Jeff is the VP for Windchill Digital Thread. His team leads Navigate, Visualization, Windchill UI and Digital Product Traceability. Prior to joining PTC, Jeff spent 16 years implementing and using PLM, CAD and CAE at Industrial, High Tech & Consumer Products companies including leading the first Windchill PDMLink implementation in 2002. He was active in the PTC/USER community serving as Chair for the Windchill Solutions committee and on the Board of Directors for PTC/USER helping to bring voice of customer input together and create a community where people could network for tools and processes. Jeff attended Rensselaer Polytechnic Institute and Lehigh University.
What is an approved vendor list (AVL)?
The approved vendor list, or AVL, is a critical tool for modern manufacturers in the strategic sourcing of both goods and services. It’s essentially a compiled list of the vendors and suppliers approved by the company after rigorous vetting, from whom the company is authorized to purchase materials, parts, or support services.
Why is an approved vendor list important?
The AVL plays a mission-critical role in helping a company advance and protect its competitive advantage. It does this by imposing a layer of effective control that affects supply chain management, quality and reliability, production efficiency, compliance, and other domains.
The benefits of an AVL
As a powerful tool for the control and management of suppliers and the goods and services they deliver, the AVL has many benefits. In aggregate, they help control costs and drive enterprise and shareholder value.
Reduces risk
Risk reduction is among the most prominent and tangible benefits of an AVL. By virtue of the vetting processes applied, only vendors who have demonstrated stability and reliability are included. Supply chain disruptions like delayed delivery are reduced or eliminated, helping ensure continuity of operations and time to market.
Improves product quality
Working only with approved vendors gives manufacturers confidence in the quality of the services, materials, and component parts they purchase. This reduces the chance of defects and ultimately helps ensure the quality of the end product, and therefore its users’ experience.
Streamlines procurement processes
The AVL development process generally seeks to establish business relationships around a foundational understanding of delivery expectations, quality requirements, pricing, and other commercial terms. This existing documented framework can greatly streamline the procurement process, reducing redundant and repetitive commercial and contractual negotiations.
Saves time
The AVL reflects “known quantities” – that is, vendors whose offering, capabilities, and professional standards are well-understood. Therefore, upfront time that would otherwise be spent researching, assessing, and introducing new sources can often be eliminated. And because the AVL protects product quality, backend time needed for rework or servicing can be significantly reduced.
Better supplier relationships
Great businesses need great partners, and the mutual understandings and commitments reflected by the AVL strengthen approved supplier relationships. An AVL essentially defines a trust-based agreement, and that kind of trust allows for faster, more confident decision-making and execution.
How do you create an approved vendor list?
While the process for creating an AVL can vary somewhat for different manufacturers, if an organization is starting from scratch, the steps and stages captured below define an effective process framework.
1. Define approved vendor criteria
Codify very clear criteria for vendor evaluation, including target metrics or standards for price, delivery, quality, capabilities, and, if appropriate, alignment with corporate and cultural values.
2. Document current vendors
Use contracts, accounts payable records, and if necessary, a formal request for information (RFI) to compile a list of all vendors providing parts and services. Capture all relevant contact information, access to (or restrictions on) proprietary information, and how crucial the vendor is to the operation (“critical,” “important,” or “useful,” for example.)
3. Assign performance ratings
Based on criteria and track record, rate and rank your vendors. Remove any failing to meet the defined criteria or offer a window of opportunity for the vendor to meet criteria on which it may currently be failing.
4. Evaluate and shortlist new vendors
To the extent these initial steps result in supply chain gaps, conduct a search for replacement vendors who can fill those gaps.
5. Conduct on-site audits (optional)
If needed, visit the potential vendors sites to assess production capabilities and quality control processes, and potentially to gauge overall fit and team chemistry.
6. Negotiate commercial terms
Establishing standards and expectations in advance is central to obtaining the benefits discussed above – especially the time-saving impact. There may be foundational standards that apply to all vendors – universal 60- or 120-day payment terms, for example – as well as unique aspects specific to each vendor.
7. Finalize AVL, formalize the process, and communicate
Once the initial AVL is established, communicate its purpose to all stakeholders, along with instructions for use. This will include how to vet, add, or remove vendors according to the set criteria, as well as any exception allowances that may have been defined.
8. Continuously monitor and re-evaluate
An AVL is not a static tool but needs to continuously evolve according to changes within the company, among its markets, and of course ongoing vendor performance evaluations. Once the initial work of setting up and implementing the AVL is done, it has to be rigorously maintained and cultivated to remain useful.
What is the difference between an AVL and AML?
It’s worthwhile also to distinguish between the AVL and an important complementary tool in the manufacturer’s portfolio, the Approved Materials List (AML). As the name implies, the AML specifies what materials, parts, or components are approved by the purchaser for inclusion in its products. Materials on the list have generally been vetted to ensure they meet the company’s standards for quality and compliance. Vendors, therefore, must ensure that their deliverables meet all material criteria set by the manufacturer.
Final thoughts
A thoughtful, thorough, and well-maintained AVL, complemented where appropriate with an AML, helps the modern manufacturer protect its reputation, brand, and bottom line. This ensures that all participants in the supply chain measure up to the standards the company has set for itself to reach its goals.
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