There are obvious risks involved in sourcing goods from other countries. Managing global vendors well is an investment in the future of your business.
In today’s socially connected world, there’s no room for error. A small mistake or error in judgement could turn into a full-blown crisis once customers and other stakeholders take to social media. And if the blunder is serious enough, it could be the end of your business – even if you’re not directly responsible. However, if you manage your vendors well, issues can often be avoided, or at the very least mitigated, before they do harm.
Many businesses today source goods or services from a third party overseas, and there is obvious risk involved. This includes:
- Unintentional harm to your company such as late or incomplete delivery of goods or use of dangerous materials or product features
- Intentional harm to your company such as design or material theft, counterfeiting, trans-shipments or substitution of materials or components
- Corporate social responsibility (CSR) issues including unfair labor practices, child or forced labor, worker safety, harm to the environment and more.
Potential risks can be reduced and even eliminated by properly onboarding vendors, establishing Standard Terms of Engagement, conducting authorizations and assessments, providing training, tracking vendor performance with scorecards and issuing and managing corrective action plans (CAPs) when issues arise.
Given the physical distance and differing views on socially acceptable ideals, managing global vendors is one of the most difficult tasks companies can face. Yet, vendor management is integral because your reputation and success – or failure – hinges on it. But without the proper tools in place, this can be a daunting task.
The right technology can help enforce control and accountability for all suppliers, vendors and third parties involved in the design, manufacturing and delivery of your product to ensure compliance, avoid costly litigation, reduce downstream risks and costs, and win market share by building and maintaining a positive public image.
3 Core Tenets of Vendor Management
When it comes to managing global vendors today, there are three fundamentals for success. Proper management of these will safeguard your business:
- Proper vendor onboarding
- Good manufacturing practices (GMP)
- Corporate social responsibility (CSR)
1. Proper Vendor Onboarding
Every vendor should be closely managed from the start of your relationship; this begins with vendor onboarding. If expectations and procedures are established before work commences, many issues can be avoided.
First and foremost, vet and evaluate vendors. This includes educating them on your company’s Standard Terms of Engagement. Once the vendor understands what’s expected of them, schedule an on-site assessment to examine facilities and assess working conditions to confirm that they comply with your Standards of Vendor Engagement. At this point, all necessary documentation and certifications should also be obtained. These, as well as all other pertinent vendor details such as capabilities, machinery, capacity, etc., should be stored together to create a comprehensive vendor profile.
During the initial evaluation process, if an issue arises and the vendor doesn’t meet the Standard Terms of Engagement, a corrective action plan (CAP) should be issued immediately. Once the issue or issues have been resolved, the vendor can be cleared to work on production orders. Likewise, throughout your relationship, report cards should be kept to calculate a score card index based on established performance metrics. These findings can be used in the future when assessing and comparing vendors.
All this information should be stored and managed in a central repository for quick reference and assistance in vendor profiling when making sourcing decisions. This data should be searchable and standardized across vendors.
Investing in the proper onboarding of your long-term vendors is an investment in your future, as well as the stability and future of your vendor. This means:
- Taking the time to put Standard Terms of Engagement in place
- Putting solid training programs in place so everyone is on the same page
- Investing in technology to properly and efficiently manage the overall onboarding process.
2. Good Manufacturing Practices (GMP)
Good manufacturing practices (GMP) are typically associated with quality assurance – ensuring products are consistently produced and controlled to the quality standards appropriate for their intended use. However, GMP audits also help ensure the long-term health of your vendors.
When vetting your vendors, make sure they have enough financing, structured training programs, quality control mechanisms, continuous investment in new technology, and all the other intangibles that ensure they will be in business long term. Consider evaluating the following key areas:
- Management commitment and continual improvement – is the management team stable or is there a high rate of turnover? Is management committed to their own continual improvement and the improvement of employees and facilities?
- Risk management – what systems and processes does the vendor have in place to evaluate the potential risks associated with various tasks, jobs, etc.?
- Quality management – does the vendor have systems and processes in place for quality control? Do these systems meet your standards?
- Site and facilities management – are the facilities properly managed? Are the sites and working conditions safe and healthy for workers?
- Product control – does the vendor hold raw materials and finished products to the same standards as you do? What is the process for performing product control audits?
- Personnel training and competency – are personnel properly trained? Do they receive ongoing training and are there plans in place to address improvement needs?
When onboarding new vendors, you invest a lot of time, money and effort. After this challenging process, if the vendor goes out of business, that investment is worthless. Even worse, if they go bankrupt while your work is in production, you could lose substantial amounts of revenue and profit.
3. Corporate Social Responsibility
In order to protect your brand and reputation, and to operate ethically, you must create corporate social responsibility (CSR) practices and initiatives. Beyond child labor, there is an array of vendor compliance issues related to fair labor, anti-corruption, safety and responsible sourcing that you must manage when contracting with global factories and suppliers.
Your vendors’ behavior indirectly represents you, and it can make or break your reputation and viability by instituting a strict CSR program and setting expectations that comply with those initiatives. Impose codes of conduct and audit your vendors’ progress. Data should reveal variants between audits and self-assessments, and you can work with your vendors to set corrective action in motion.
Managing Global Vendors and The Role of Technology
Vendor evaluation, onboarding and compliance are nearly impossible to manage with a manual system of email, spreadsheets and attachments. This is where a technology solution, in particular a digital supply chain platform for integrated vendor management, comes into play – to help onboard, organize, vet and manage your vendors in a systematic, efficient and integrated way to assist you with better sourcing decisions, ensure overall compliance, and mitigate risk before it becomes the next trending topic on social media.
The best solutions for managing global vendors should offer fast implementation, with global accessibility and multi-lingual capability, as well as local training support to assist with the rollout of your global solution. You should be able to streamline your processes, as well as improving the onboarding and ongoing management of your global vendors to ensure immediate, and future, compliance, thereby safeguarding your company.
Read more about vendor compliance and corporate social responsibility here, or watch this short video showing how a connected vendor ecosystem facilitates collaboration and transparency.