Is Your PVC Supplier Part of Your Team?

By Michael Swiecicki, Lighthouse Point Associates Inc.

Selecting the right PVC manufacturer can be as confusing as trying to decide between eating at McDonald’s, Burger King or Wendy’s. With options to purchase PVC all over the globe, choosing the right manufacturer can be complicated or be as simple as basing your decision solely on price. Whatever path you decide to take, be cautious; because when problems occur, it can disrupt your entire business including your customer.

There are several key points that come to mind during the selection process, and each one needs to be answered before making your final decision. Is logistics an issue? Can you be assured they can meet your delivery requirements? Is price your only objective? Will they deliver a consistent quality product? Can they offer you attractive terms and conditions? These are just a few questions that you need to ask before signing on the dotted line.

Suppliers offer different services and resources that should be considered when making the final decision. Some vendors offer multiple products and access to technology. Others provide attractive financial incentives or inventory programs. These are all important things to consider, but separately one may be the deciding factor.

Whichever supplier you select should be viewed as a business partner that is held to the highest level because, as a partner, they should add value to your business. Do they have a good reputation? Are they trustworthy and accessible? Do they have good communication skills? Are they financially stable? Are their culture and beliefs in line with yours; and finally, are they giving you the quality, support and service to operate your business?

Before any negotiation begins, there needs to be clearly defined and measurable goals and objectives that both parties understand. It is also important that companies not be one-sided in their thinking and only focus on short-term goals. Instead, they should look at the win/win aspect and the potential for a long-term relationship.

This article is intended to offer you some guidance when selecting a supplier, taking into account several considerations for you to evaluate prior to signing a contract. Many companies have a tendency to underestimate the financial impact selecting the wrong supplier can have on their business. And in many instances, PVC does not get the respect and attention it deserves because it’s treated as a commodity.

Selecting the Right PVC Supplier

Selecting the right PVC supplier can be a tedious but rewarding experience; but when correctly evaluated, it will flow positive results to the bottom line. While this process will offer you some guidelines to follow, in the end, you must follow the path that makes you most comfortable.

Request for Proposal (RFP) Process

• Begin by forming a project team

• Set requirements and success metrics

• Goals and objectives must be reasonable and measurable

• Draft an RFP using best practices/perform due diligence

• Negotiate using a win/win philosophy

• Complete decision analysis

• Monitor the process using continuous process improvement

• Determine and document the selection criteria

• Determine what process the evaluation will follow

• Include key dates, where possible

• Include language stating any outside pressure to influence the selection process will automatically lead to a vendor’s proposal being eliminated

It is critical that the RFP process be very clear and concise in terms of the factors being evaluated. Considerations should include:

• Functionality

• Technology

• Project management

• Staffing requirements

• Costs (upfront and ongoing)

• Cost of integration

• References

In today’s business environment, it is no longer practical for one person to be adept in all matters of purchasing, especially if they are not familiar with the product or process. It’s recommended that other specialists be considered when forming a project team to complete the purchasing analysis and vendor negotiation, which are part of the RFP process. These specialists include:

• Finance

• Legal to review the contract

• Quality assurance

• Marketing

• Purchasing

• Technical product/service specifications

• Department’s that use the product on a daily basis

• Supplier (to be included at the appropriate time)

It is critical that your RFP selection process follow certain guidelines. The RFP should clearly define from the highest level a detailed, step-by-step evaluation including the defined criteria for passing or failing the product.

This method will help both your company and the supplier serve your needs during the selection process. It is very important that there be a communication feedback loop during the entire process, thus keeping vendor complaints to a minimum, including the issue of not fully understanding the selection process. This needs to be clearly defined prior to the start of the qualification process. The selection process should be fair and equitable to all suppliers.

Utilizing Templates

Templates should be utilized to insure that all data is captured in a clear, concise and consistent format. This will also be a benefit when reviewing the results of each supplier participant. It will also alleviate confusion between suppliers and the project team when presenting the final outcome. It is important that the results of the tests be shared with the supplier so they clearly understand why and how you reached your final decision.

Additionally, all relevant communication pertaining to the selection process should be recorded throughout the selection process. This information will be a critical component if challenged by a supplier. It is not too uncommon that a communication breakdown occurs, negatively impacting the process. Having a formal process will reduce or even eliminate this issue.

These are just a few recommendations that come to mind, but there are several others that may be considered as well. It’s important to note that the processes not become too wide in scope, therefore causing confusion and a lack of interest from the project team. In addition, if a company policy prevents a supplier from competing for any reason, they should be notified in writing immediately.

Project Team

Establishing a PVC project team can be a rewarding and beneficial experience for both the Company and its members. Involving and empowering the very people who use the product creates a make-it-happen attitude and removes the excuse that “management forced us to use the product.” Empowering your people in the decision process insures they are part of the solution and not part of the problem.

In addition, including the supplier as part of the team eliminates confusion and delays getting the right PVC into your plant. It is critical that a communication feedback loop be an essential part of the overall process, especially when a program is starting. Far too often the PVC supplier is blamed for non-conforming material because the card manufacturer failed to include them as a partner during the qualification process.

In the end, having all the right people on the team will have a positive impact. It’s been my experience that the majority of suppliers would welcome this type of participation. Project teams are an essential part of any major company decision because they are empowered to utilize all of the company’s available resources, including access to funds, if required.

A product team will also enhance the customer-vendor relationship. Having each potential vendor meet with the selection team will allow for a two-way dialogue, giving each vendor equal opportunity to present their product. It’s important that the team understand that management is sponsoring the project and that specific documented guidelines are adhered to including a clear goal, objective and timeline for completion.

• Once the members of the team are selected, the team should be briefed by the sponsor (preferably the president of the company via a kickoff meeting)

• Define the role of each member of the team (Team Leader, Facilitator, Scribe, Timekeeper, etc.)

• Ensure the negotiation team understands cost and pricing data that supports the issues at hand

• Coordinate with legal counsel on accepting negotiated terms and conditions

• Define the scope of the project (What are the limitations of the team?)

• Define the goals, objectives and timeline for completion

• Provide a written solution including specific benefits (objectives) for the project

• Ensure your RFP defines the process your selection will follow

• All selection data should be captured in templates

• All communication with vendors should be captured/documented

• Do not allow the vendors to increase the scope during the selection process

• Include your organization’s internal audit department upfront in the process

It is important to note that a selection team must judge whether a project is more technical, thereby requiring experienced technical engineers vs. financial or operations personnel. In other instances, the project may just require a cut and dry decision where its best to leave the negotiations to the purchasing team who deal with these decisions on a day-to-day basis. No matter what the situation, it’s always beneficial to have feedback from people who work with the product.

It would be very misleading not to mention that price does and should play a key role in selecting a vendor; but, there are many other factors that need consideration because PVC is not created equal. Specifying copolymer, homopolymer or even the surface finish is just a small part of the overall selection process.

It is recommend that you do not begin negotiations by discussing price. Some suppliers can be very sensitive to lowering price but may change their position on other factors. Remember that everything is negotiable and starting a dialogue with other subjects can start the ball rolling without getting into immediate conflict by discussing price.

Another important factor that sometimes winds up under the radar is an assessment of the supplier. Are there documented quality control processes? Are they ISO certified? How closely do they monitor the calendar? Take time and visit their facility and meet the people who are part of their product team. It is recommended that you create your own checklist of issues you feel require attention and make sure they are answered to your satisfaction. With proper planning and communication, you will have a partner who understands your business and will deliver a quality product on time and with exceptional service.

Select the Right Negotiation Approach for Your Business

Trying to select a negotiation approach should be determined by how well you know the supplier and your assessment on their threshold of handling your demands. One approach is the take it or leave it discussion. It’s direct but not very effective for a long-term relationship. Another approach, which is much more reasonable, is a collaborative effort between two parties, which leads to a more positive exchange.

Other Negotiation Points:

• Terms and conditions

• Penalty clauses

• Warranties

• Service contracts

• Delivery schedules/timeliness

• Discount programs

• Product liability

• Shipping costs

• Length of contract

• Performance metrics/quality

• Payment terms

• Credit arrangements

• Consignment

• Logistics

A systematic process will not ensure success; but it will give the project team their best chance of succeeding. When the process is left to ad hoc measures, it rarely generates the desired results even if a solid selection is made. It is very important that, given the financial impact that is on the line, only a direct hit should be acceptable.

Project Steps

• Draft RFP

• Identify vendors for solicitation

• Include all requirements and success metrics to elicit a proposal

• Establish all evaluation criteria and include specific questions to test these criteria

• Perform additional financial due diligence

• Negotiate

• Assess all items, other than price, for negotiation

• Select a negotiation strategy

• Complete a decision analysis

• Identify all alternatives

• Evaluate all “critical” decision criteria

• Evaluate all other decision criteria

• Select vendor

There are many more considerations that must be included in making your final decision. This article does not mention material test methods, but focuses on a process that will give you the best information to make your decision.

Competing for market share includes how effective you are at pricing your products, because price plays a key role in determining if you win or lose. Please remember that price by itself should not be the deciding factor when making your selection. If you did not include the other variables like scrap rate, rework, lost opportunity and customer satisfaction, price may or may not be the issue.

Conclusion

Selecting the right supplier is like a marriage. Choose incorrectly and you could be entangled in a costly divorce. For this reason, it is important to work with a vendor who brings value to your company. Every aspect of your relationship should be detailed including a written plan to deal with obstacles that may arise such as a price increase or a disaster recovery plan.

If you view PVC as dollar bills moving from one operation to another, I believe your selection process will take a higher level of importance and in the end your business and customers will be much happier.