1.2 Supplier Selection & The AVL

The Approved Vendor List (AVL) functions as the primary firewall for the manufacturing ecosystem. Permitting unvetted entities to inject material into the supply chain guarantees downstream failure, whether through counterfeit components, sudden insolvency, or unmanaged lead time variability. A rigid, data-driven AVL acts as a hard gate within the ERP, physically preventing the generation of Purchase Orders to unauthorized sources.

Qualification Criteria

Entry to the AVL requires objective evidence of stability and security. Subjective relationships do not mitigate risk.

Authorization & Traceability

• Requirement: Vendor must hold valid Franchise Agreements or Authorized Line Cards for the specific commodities being sourced.
• Verification: Validate directly with the Component Manufacturer (OCM).
• Why: Direct authorization ensures an unbroken Chain of Custody (CoC), nullifying counterfeit risk.

Quality Management System (QMS)

• Requirement: Active ISO 9001 certification (minimum); AS9100 or IATF 16949 (preferred for automotive/aerospace).
• Verification: Validate certificate scope and expiration date via the issuing registrar.
• Why: A certified QMS proves the supplier possesses documented processes for handling non-conformances (RMA) and corrective actions (SCAR).

Financial & Operational Solvency

• Requirement: 3 years of audited financials or D&B rating > 3.
• Why: Prevents "ghosting" during critical shortages or warranty claims.

Commercial Terms

• Requirement: Alignment with standard payment terms (Net 30/60) and Incoterms (Ex Works / FCA).
• NCNR Constraint: Non-Cancellable Non-Returnable (NCNR) terms are restricted to Custom (MG-04) or End-of-Life (EOL) buys.

AVL Lifecycle Workflow

Manage the vendor lifecycle through distinct states. The ERP system must enforce these states logically.

Phase 1: Request & Evaluation

• Input: Sourcing Request Form submitted by Commodity Manager.
• Action: Quality Assurance performs desk audit (certs, financials) and optional site audit.
• Decision:
  • Pass: Move to Provisional.
  • Fail: Move to Blacklisted.

Phase 2: Provisional (Probation)

• Condition: Limited to 3 POs or $50k spend cap.
• Action: 100% incoming inspection on all receipts.
• Transition: If 3 lots pass acceptance → Move to Approved.

Phase 3: Maintenance & Performance

• Routine: Quarterly review of On-Time Delivery (OTD) and Quality Acceptance Rate (QAR).
• Logic:
  • If OTD < 85% for 2 consecutive quarters → Downgrade to Conditional.
  • If Critical Counterfeit/Fraud incident → Immediate Disqualified.

The AVL Entry Record

Standardize the data structure for every AVL entry to ensure database integrity.

Field	Description	Data Type	Owner
Vendor ID	Unique ERP identifier (e.g., V-00432)	Alphanumeric	Finance
Vendor Name	Legal Entity Name	String	Sourcing
Classification	OCM / Franchised Disty / Broker / Service	Enum	Sourcing
Status	Approved / Provisional / Conditional / DNU	Enum	Quality
Commodity Scope	Allowed Purchase Groups (e.g., MG-02 only)	Array	Sourcing
Risk Rating	Composite score (1-5) based on financials/geo	Integer	Risk Mgmt
QMS Expiry	Date of ISO certificate expiration	Date	Quality

Exception Logic: One-Time & Spot Buys

Operational reality sometimes necessitates deviating from the standard AVL (e.g., Line-Down situations). Enforce strict protocols for these exceptions.

Scenario: Shortage Waiver (Broker/Independent)

• Trigger: Authorized channels cannot meet commit date; production stoppage imminent.
• Protocol:
  1. Authorization: CTO or VP Supply Chain signature required.
  2. Vendor Type: Create temporary vendor record defined as "One-Time Vendor".
  3. Validation: Mandatory 3rd-party test report (AS6081) linked to the specific lot.
  4. Closure: Vendor record automatically deactivates after PO receipt.

Scenario: NPI / Engineering Sample

• Trigger: Component required for prototype; not yet carried by volume distributors.
• Protocol:
  1. Limit: Maximum spend < $1,000.
  2. Restriction: Parts Forbidden for Mass Production BOMs.
  3. Flag: Item Master marked as "Eng-Only".

Final Checklist

Control Point	Requirement	Critical Threshold
ERP Lockout	Non-AVL PO Generation	Blocked
Ownership	Master Data Management	Supply Chain / Quality
Review Cycle	Vendor Performance Review	Quarterly (QBR)
Doc Retention	ISO/AS9100 Certs	Current (Non-Expired)
Broker Access	Independent Distributor usage	Exception Only
Traceability	Chain of Custody Evidence	100% of Transactions