Why does supplier assessment or evaluation matter?
The process of supplier selection could be quite complex and costly. Given that, it’s not uncommon that many organizations emphasis costs as the sole criterion when sourcing suppliers. In doing so, they hope that they can save some money for the company. Such a criterion will always later to be proven to be inefficient and may require more time and resources to change.
Switching to new suppliers is also almost close to impossible in manufacturing. Because it means that you have to end what you’re doing now, which equals to erase what you’ve built and invested so far and start all over again. No one is going to like that.
So, why don’t we get it right from the very beginning? This is why the SWOT analysis, i.e. strengths, weaknesses, opportunities, and threats analysis, is introduced as a scientific evaluation and assessment approach for supplier assessment and evaluation.
When selecting a supplier
When you’re sourcing for an ideal supplier, you need to make sure that you’re picking the best supplier for your product ideas. That said, you need to know what your supplier is capable of and how well do they fit your needs.
This is why the SWOT analysis in selecting the ideal supplier so important. It tells you the strengths and weaknesses of the potential suppliers so you can see quickly the capabilities of the suppliers to fast decide whether the supplier meet your selection criteria. With the opportunities and threats of the potential suppliers clarified, you’ll have a better idea whether long term cooperation is expected and what possible actions you should take to mitigate potential risks in the project.
When assessing or evaluating the supplier
SWOT analysis is one of the crucial steps in telling you in 4 dimensions how capable is your current supplier in delivering what they promise, and what’s the possible future for the cooperation.
Compared with other objective assumptions and judgments, the SWOT analysis is more quantitative and subjective in telling you the capabilities and expertise of your supplier, and what risk mitigation action you should take to drive the cooperation up to the next level.
This is how you find the room for improvement in the supply chain, identify the corrective actions that you should take to drive the overall supply chain performance, and look for new business opportunities if possible.
The SWOT analysis
With all being said, the SWOT analysis in manufacturing does play an important role in identifying the best solution for manufacturing your product. Now let’s break it down and see how we can make the most out of it to drive the overall supply chain performance.
When you look at your potential supplier, or your current supplier, what aspects do you need to focus? Here is where you can start:
- Are they experienced and capable in design, engineering and manufacturing?
- Do they have well-recognized safety certifications such as ISO9001, and ISO14001?
- Are the above certifications well executed?
- Do they have solid relationship with their upstream and downstream suppliers?
- Do they have clear quality inspection system covering IQC (incoming quality control)/ IPQC (in process quality control) / OQC (outgoing quality control) / reliability test?
- How responsive are they in providing you technical and service support?
If your supplier is overseas:
- Are they familiar with overseas market certification, production and shipment requirements?
- Are their engineers and project managers possess excellent English skills?
It’s not difficult to spot the weaknesses in the supply chain, but it can be tricky to foresee them before they come up. So here are the questions you need to know the answers to:
- Are they outsourcing any parts or materials? If so, where do they outsource to? Do they have solid control over the outsourced suppliers?
- Are they capable enough to predict and anticipate project technical risks?
- Do they have the manufacturing capability and experience that is relevant to your specific product needs?
- Does the pricing give your organization enough competitive edge on the market?
- How long is the lead time?
The opportunities here could mean new business opportunities, opportunities to improve the overall supply chain performance, an extension of credit terms, and/or an increase in existing credit limits. For example:
- How willing are they to improve the service, product quality and/or on-time delivery?
- Can they lower the inventory cost and help with the freight costs?
- How professional are they in helping you enhance your product?
Talking about threats in the SWOT analysis, you need to focus on both the current threats and the future ones. You need to pay attention to things like:
- Excessive lead time;
- Possible future price increases;
- Supply chain disruption;
- Insufficient cost transparency.
The final result
Now you’ve got the strengths, weaknesses, opportunities and threats of your supplier all considered, it shouldn’t be hard for you to select the ideal supplier, and gain more insights in knowing what you need to do to drive your supplier performance.
Here is what the SWOT analysis chart might look like:
That’s about what we have to say about the SWOT analysis in manufacturing. Should you have any question about it, do feel free to let us know. We’d be more than glad to help you out.