Question

One of the most important topics for Sourcing is the Supplier related Issues. Please write at least 3 paragraphs about the issue of Finding suppliers and how important is that for a business. Also, list some examples about some businesses.

Answer 1

In today's modern world the businesses have become more dependent on suppliers with the concept of outsourcing most of the supplies a business has also become vulnerable of supplier challenges. With the beginning of 20th century the concept of OEMs and core competency came in to the business world and businesses started taking make or buy decisions, this started proving to be more profitable for them as they were able to get the raw products on costs lower than they were able to produce thus they were able to divert their entire resources on their core competence resulting in better market share and more profits.

The issue in finding suppliers generally arise in the initial phase of procuring that particular material, the very problem arises about how to choose suppliers and which one to choose. This is a time taking process and entire management is involved in the decision making. The specifications are sent to suppliers and based on the quality, price, capacity of supplier and the delivery schedule the decisions are taken. Price remains just one factor and a balance is created among the reputation of supplier and the price we are getting from him.

It may be possible at times when we face a situation where a number of supplier are present for a single good and all hold the same type of image in the market, we then by gathering market intelligence on them decide which one will be better for our requirements. Not all the time the decisions are right and we might need to change the supplier in mid way.

Issues also arise in the departments or people involved in the supplier selection process the production department may ask for a more expensive and quality product and the finance department be show its constraints of funds for procurement of expensive items, this is the situation where the top management comes in and taking all factors into consideration decides what has to be done.

Suppliers are the backbone of any business, they provide you with the raw materilas and products based on which your products quality and brand image is dependant in the market. A minor mistake in selection of supplier may lead you in much bigger trouble and even the sustainability of your business may be in question.

For e.g. If you are a Cell phone manufacturing company and your supplier of LED screens stops sending you the supplies on time your entire production and marketing operations will be be hampered and probability is you will suffer huge losses because due to the shortage in the necessary part required for the manufacturing of Cell phone you will not be able to produce and workers will sit idle and also you will not be able to supply the required number of products to the market creating a negative image overall.

Another example is we have seen in recent times many automobile companies such as Ford, Maruti Suzuki of India and Toyota recalling number of products from market because of some issues in their vehicle, this all happened because the suppliers who delivered a certain part which was fitted into the vehicles were faulty and this added into the books of these companies as extra expenses.

Toyota a follower of JIT (Just in Time) inventory system once suffered huge losses due to a fire in one of its supplier’s plant and the supplier became unable to supply the parts to Toyota. Toyota was unable to manufacture one of its much liked SUVs and even the supply schedule to its dealers was hampered substantially.