5 Big Reasons Your Company Needs Supplier Assessment

Supply Chain Disruptions Can Seriously Impact Long-Term Shareholder Value, Profitability, and Share Price Volatility

  • 7% Lower Sales Growth

  • 11% Higher Cost-of-Goods

  • 14% Higher Inventory

  • 10.5% Decrease in Stock Value

  • 13.5% Increased Share Price Volatility

“Proactive and thorough due diligence of critical Suppliers is a new necessity in the global supply world; where distances can be great, supply complexities can be even greater, and consequences of poor supply can be devastating to the bottom line.”

Could These Types of Disruptions Happen to Your Company?

Components Manufacturer

This defense industry precision machining company had to accept the return of a large number of machined components because they failed certain quality standards. The failures occurred not in production, but in the quality of the incoming raw materials. The failures were significant factors in the customer awarding subsequent years contracts to company’s competitor.

While the company had an incoming inspection process, they had no way to tangibly and proactively assess their metal Supplier’s manufacturing process. This resulted in the supplier certifying batches of material as meeting metallurgical standards, when they did not. 

The company’s failure to assess the Supplier’s quality management process resulted in them accepting the Supplier’s faulty certifications.

How GDI would have probably rated this Supplier?

Automotive Company

This company’s sole source chassis Supplier was on the verge of bankruptcy in 2001. The Supplier refused to ship chassis to the company without additional advanced payments, ultimately forcing the company to buy the Supplier to resolve the problem.

The Supplier was not economically viable.

The company should have assessed the Supplier’s economic viability years before the issue became a problem. This would have allowed ample time to dual-source the chassis.

How GDI would have probably rated this Supplier?

Automotive Company

After the 1995 Kobe, Japan earthquake, virtually all of this company’s assembly plants in Japan had to shut down due to an inability to get brake-shoes from their sole-source Supplier.

The company had trimmed its brake-shoe supply-chain to one Supplier without fully understanding the risks.

The company failed to understand the Supplier’s catastrophe management capabilities. This should have been assessed before a supply agreement was negotiated.

How GDI would have probably rated this Supplier?

Electronics Manufacturer

In 2000 and in 2001, the entire world-wide electronics industry experienced a shortage of tantalum capacitors because a leading PC manufacturer began hoarding these devices at the same time new applications for tantalum capacitors developed in cell phone design. The company was forced to shut down entire product lines in their contract manufacturing business.

Supply effectively evaporated overnight because the company did not understand the world-wide growing need for one of its critical components. This forced the company to redesign the 25-cent capacitor and replace it with a $1.25 alternate part. This resulted in a five-fold increase in capacitor costs as well as a significant shipping shortfall in 2000 and in 2001

If they understood this, they could have begun their redesign efforts sooner. Perhaps they could have discovered an alternate part that was less expensive.

How GDI would have probably rated this Supplier?

Telephony Manufacturer

In 2000, the company failed to ship in excess of $1 billion in cell phones because a fire at a semiconductor Supplier’s plant seriously disrupted the company’s inbound materials and production.

The company had trimmed its Supplier base and did not establish appropriate safety stocks to buffer emergencies in a buffer-less manufacturing environment. Further, the company did not insist that their Supplier maintain consigned inventory stocks in a building separate from manufacturing.

The company failed to understand the Supplier’s internal manufacturing points-of-disruption. If they did, they could have rationally determined the safety stocks needed to adjust for the quantified risks. This should have been assessed before a supply agreement was negotiated.

How GDI would have probably rated this Supplier?

Automation Company

The company had to shut down an entire factory and lose over two-weeks of production because its power supply Vendor was suffering cash-flow problems and could not pay their downstream Suppliers. This in turn led to a shortage of critical components to their factory and ultimately to missed deliveries to their customers.

The company reduced its power supply Vendor base to two Suppliers. The largest of the Supplier’s had economic viability issues. The smaller of the Suppliers had ramp-up difficulties. The result was a significant and lingering shortage of parts, which ultimately resulted in market share loss.

The company failed to understand the weaknesses of each of these Suppliers. Had they thoroughly assessed each of these Suppliers, they would have adjusted safety stocks and perhaps given the smaller Supplier more business in order to provide them with an incentive to scale-up their production capabilities.

How GDI would have probably rated this Supplier?

GDI’s Comprehensive Supplier Performance & Risk Assessment Methodology

Completed in only 3 weeks!

A thorough Supplier assessment, conducted by GDI Consulting & Training Company, requires a team of up to four highly-skilled analysts over a three-week period in order to execute a structured (and repeatable) process in roughly the following manner:

One week of preparation and analysis of off-site information including Suppliers financial statements, customer service data and available public data.

One week (six days) on-site analyzing Supplier-specific performance in critical functional areas. Numerous structured observations relating to the triple risks of Supplier Delivery Reliability, Product Delivered Quality and Supplier Economic Viability, are developed.

One week off-site drawing conclusions from the previous 2 weeks of data gathering and analyses efforts. A final report is developed, presented and reviewed with your management.

The GDI Comprehensive Supplier Performance & Risk Assessment practice draws heavily from nearly thirty years of manufacturing consulting experience, from numerous formal fact-driven methodologies, from our successful operational due-diligence practice, and from proprietary software that provides automation to our methodologies. It is this automation that provides us with breakthrough capabilities, allowing us to complete a thorough and critical assessment of any Supplier’s performance and any risks in just three weeks.

Watch this E-Learning Program to learn more about our World-Class Supplier Assessment Methodology!

3 Levels of Assessment… Each with a Specific Purpose!

Up to 19 Specific Sources of Supply Risks Within Your Corporate Supply Chain

Fixed Price – No Surprises!

Level 1

Minimum Assessment

  • 1. Supplier’s Economic Viability
  • 2. Supplier’s Production Processes, Methods, Equipment, Tooling & Facilities Capabilities
  • 3. Supplier’s Management of Product Quality
  • 4. Supplier’s Manufacturing Planning & Scheduling Capabilities
  • 5. Supplier’s Inventory Management Capabilities
  • 6. Supplier’s Purchasing Management Capabilities
  • 7. Supplier’s Ability to Integrate with Customers
  • 8. Supplier’s Logistics Management Capabilities
  • 9. Supplier’s Customer Service Capabilities
  • 10. Supplier’s Leadership & Critical Support Teams Capabilities
  • 11. Supplier’s Catastrophe Planning & Management
  • 12. Supplier’s Delivered Cost Information, including “Should-Cost” & “Could-Cost” Insights

Level 2

Comprehensive Assessment

  • Level 1 Assessment plus…

  • 13. Supplier’s Product & Process Engineering Capabilities
  • 14. Supplier’s Data Integrity & Information Sharing Capabilities
  • 15. Supplier’s Suppliers Capabilities
  • 16. Supplier’s Impacting Supplier Legal Issues
  • 17. Supplier’s Human Resource Issues

Level 3

Progressive Assessment

  • Level 1 & 2 Assessment plus…

  • 18. Supplier’s Corporate Citizenship
  • 19. Supplier’s Corporate Governance & Ownership

Each Assessment Yields FOUR Comprehensive Reports

This book summarizes the Supplier’s risk profile and describes how the Supplier scored in each of up to 19 risk categories. A summary of our recommendations for modifying the terms of conditions between our client and the Supplier is also provided.

This book provides an in-depth analysis of the Supplier’s economic condition and risks driven from that condition. We provide this as a separate book due to the confidential nature of the information.

This book provides the details behind our assessment in each of the 19 risk categories. Within each category, we describe the diagnostic routines we executed, the methods of interpretation and a summary of critical risks.

This book summarizes our findings in a manner that the Supplier can understand and build an improvement plan from. Since we compete a thorough analysis of the Supplier, it seems only reasonable that the Supplier should be left with a summary of their risks and some suggestions for making them a better Supplier to our client.

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Our professionals are ready to answer any questions you may have on GDI Supplier Assessment Practice. We take great pride in our expertise and look forward to hearing from you.


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