BUYER MANAGED SUPPLIER SYSTEM Part II

In 2012, i wrote an article in this blog about B.M.S - acronym for Buyer Managed Supplier System.

First of all, isn't  all suppliers are managed by the buying team to ensure conformance and reach the expected performance all organization strive for? Why this is different from the convention?

My answer was, you damn right, there is no difference and you are also wrong because in B.M.S, buyer take the challenge to develop a supplier from ground Zero and against all common convention, the procurement management choose a supplier which do not fit at all.

If an audit is carry out, this type of supplier will have almost nothing in the system you expect them to be.

- ISO standard? Zero
- Quality system? Almost do not exist beside them knowing this is OK and that is Not OK bases on "feel"
- Production method? Let visit a farm in Timbuktu which have some level of standard, just maybe
- Cost? EXCELLENT! Perfect!

When the west desired cheap product in the 1980s to early 2000s, they procured many products from country like China and Far East. Unless they set their own plants there, and thus have a real system in place, let think how the procurement management function.

B.M.S is still valid till today and it take a lot of collaboration effort, partnership and micro management system in place.

I am not telling you out there that this system is useful for all spectrum of industry. Neither am i saying it is not impossible. There are RISK involve.

It can be useful for non critical industry or item. Definitely not for spaceship or part which put life at risk.

In this system, organization use cheap labor and cheap cost of product to their advantage and it involve tedious works and follow up and meetings.

If we inspect the 7 profile of supplier, this kind of supplier will be a Newbie or a poor Follower.

Buyers will have a high upper hand as the party most needed this collaboration will be the supplier as your volume and value will be high.

Supplier development will be the key strategies and focus on the performances, quality and relationship, the three key element of crucial supplier management but in that particular order.

Procurement team are hard press all the time for lower price, highest quality standard and production line have the minimal line stoppages. Achieving this from established suppliers on quality and delivery performances will not be an issue but the purpose of business it to make profit and sadly the demand for higher margin and lower purchasing cost to consumer is the only consideration.

With B.M.S, the function of R & D lies on the buying organization. The setting up of process and quality control are also decided by the buying team and this includes the delivery deadline. Supplier will be monitored closely and reporting from suppliers to the buying team will be like a production department sending report to top management.

The key principal of a B.M.S system is as following:-

a) Cheap source of product
b) Quality are determine via close monitoring, monthly to annual auditing, third party inspection
c) Close reporting of information like  rejection rate, output, material quality report on daily to weekly basis
d) Costing of products are jointly developed and in some instances, prices are predetermined by buyers

Do not confuse this with sweat shop strategy, this is unethical and cautious to the buyers to ensure the cost of production do not translate to a sweat shop phenomenon.

To ensure this do not happen, ethical standard to be jointly develop from minimum acceptable wages, working hours, rest day and employee living condition.

It is not easy to manage but it is  workable.