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The Weakest Link—Examining Your Chain of Supply

It’s not uncommon for small-business owners to blame the failure of their business on their suppliers. “If only I had better suppliers,” “Our suppliers can’t do anything right,” etc. I recently came across an article by S. Lichtenstein, from the Israeli Society for Quality, that suggested ways that will help minimize problems within the chain of supply, thus saving money—and maybe the business too. These are pretty useful tips even, and maybe especially, for small and medium-sized business owners.

• Like in any other process of self-help, the first step is to stop blaming others for your problems and focus on you; maybe it’s you who is doing something wrong. For example, maybe you’re outsourcing in order to cut costs but doing so out of urgency and not allocating the resources needed to do it successfully. At the end of the day, you usually do get what you pay for.

When outsourcing, ask yourself—why? If the answer is “in order to save costs,” try to take into account all other possible costs, direct and indirect. Paying the supplier is just one aspect of the cost structure; choosing, training and managing the supplier all cost money. You might find out that, financially, it would be better not to outsource.

Formulate a different plan for each and every outsourcing job and put only one person in charge of each plan. Prioritize: let the people around you know that the plan will need their professional help, and that it’s a top priority. Once a plan starts lagging behind, and people postpone working on it because they think it’s a menial task, the plan will surely crumble.

Choose your supplier wisely. A supplier who will offer you a cheaper contract might look appealing but will end up costing you more money instead when he or she files for Chapter 11 after a minor glitch in the process. Make sure your supplier is experienced in your line of work and has the financial resources to support any future mishaps.

Communicate. Assume that the supplier knows nothing about the product and the process. Transfer any related documents, but make sure the information is clarified and finalized; you don’t want to confuse the supplier. Also, there is no need for suppliers to know you internal thinking methods, processes, and such—supply them with “bottom line” information only regarding their role.

Write things down! It’s easier to track a written paper than a spoken word. Even if the order is urgent, make the time to write it down clearly, or else confusion will be evident.

Work with checklists. Make sure the process is known and verified, and go through a checklist before the work starts to be sure nothing is being left out.

Allocate a budget to monitor and audit the supplier. The earlier you find a problem, the easier and cheaper it is to fix it. Make sure you’re looking at the right indicators when monitoring the process.

Be active, react. Scold the supplier for making a mistake, but also praise him for a job well done. Personalizing the relationship might make the supplier try harder to not fail you. However, don’t be afraid the switch suppliers if mistakes are discovered repeatedly, and you feel that you’re being ignored.

Outsourcing does have its advantages, but make sure it is truly what you need before going down this path. There are many variables to consider: you might save on costs, but end up losing manufacturing knowledge and know-how—which translates to cash as well—and thereby increase your dependence on more suppliers in the future. If you do decide to outsource, do it right; don’t cut corners, and don’t fire-and-forget. Your products are your income, after all.

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