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Effective Supplier Programs
How well do you know your vendors?
by Dan Zaura
When shopping for big-ticket items such as autos, furniture, household appliances and electronics, any smart consumer will do some research before actually making a purchase. A shopper may spend endless hours seeking just the right items at the best prices because he or she has been “burned” by bad purchases in the past.
Human nature also dictates that we desire a certain comfort level in items purchased regularly. For example, you would rarely question items purchased at your favorite grocery store because you’ve developed a “trust” that the store would only carry goods from reliable vendors. Even on rare occasion when a product is found to be inferior, a store would typically honor your complaint either through replacement or a refund.
The common element here and in supplier relationships for businesses is TRUST. However, in both personal relationships and in business, trust must be earned.
Choosing Your Suppliers
We all know the old saying “garbage in, garbage out,” which is a simple way of saying that your end product is only as good as the quality of the material going in. In the food business especially in restaurants the attitude should be that the food is at its freshest when first received. You cannot make it any fresher than when it first arrives, and so you need to make sure it is at its best upon receipt.
Purchasing materials that are used to make your products must be carefully controlled by establishing close working relationships with your suppliers and provide them with high standards, as well as providing feedback as to their performance. Suppliers of raw materials must only be selected after following appropriate assessments and approvals.
Selecting the Right Vendor
A good supplier relationship starts by defining what you require of that supplier to be considered “approved.” The first step is telling a potential supplier exactly what you want in the form of a purchasing specification. This is important, especially on critical requirements.
Prospective vendors can, by reviewing the specification, determine if they are able to supply required items to you. This may eliminate certain vendors. Occasionally, there may be one or more items in your specification that cannot be met, and negotiations, regarding any possible changes to the specification can take place. The potential supplier would normally submit a “sample” to you as a representation of the product you would be buying. This sample should be analyzed for specification compliance.
However, product specifications should not be the only criteria for approval. Based on food industry standards and practices, your supplier-approval program should require the following:
Quality Systems Compliance: Your supplier must have its own quality system in place, which must meet certain industry standards. Auditing firms have the expertise to review these programs for their existence and effectiveness.
Programs that are expected to be included in the supplier’s quality systems include: An organizational chart; job descriptions for all the positions on that chart; self-inspection programs; incoming goods and trailer inspection programs; raw material and finished product analyses; outbound trailer inspections; written cleaning procedures; a master sanitation schedule; a documented recall program (including the ability to perform mock recalls); a HACCP program; a written quarantine policy; allergen control (if necessary); a policy regarding how to manage rework; water testing records; procedures regarding handling regulatory audits; a customer complaint program; a safety committee; and proof of training for both new and tenured employees in areas relevant to your product. Also included should be the presence of a formal pest control program, records of cooler and freezer temperatures (if applicable), and a preventive maintenance program.
Third-Party Audits: In addition to quality systems compliance, suppliers must also be willing to have their facility inspected by an independent auditing firm or agree to allow your company to send in an auditor. The purpose is to assure that the vendor has demonstrated compliance with food safety and sanitation regulations and appropriate codes of good manufacturing practices (GMPs). This will determine whether or not the facility is clean, well-maintained, has appropriate operational procedures in place, and is free of pest activity. The audit report issued will include an overall grade or rating, and that supplier must meet a certain minimum standard rating to be considered approved.
As an alternative, many companies will require their vendors to fill out a comprehensive survey about their operation, similar to a self-inspection form. This is used in cases when an external auditor or someone from your company is difficult or impractical. This can also be used for highly reputable vendors who supply to other companies and have a respected “track record.”
Regulatory Compliance: The supplier should also demonstrate that they comply with all local, state and federal agencies. This can be proven by reviewing of any regulatory inspections on file.
Specification Compliance Evaluation: Your potential supplier must agree to undergo all necessary evaluations so that they can consistently meet your product requirements, including specification changes that you may require. This can be done through sample exchanges or through the use of an outside lab to test products periodically for specification compliance.
Certificates of Analysis: Your supplier should be able to provide you with certificates of analysis on your purchases. This is an assurance from the supplier that it has tested your product prior to shipment, and specific test results were obtained. This is different from a “guarantee” in that a certificate of analysis documents test results specifically for that product and does not imply that the results are good or bad. A true certificate of analysis may contain unfavorable test results for you, but not for another customer.
It is also important that your supplier agrees to include all testing that you may require, such as microbiological tests, certain chemical tests, pesticide information, as well as other parameters. Many companies also require that each supplier provide a “continuing guarantee,” which typically is a general agreement that all product shipped to the customer will meet all local, state and federal requirements, in addition to meeting customer standards. Guarantees do not contain specific information about the customer’s products.
Returned Goods Policy: It is essential to determine what the prospective vendor’s policy is regarding returning product if it is found to be unacceptable. This should be specified as a requirement prior to approval.
Supplier List and Performance Evaluation
Once your company has established and implemented its supplier-approval program, an actual “approved supplier list” must be maintained and used for all raw material purchases. This approved list should name all vendors, including suppliers of raw materials, and food contact packaging, as well as services affecting food safety and quality (i.e., the pest control company). Only vendors from this approved list should be used in buying any commodity for your business. For emergency situations, procedures should be in place outlining a process for buying from “non-approved” vendors.
Once you have determined who your suppliers will be, a system should be in place to measure the vendor’s overall performance in the supplying of their goods and services. This can be done through a supplier history file or an actual rating system. Feedback to these suppliers is important. It is recommended that routine feedback on the vendor’s performance be provided, rather than only when a problem arises. All companies like to know when things are going well, and ongoing dialogue leads to better supplier and customer relations.
Complaints, Corrections and Communication
Finally, things do not always go smoothly, and you need to measure your suppliers’ ability to handle complaints, returns and implement corrective actions. Any such occurrences should be documented and included as part of your supplier performance evaluation.
As mentioned previously, the element of trust in supplier-customer relationships must be earned. In the food industry, trust is earned by knowing your suppliers well, having specific knowledge about their operations, and having open communication with them. Maintain a good, healthy relationship with your suppliers by informing them regularly about their performance even when things are going well, just as you would when problems arise.
Dan Zaura, a HACCP and NFPA-certified auditor, is a senior consultant with ASI Food Safety Consultants. Reach him at 800-477-0778, ext. 113.