Key Questions When Assessing Supplier Health

A recent article over on Industry Week that indicated that it is time for a supplier health check made a good point — Tier 1 suppliers may need to expand globally in the high-growth markets more quickly than they had originally anticipated, and manufacturers need to know if their Tier 1s are up to this challenge. In order to make this assessment, they have to do a detailed supplier assessment of their current Tier 1 suppliers, which should ask, at a minimum, these questions:

  • Does the supplier have access to capital to retool and meet an increase in demand?
  • Does the supplier have the talent to support a ramp up? Or did they do significant layoffs?
  • Does the supplier have the leadership to accomplish a ramp up? Or was the management team significantly reduced by layoffs or attrition?
  • Does the supplier have the right techology to support new systems and processes?
  • Does the supplier have the right financial controls in place to support a larger operation?
  • Is the organizational structure suitable to expansion?
  • Does the supplier have a viable business plan to support an expanded operation? Has it been executing against the plan?

If any of these questions yield negative answers, the supplier might need to be replaced. The alternative, if the supplier is critical, is for the organization to take an ownership position in the supplier and get it back on track. Either way, the supplier base needs to change.