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June 30, 2015

How to Change Suppliers the Right Way

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If you have been in manufacturing for any period of time you know how many variables exist in managing a complex supply chain.  From raw material selection and inspection through quality inspection and distribution, the potential obstacles could be endless.

Some of the variables are out of your control, maybe the Port of Long Beach shuts down. Some variables are under the control of your manufacturing partner.

The top reasons why customers look to change suppliers or search for a new manufacturing partner are:

Competitiveness

This is fancy way to say saving money.  You have engaged another manufacturer to quote your mature product to ensure you are market value.  No manufacturer likes to be the quote king (read here about Quote Fatigue) but it happens.

Quality

The product you received is sub-par to the quality you would deliver to your customer.  Over time the issue has crept a little higher but now you are in tough position and risk losing customers with low quality products.

Capacity

Great News – Business is booming!  Uh – oh, your manufacturer said, “No problem” when you first met and asked, “What if my demand spikes or sales take off”?  Reality is the manufacturer simply cannot deliver and you can only make so many excuses before you risk jeopardizing your business.

Diversify Supply Chain

(See Capacity) Business is growing and/or your current supplier cannot manufacture enough volume cannot keep up with your demand.  Maybe dual sourcing is the best option: One domestic, one offshore.

The reasons to change are many.  The right way to change are few.

The right way is simple and takes us back to the first grade: Honesty is the best policy!If you know it’s time to change then pick up the phone (NOT the time for a carefully crafted and evasive email) and discuss the impending shift in your supply chain.  Yes, your initial manufacturer is going to be upset.  Once emotions settle they will ultimately be grateful for the 6 month window it will take to ramp up the second (or new) supplier.  This allows them to ramp up Business Development on their end.

If you know it’s time to change then pick up the phone (NOT the time for a carefully crafted and evasive email) and discuss the impending shift in your supply chain.  Yes, your initial manufacturer is going to be upset.  Once emotions settle they will ultimately be grateful for the 6 month window it will take to ramp up the second (or new) supplier.  This allows them to ramp up Business Development on their end.

Build a business continuity or ramp up (or ramp down) plan to keep your operations moving smoothly. 

Losing is never fun.  But switching suppliers the right way is really best for your new supplier, your soon-to-be old supplier, and your business.

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Filed Under: Supply Chain Management