SupplyChainTalk: Getting a better handle on your suppliers performance

On 16 November, SupplyChainTalk host Duncan Brock was joined by Prof. Md. Mamun Habib, Independent University, Bangladesh and University of Texas-Arlington, USA; Robert Jones, Head of Procurement, Community Fibre Limited; Peter Bonney, CEO & Co-Founder at Vendorful.

 

Views on news

 

Visibility platform project44 raised $80 million in funding to help build a system for measuring scope 3 emissions. Companies in the supply chain visibility market include Shippeo, Transporeon, FourKites  and MacroPoint.

 

The large sums of new funds, plus investments from companies with major shipping lines like Maersk and CMA CGM, illustrate the interest shippers and carriers alike are showing in visibility solutions. Although interest in the venture capital world for investments in software companies has been diminishing, there is still demand for critical business solutions.

 

It’s great progress that we hear about implementations now, not just plans and goals.

 

 

Which KPIs matter?

 

Customer-centric companies can start from Trust Pilot scores and KPIs such as churn rates, retention, as well as how successfully customers’ problems have been resolved – the company’s mission will also help identify what these KPIs should be. OTIF is another useful metric to assess supplier performance and so is SRM (Supplier Relationship Management).

 

Every business is going to be different, and it’s key to have alignment between business objectives and what you’re measuring (material quality for a footwear company and uptime for a software one). A simple but very relevant question can be asked from existing stakeholders: what do you think of this supplier on a scale of 1-10? Answers will suggest you the areas where you may want to dig deeper. There should be a two-way communication between the company and its suppliers. Customers shouldn’t just focus on what they want to get from their suppliers.

 

A detailed service level agreement is also key. Your KPIs should also be adjusted to the realities of the market. (During Covid, all KPIs were beaten by the question whether the company can get a particular product at all and is it a preferred customer of the supplier? Although there are tools now to get visibility of second and third tier suppliers, there is a surprisingly high number of firms that don’t have a clear view even of their first-tier ones.

 

However, all suppliers measure their client and prospect performance very closely and are quantifying all their interactions with their clients, including your company (lead scores, revenue against cost of service). The four main areas that you should assess performance on are on-time delivery, quality, relationship and cost management.

 

Companies typically build long-term relationships with their supplier and tend not to change them too often, therefore, maintaining long term relationships and focusing on the right flow of information both ways are key. Finally, you must add quantitative metrics into the mix too. Chances are that most of the data you need to do that Is already in your ERP system.

 

 

The panel’s advice

 

Only measure KPIs that you are able to impact, otherwise you’ll just waste your resources.

When you have trouble measuring certain indicators, use proxies – measure activities that will impact that indicator.  

 

As always, prioritisation is key in validating data reported by suppliers. Make sure that you’re using your resources to only check the authenticity of supplier data that is relevant to your sustainability performance. Ignore indicators if they are not applicable to a particular supplier.

 

You can learn a lot about your tier-one suppliers by just collecting better data on them and analysing it prior to implementing any complex systems about your whole supply chain.

 

Include just one question in your mini supplier surveys. They will be much more likely to answer them than a sequence of 10 or more questions.