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Should Approved Vendor Lists Be More in Line with Design Cycles?

Despite pervasive emphasis on “faster, sooner, better,” companies that have multiple design cycles a year only update their approved vendor lists on an annual basis. Maybe it's time to rethink this.

According to joint research done by Design News and Exploration and Insights in 2014, 67% of companies have design cycles of 3-12 months. The remaining 33% of survey participants are almost evenly divided between design cycles requiring longer than a year and those taking less than three months. Regardless of their length, we can be sure all of those teams are looking for ways to shorten them, without sacrificing quality or functionality, so that they can be first to market and get the greater share of customers.

While the need to speed up design cycles is top of mind today, it is not a new initiative. In fact, 20 years ago, Design News published what you might call a “multi-generational design engineering retrospective.” As stated in “Engineering Megatrends,” published on Aug. 28, 1995, “Since the first caveman decided to capitalize on his best idea for a new club, businesses have operated on the principle that the first to get to market owns the market — at least for awhile.” With increased competition from all corners of the globe, and the nearly universal consumer fascination with having the latest, most innovative products, cutting time to market is now a critical element of competitive advantage.”

Despite this pervasive emphasis on “faster, sooner, better,” the same organizations that have multiple design cycles a year only update their approved vendor lists (AVLs) on an annual basis.

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There is no right answer for how often an AVL should be formally reviewed, but there should be a connection between the pace seen in the rest of the design effort and list updates. In addition, the trends seen in other areas of the business, such as the pressure to shorten design cycles over time, should influence the update schedule for the AVL in the same direction.

While having an AVL is a convenient way to manage frequently used sources of supply without specific volume commitments, an efficiently managed list is easier to reference and will better represent the company’s actual spending patterns. It is the information and decisions recorded from each project that create the need for updates. Since all project teams can be expected to reference the AVL, it should always reflect the most up-to-date information available.

Even the companies with design cycles of approximately 7-12 months, where an annual AVL refresh might seem reasonable, have multiple projects going on simultaneously. Assuming their timelines are staggered, more than three projects may be affected by something as infrequent as yearly vendor evaluations. In order to ensure that everyone has access to the most up-to-date information about suppliers before a sourcing decision is made, two things need to happen with greater frequency: updates to the list and referencing the list for updates.

Updates need to be made quickly after they are confirmed — especially if they are likely to affect the decisions made by other project teams. The more complete the AVL is, the more important the updates are. While new representative contact or supplier website information is administrative in nature, an update to payment terms could change the cost equation in such a way that it tips the scales in favor of a supplier or against them.

The other side of this, of course, is that project leads need to get in the habit of checking the AVL more than once per project. It is natural to consult the list at the outset to get relevant supplier names and contact information, but checking again before eliminating a supplier from contention or before making a final contract award decision may represent a significant opportunity for impactful change that the project team would have missed otherwise.

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In addition to updating and checking the AVL more often, companies should not underestimate the importance of the gatekeeper of the list. Someone has to own the overall list, overseeing updates and new listings. While an overall, regular review of the AVL is, of course, a good idea, someone should also be looking for overlap in between refreshes, communicating new information to individuals and teams that will be affected but don’t necessarily know to look. The better and more active the ongoing management of the list is, the less time and effort will be required at each refresh.

Having an AVL is a great first step toward a better, more accessibly managed supply base. Given how important the information on the list is, there should be a clear connection between the update process and the design work that depends upon it. The timing of the updates doesn’t need to match that of design cycles, but if there is a benefit to shortening the time to market, you can be sure that there is an advantage to increasing the priority of updates to the AVL as well.

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Kelly Barner is the co-owner of Buyers Meeting Point, an online resource for procurement and purchasing professionals. She has been an industry award-winning supply management practitioner and consultant, and is now an independent thought leader and author on procurement, sourcing, and purchasing. She is co-author of Supply Market Intelligence for Procurement Professionals: Research, Process, and Resources. Kelly earned her MBA from Babson College.

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