American manufacturers spend as much as half their earnings on suppliers for goods and services. Procurement managers determine the best value opportunities for their companies after studying how technical, legal and operational factors will impact their organizations. They must consider internal, as well as external, buying opportunities. Here are key areas of concern for making cosmetic packaging purchases.
Cosmetic buyers evaluate suppliers based on a process that involves soliciting information, reviewing contract bids and discussing contract terms. Researching raw materials sold through commodities exchanges is another area in which buyers must gain skills and experience. Pricing, lead time, quantity and terms are some of the factors that procurement managers must consider before awarding a contract to a supplier. But the evaluation process must continue throughout the life of the contract.
New suppliers often attractive candidates if they are known for competitive prices and higher quality than market leaders. Key factors that may persuade buyers include low labor costs or import/export regulations that benefit the cosmetic packaging firm. Buyers should also be on the lookout for additional suppliers that can provide competitive bidding. They must also beware of unstable suppliers that run the risk of going out of business.
The more the buyer can reduce supplier disruption risks by avoiding unreliable vendors and pursue qualified suppliers, the more likely the cosmetic firm can achieve its goals. Another vital step in supplier selection is known as Operational Risk Management Science (ORMS) research. Asking for client references to check reliability and financial health of the supplier is an important step toward quality control and reducing unwanted risks.
Final decisions should also take into account the ability of the supplier to guarantee production deliveries that meet deadlines and overcome shortages. One way to clear up any doubts about the supplier is to visit their facility and observe operations from the staff to the equipment. In order to be absolutely sure about the supplier, the buyer may set up a meeting with one of their own internal engineers to meet with the supplier's engineers.
Once the buyer develops a list of pre-qualified suppliers, they may try to test out vendors with short-term contracts. The buyer usually takes the further step of requesting that suppliers provide information about their products and services. These requests come in the forms of:
In some cases long-term contracts may be awarded for individual items. At the same time, this experiment can lead to developing a supply base that can provide competitive bids for future contracting. After suppliers prove their reliability, then the procurement manager should award a long-term contract, since long-term relationships are more cost effective in the long run. The evaluation process can be very expensive and should be done sparingly in the big picture.
After contracts are awarded, whether it involves a sole supplier or set of multiple vendors, the buyer must continuously monitor the performance of each supplier. Most important in this process is tracking the cost and quality to make sure the cosmetic packaging firm benefits and can maintain an acceptable profit margin. Crucial to this monitoring is product inspection for defects. Over time the buyer needs to decide if the company would gain a better advantage by outsourcing certain items.
Before awarding contracts to cosmetic packaging suppliers, procurement managers must conduct thorough evaluations of both suppliers and their offerings. Part of the research involves identifying game-changing suppliers that have developed industry reputations for streamlining their businesses. It is essential that the buyer avoids offering a contract to suppliers with a history of weak performance and disappointing forecasts. The evaluation process can take several months before the buyer decides to award the supplier a contract.
Disclaimer:
The postings in this blog section do not necessarily represent Desjardin's positions, strategies or opinions.