consultants do something similar.
Some may argue this is an unnecessary expense, but I see it as risk management to avoid the horrendous expense and disruption which ensue when such contingencies are NOT provided. It all depends on how risk averse the organization and its managers are.