Library
Supplier Associations
from The Lean Toolbox, by John Bicheno. Available from PICSIE in Britain.
The supplier association concept is an extension of the supplier partnership concept. Supplier associations are “clubs” of suppliers who form together for mutual help and learning. Members may all supply one company, or are all from one region serving different customers. The associations seek {o learn best practices from other members or to gain competitive advantage and/or productivity through cooperation. In Japan, Supplier Associations are known as kyoryoku kat.
There are three types of association for operations (to gain cost, quality, delivery improvements), for purchasing (to gain from economies of scale), and for marketing (to gain from synergistic practices or by pooling expertise).
Peter Hines defines the former type as “a mutually benefiting group of a company’s most important subcontractors brought together on a regular basis for the purpose of coordination and cooperation as well as (to) assist all the members (by benefiting) from the type of development associated with large Japanese assemblers such as kaizen, just in time, kanban, U-cell production, and the achievement of zero defects.”
The aims are (following Hines) are
to improve skills in JIT, TQM, SPC, VE/VA, CAD/CAM, Flexibility, Cost
to produce a uniform supply system
to facilitate the flow of information
to increase trust
to keep suppliers in touch with market developments
to enhance the reputation of the customer as a good business partner
to help smaller suppliers lacking specialist trainers and facilities
to increase the length of relations
to share developmental benefits
to provide an example to subcontractors as to how they should develop their own suppliers.
The company-sponsored variety may benefit from the parent company’s expertise and resources, often given free. The regional variety simply shares resources such as training seminar costs and training materials, but also will share expertise by lending key staff experts to other member companies for short periods. The regional type may be partially funded from government, and may have a full-time facilitator. In Japan it is considered an honour to be asked to join a prestigious supplier association, as run by a major corporation.
Joint projects, assistance in areas of expertise, development of common standards, training, courses, an interchange or secondment of staff for short periods, benchmarking, hiring of consultants or trainers, factory visits within the association, joint visits to outside companies or other associations, are all common..
The type of supplier who may join an association is not necessarily dependent on size - in fact, larger suppliers with their own corporate resources may benefit less. Also, suppliers of common or catalogue parts may not be invited. Suppliers that are usually targeted are those dependent upon a parent for a significant (perhaps 25% or more) proportion of their business. The purchasing department of the parent company often plays a key role, but some supplier associations have been set up on the initiative of lower tier suppliers or academic groups (such as the Cardiff Lean Enterprise Unit).
Often, a supplier association will hold an annual or biannual assembly to look at performance figures. Ranking of suppliers by different measure is presented. This is often sufficient motivation for lower ranking members to ask for help or to take action on their own.
A supplier association usually will have its own set of rules and regulations and be run by (perhaps) a retired senior engineer from the parent company or increasingly by a full- or part-time coordinator from one of the companies. Support staff are seconded for short periods, depending on projects and needs. Often member companies pay a subscription fee. At the top level, the association will have a steering group at MD level, which meets perhaps annually. Some functional directors may meet quarterly. Engineers and front line staff may meet more frequently or may form temporary full-time task groups to address particular problems. Some associations consider social events to be important icebreakers. Within the association there may be a functional split by product category, or by area of concern (cost, quality, delivery, production planning, etc.)
Purchasing Associations
A variation is an association that bands together for mutual purchasing advantage, gaining from improved quantity discounts and greater “clout” than a single company can bring to bear. A database of required materials and goods is usually maintained, sometimes by a third party. These have been successful in Australia, often on the initiative of a purchasing consultant. A purchasing association does not necessarily go in for all the activities of an operations association, and may be confined to purchasing staff.
A type that has become fairly common in JIT plants is where a contractor takes on the responsibility for the inventory management and supply of numerous small items. This is a form of “vendor managed inventory”. Because such contractors operate in different regions they may be able to gain quantity discounts some of which are passed on. Typically such a contractor supplies one large plant, but there are variations where a contractor supplies numerous small firms in a region. This is almost like having a co-operative shop, except that the contractor is a professional inventory manager and re-stocker.
A Marketing Association may have characteristics similar to “Agile Manufacturers”. That is, they pool resources for synergistic gain or to win large contracts. Such groupings, often known as consortia, have been common in defence, computing, and construction.
Further reading
Peter Hines, Creating World Class Suppliers: Unlocking mutual competitive advantage, FT/ Pittman, London, 1994. ISBN 0-273-60300-0
For a case study on the establishment of a supplier association in Wales see
Dan Dimancescu, Peter Hines, Nick Rich, The Lean Enterprise, AmaCom, New York, 1997 , ISBN 0-8144-0365-4