SUPPLIER EXPECTATIONS OF Company X INC.
“Our mission at Company X Inc. is to –Foster an atmosphere conducive to continuous improvement, cooperation, and mutual respect among employees, customers, and suppliers.”
The following is a general list of our expectations of a supplier. We ask you as a supplier to respond to every expectation. Note that the first five expectations are tracked by us and summarized on a monthly basis. This is performed for our major suppliers and is extremely important for our overall success.
1. Delivery must be outstanding! The shorter the cycle or delivery time the better we can meet our customers needs. Suppliers delivery performance is tracked by purchase order and by the number of line items received on time. This tracking is based upon the want date indicated in the purchase order. We encourage suppliers to provide us copies of their own internal reports that track performance. Suppliers that have the capability to deliver directly to our in plant end users can significantly reduce our transaction costs. We are a dynamic company in the growth stage that challenges our suppliers with formidable delivery dates. If you can not provide us a specific part we would expect your strong commitment in obtaining the part from another source or supplier. Lead-time reduction is essential for our continued competitive viability. As an OEM we have penalty clauses for late equipment delivery.
2. We want quality certified suppliers. We prefer ISO 9000 certification status. Inform us if you are already quality certified by other customers or industries. Give us the names and contacts of customer references that have certified you in quality. We want to know about your quality certification process. We need a thorough description of your quality program and copies of key quality documents. We are interested if you have recently received any quality based awards. We expect that you possess a supplier selection process that emphasizes quality. We want your quality level to be such that it eliminates the need for our internal inspection. A supplier’s number of rejects and number of returns is tracked by us. We insist that suppliers correct Nonconforming Materials (NCMR’s) as soon as and expeditiously as possible.
3. Back orders are an administrative nightmare for both a supplier and customer. We track the number of line items shipped complete on the first shipment. First time “no problem” fill rates are crucial.
4. Accuracy in receiving documents is indispensable because of the fast pace of our growth. We track the number of packing slip errors, the number of items shipped in error, and the number of items priced incorrectly. These are administrative errors that cost us time and energy to process. Suppliers need to correct these mistakes with the minimum of disruption to us. The packing slip must have the date shipped, supplier name, invoice number, purchase order number, shipped quantity, backorder quantity, and the part description which includes our Company X Inc. part number. The purchase order number must be clearly designated on the outside of the box to help us find a specific part. Other information you need to include if available is the name of the person who ordered these parts. We will be going to a bar coding tracking system and expect all our suppliers to have bar code capability.
5. We expect professionalism from all our suppliers. We do a qualitative evaluation of supplier response to phone inquires, the packing of items, ability to follow shipping instructions and pricing competitiveness.
This completes the expectation areas that we formally track with major suppliers. The following expectations are also very important considerations from our suppliers:
6. We count on “most favored” pricing status. This means that you extend to us the lowest best price and margins that you would grant to your very best customers. We do periodic benchmarking of pricing to verify competitive pricing. We as a practice ask for a comprehensive fixed price list for our parts for a period of one year. We keep a three year history but would expect that you work with us to develop a history of usage and pricing. Joint updating of our contract files and computer systems is an anticipated outcome of our efforts. Written justification of any price increase is required. Price increases must be mutually agreed to by both parties. Suppliers must agree to work with us to eliminate inflationary price increases and to give us alternatives to drive down the overall supply chain costs.
7. We are interested in a “turnkey” type approach to inventory. This would include concepts such as continuous replenishment, on-site stocking, consideration of consignment, elimination of re-stocking charges, recommendations around storage racks, assistance in disposing of obsolete parts, and the capability to expand the parts that you can provide to us.
8. We need suppliers who can eliminate all transaction costs. Your must have the capability to accept purchase credit cards. Our purchase card brand is American Express. EDI capability and installation expertise is a plus. We would like systems purchasing capability along with electronic mail and electronic catalogue options.
9. Our financial standard financial terms are 2% 15 net 60. We will not normally grant any downpayments or prepayments. Our credit rating is outstanding. We require full financial disclosure of a supplier’s financial status to include audited financial reports, SEC form 10K and 100, credit rating documents, and corporate financial records on file. We also insist on disclosure of any relationships with our competitors. In addition, all duty drawback rights must be assigned to Company X Inc. Your price list must include the country of origin and reference the original manufacturers part number and cross reference it to Company X’s part number. You need to make available to the assigned agent of Company X all import documentation required to facilitate a manufacturer’s duty drawback. We sell internationally and expect suppliers to meet the differing language requirements of our international customers which would include CE Mark and international type contractual specifications.
10. We seek suppliers that can help us continuously improve. In order to encourage this behavior we are willing to split hard improvement savings with you 50-50 for the first year of these savings. We need your help in educating end users, designing manuals, working with cross functional teams, and introducing new products. We want to take advantage of your technical expertise. We value suppliers with good technical services and those who can keep us informed of leading edge technologies that we can employ.
11. We are open to long term relationships in a partnership mode. We seek long term contracts signed with partners whenever feasible (three years or longer). Any prior track record of business with Company X and prior partner relationships is helpful. We prefer an accounting of your partnering experience along with specific contact listing of references that can verify your performance as a supplier in a partner or alliance relationship. We look forward to our suppliers educating our plant personnel on the benefits of partnering, open to expand the bucket of goods that they can provide us, willing to engage in an “on-site” supplier relationship, and agreeable to us visiting their plant and assisting us in streamlining the supply chain. The start up of a partnership relationship is extremely resource intensive. A supplier must dedicate resources during the start up phase.
12. We are trying to pick the “best of the best” of world class suppliers for Company X. We would like to know about any best practices that you are using. We want to know about the stability of your workforce and commitment to progressive organizational design and your employees. Current business capacity and future growth plans are important to help us understand your capabilities. Shutdown timing information and your status as a union or non-union manufacturer is requested.
13. We strongly urge our suppliers to conduct themselves according to the ethical standards noted by the National Association of Purchasing Managers.