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PRE-SELECTING VENDORS

The book that started the lean production movement, The Machine That Changed the World, notes that in the best lean production companies: Suppliers "are not selected on the basis of bids, but rather on the basis of past relationships and a proven record of performance."

The bottom line for vendor/partnerships is that customers need to pre-select vendors (and renounce bidding of custom parts if that is in the way) so they will help their teams develop products, as the following leading companies do:

"Toyota selects suppliers early in the product development program, guarantees the business, and incorporates them as part of the extended product development team."

"At the formal start of the design concept phase, Philips people representing all functions involved in design, manufacturing, and supplier relations, as well as a manufacturing line work and a buyer, meet with their counterparts from the suppliers."

At Motorola, bringing in vendors into the team has proven to be a major contributor to a project's success.

Hewlett-Packard's policy is that vendors should be willing and able to perform all three of the following roles: (a) help design the product; (b) build quick-turn prototype parts and parts for short-run projects; and (c) build production units. Companies should avoid changing vendors as volumes rise because this adds new sources of statistical variation at the worst time for unexpected problems to occur.

So both customers and vendors should be striving to reap the benefits of vendor/partnerships. Customers may first need to abandon counterproductive policies that discourage these relations, such as bidding custom parts and incentives that encourage bidding. Then they need to establish a policy of pre-selecting vendors of custom parts and expecting them to help design their parts, build quick-turn parts, and build the production units. If customers can't do this as a "leap of faith," they will have to first launch an initiative to quantify overhead costs, which will then prove beyond a shadow of a doubt that vendor/partnerships do save money on a total cost basis. There are quick and easy ways to do quantify overhead costs; see the article "Measuring Total Cost" by Doug Hicks, CPA, at www.HalfCostProducts.com/total_cost.htm.

Although it is the customer who normally initiates vendor/partnerships, vendors can encourage vendor/partnerships by:

• Offering to help customers design the parts that the vendor will be building, in exchange for the business.

• De-emphasizing bidding work and instituting a preference for working with customers that are welcome to vendor/partnerships.

• Educating customers (using the above points, the books quoted, or the web-sites cited) or recommend customers arrange training on Concurrent Engineering, which should also be attended by key vendors' representatives.

Editor's Note: Dr. David Anderson is a California based consultant specializing in training and consulting on Design for Manufacturability, Concurrent Engineering, Build-to-Order, and cost reduction. He is the author of "Design for Manufacturability & Concurrent Engineering; How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production." For more information, visit www.design4manufacturability.com, or e-mail andersondm@aol.com.