Kevin Teehan, vice president of global supply chain with HID Global, discusses how the market leader in products and services for secure identity forces "deep" relationships with its suppliers that go well beyond the criterion of price.

In determining where to source product around the world, price is just one important criterion. "It's really about total cost of ownership," Teehan says, citing the cost of materials, transportation, warehousing and taxes as other key concerns. No low-cost sourcing strategy can afford to skimp on product quality and brand reputation, he says.

HID Global seeks to build long-term relationships with suppliers, based on more than cost. That emphasis on a "holistic approach" helped the company to get through the recession of 2009, Teehan says.

Other aspects of a successful supplier relationship management strategy include strong communications, the use of supplier scorecards, and quarterly discussions about performance. In addition, HID Global turns the tables and asks suppliers about how it's performing as a customer. "It's critical to have that path open," Teehan says.

Equally important is having one's own personnel on the ground in key sourcing areas. HID Global maintains a quality leader at each site. Recently it added an operations leader for all of Asia, who can deal directly with suppliers in the region.

The company is looking beyond Asia to additional areas for low-cost country sourcing. Brazil and Eastern Europe are showing particular promise. Teehan says HID Global is partnering with local individuals who have an intimate knowledge of markets in those regions.

To an extent, the buyer's size and degree of leverage determine the willingness of a supplier to forge something deeper than a standard commercial relationship. But any buyer can work to improve its alignment of suppliers, Teehan says. There's always a need to balance the advantages of supplier consolidation with the risks of having just one or two vendors for a given product or component. So companies need to keep close watch over the health of their supplier base.

"Supply chain is risk management," says Teehan. "We're constantly having that healthy level of paranoia about the next thing that's going to come over the horizon."

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