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May 7, 2007
Monitoring Supplier Collaboration: By the Numbers
Improvements in supplier performance are critical for increasingly more companies that rely on their supplier base for a huge variety of supplies and goods. Yet a recent Supply Chain Consortium survey of 100 top retail and consumer goods companies revealed that holding suppliers accountable through punitive compliance programs may not be working, as shown by the following key stats.
Supply Chain Consortium's recent Supplier Collaboration Report, based on a survey of 100 retail and consumer goods companies regarding their supply chain practices, included the following findings:
61
Percentage of companies that meet with suppliers on a monthly basis to discuss performance
29
Percent that meet with suppliers on a quarterly basis to discuss performance
67
Percent that impose financial penalties on suppliers
55
Percent that reduce order volumes with suppliers due to poor performance
58
Percent that rate their compliance programs as ineffective or only marginally effective
90
Percent that have assessed financial penalties to suppliers in the past 12 months
72
Percent that monitor supplier performance with respect to shipment of the correct products and shipment of the correct quantity
66
Percent that do not have a formal improvement suggestion program with suppliers
76
Percent that do not receive feedback from suppliers on the effectiveness of their internal processes
33
Percent of Service Level Agreements (SLA) that are developed to cover supply chain issues only (while 67 percent are comprehensive business agreements)
Survey respondents noted their top strategies for improving supplier performance and developing relationships with their supply chain partners as follows:
• Establish expectations with a formal SLA or less formal written guidelines, depending on the supplier's performance and history. More than 50 percent of respondents have an SLA with one or more suppliers.
• Focus on collaboration, improvement initiatives and information sharing. Many companies have already achieved improvements in on-time delivery and inventory reduction. Now the focus has shifted to more collaborative efforts, including order lead-time reduction and the sharing of inventory and forecast data.
Credit: Tompkins Associates
• Measure, monitor and evaluate suppliers based on carefully selected performance measures. Formal performance scorecards — adopted by 57 percent of companies — are influential in enhancing accuracy and speed to achieve the "perfect order."
Credit: Tompkins Associates
Ah, the seemingly mythical "perfect order." How do you define it? Edward Marien, long-time director of supply chain management programs at the University of Wisconsin, recently told IndustryWeek that customers are asking for the following:
1. The Right Product in the
2. Right Quantity from the
3. Right Source to the
4. Right Destination in the
5. Right Condition at the
6. Right Time with the
7. Right Documentation for the
8. Right Cost.
The final strategy for improving supplier performance, according to the Supply Chain Consortium survey participants: Hold suppliers accountable for performance with a balance of punitive and incentive-based expectations.
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Comment
2 CommentsI think most procurement professionals need to sit in a customer service/inside sales position for a month to understand how important your approach is to develop the teamwork required to achieve goals.
It is important to admit we don't make the magic happen alone. It is really a collaborative team effort between customer and supplier that we have to continuously develop and/or improve. We often ask our suppliers to do things at their expense when we are responsible or to serve us in a way that compromises their own company.
It is vital to keep in the back of our minds that we need to let them know our expectations in order for them to be our "heroes." This can only be done by maintaining a very open, honest and realistic approach in our relationships.
I find including my supply chain in the resolution of problems really has a positive effect. Whether it's pricing, missing a deadline without advance notice, shipping unauthorized partials, etc., they still remain an important factor in resolving the situation at hand.
May 23, 2007 5:15 PMThe best Subcontract executions happen when both sides of the negotiation walk away with their basic needs met and no one tries to take the other for all they can. They then tend to work better together when problems arise. I agree with the author above not so much that I have to be a Salesperson for a month to be an effective Buyer but that I have to recognize that my suppliers have to be healthy too or they will not perform well. Sometimes you run into the arrogant self-centered person who wants it all and you have to find ways to straighten them out or pull them from the team or stop their direct contact from the other party. Sometimes you have to wear the referee's shirt and advocate the other side. This puts money in the bank of character with your supplier and often returns you their help when you need it. Lastly, one only looks at the terms and conditions of a subcontract when the relationship has gone south. The best executions start with well-written contracts that you rarely have to refer to. It is about people being forthright, doing an honest job and playing fair in the sandbox.
September 5, 2008 10:33 PM
