What Is An Approved Manufacturer List (AML)?

The need for modern manufacturers to work concurrently with multiple suppliers is increasing. This is especially critical for complex or highly variable products, whose supply chains may include many suppliers, and be widely distributed geographically. Modern manufacturing supply chains are most often international in their reach, adding complexity to the dynamics of supplier management.

What is an approved manufacturers list?

The Approved Manufacturer List (AML) is a mission-critical tool for many leading manufacturers to help manage this complexity while protecting the quality and consistency of their products. An AML documents the specific suppliers, vendors and other partners who have been properly vetted and approved to deliver specific materials, parts, components or services in support of the enterprise’s manufacturing objectives.

Why should I have an approved manufacturers list?

The principal benefit of a well-maintained AML is to ensure that every contributor to the company’s production output has met, and pledges to maintain, the manufacturer’s standards for quality, reliability, and performance. The AML can also help keep suppliers aligned with other corporate priorities that may have little to do with manufacturing itself but are nevertheless important to the enterprise. For example, a company may be committed to support a certain proportion of minority-owned businesses or avoid questionably sourced materials like “conflict minerals,” and expect the same of its key suppliers.

Higher quality

From the standpoint of manufacturing itself, protecting the quality of a company’s products (and thus its reputation and brand) is the paramount benefit of the AML. Sourcing through an AML greatly reduces the risk of product defects.

More consistent repeatability

Using only suppliers who have been through a formal vetting process helps maintain consistent quality in the aggregate, across many different manufacturing batches that may even be produced on different lines and in multiple factories.

Improved purchasing process

An AML can significantly streamline procurement processes by eliminating much of the need for research, evaluation and negotiation for individual purchases. Down the line, this translates into faster time to market.

Cost control

Because submitting to the AML evaluation process can be an arduous process, once a vendor is approved, a significant degree of mutual trust and understanding has often been established – the foundation for a more robust relationship. Often, suppliers will provide more aggressive pricing because of this long-term commitment and higher expected volume over time.

How do I create an approved manufacturers list?

Every manufacturer will bring its unique considerations to bear on the development of its own form and process for the approved vendor list. However, common best practices include:

Set clear criteria

Define the requirements for vendors as specifically and in as much detail as practical. Crystal clarity up front will always reduce delay and confusion later.

Evaluate vendors thoroughly

Scrutinize a candidate suppliers’ operations and capabilities carefully, including, as appropriate, on-site audits, IT and other system reviews, security and compliance practices, and financial stability.

Create categories of suppliers

according to how well they measure up to criteria. There can be “grades” or tiers of suppliers within the list, like preferred, approved and conditional, that allow for nuanced and prioritized purchasing decisions.

Communication

Document and communicate requirements and process expectations to vendors early and often, to avoid confusion, misunderstanding and delays.

Connect systems

Carefully integrate the AML with existing IT systems, in particular Product Lifecycle Management (PLM), Enterprise Resource Planning (ERP) and Material Requirements Planning (MRP) systems, to maximize the enterprise value of the AML over time.

How should an approved manufacturers list be maintained?

Once the process has been defined and the initial AML created, ongoing maintenance is crucial to the list’s remaining accurate in its content and effective as a governance tool. Suppliers can go out of business, capabilities can improve or decline, and relevant new candidate suppliers may enter the market. Attending to a few key practices can maximize the utility of the AML over time:

Review and assess

Establish a regular cadence of reviews to evaluate and document the ongoing performance of each vendor on the AML.

Update list

As requirements evolve and patterns of performance and delivery are established, new vendors can be added, current members may be promoted from one tier to another (from “Approved,” to “Preferred” for example, as discussed above), and if necessary, vendors who fail on any of the criteria may be removed or placed on probation.

Nurture supplier relationships

The AMP provides a framework within which to collaborate and communicate with suppliers, strengthening and streamlining the dynamics of each commercial relationship.

Reinforce sourcing diversity

To mitigate the financial and supply chain risks of single- or limited-sourcing situations, actively cultivating the AML broadens the scope of vendors with whom the company is ready to transact.

Conclusion

The AML is a relatively straightforward methodology with a high payoff, as a manufacturer seeks to attain additional competitive advantage through more consistent quality, faster time to market, and long-term cost control.