Manufacturers lose money through their suppliers, due to delays, defective stock, last minute changes, insolvency and more. With food manufacturers, for example, likely to have 90 per cent of their annual revenue represented by supplier contracts, supplier underperformance can have significant consequences for the bottom line.
Many leaders will view supplier issues as relationship problems, shaped by company-to-company interactions, trust levels, authority and standards established between manufacturer and suppliers. However, with 50 per cent of businesses having 26 or more suppliers, and 37 per cent using 50 or more, supplier management moves beyond the interpersonal and instead, your supplier base becomes a key dataset.
A crystal clear view of the facts and figures relating to your supplier base, and the ability to analyse this data, is key to reducing losses. Apply a systematic, statistics-led approach to optimise your supplier base.
Analyse performance
After choosing a supplier, many businesses will consider the job done. However, constant monitoring of metrics such as delivery time, quality and cost keeps procurement plugged into the performance of their supply chain; able to identify, reward and increase spend with their top suppliers and replace any weak links. Where underperforming suppliers cannot be swapped out, monitoring will at least ensure that teams are aware of where delays are likely to occur or quality issues may arise, ensuring contingency plans can be made.
You should also monitor metrics that go beyond your direct orders with suppliers, gathering and analysing information around the business health of the companies you buy from. A full view of regulatory compliance, supply chain risk and supplier integrity – including negative media – allows you to predict any business issues like bankruptcy or price increases before they arise. Rather than operating a responsive supplier management strategy, pivoting in reaction to disasters and changes as they occur, a data-driven approach allows for pre-emptive action.
Improve decision making
A wealth of your own historical supplier data is a key strategic asset, allowing you to avoid previous mistakes and make deeply informed decisions when choosing where to spend. Align historical performance information with your key priorities when sourcing new suppliers. For example, did longer lead times result in customer complaints? You can make sure that your suppliers commit to a certain delivery window. Patterns and trends can be identified and addressed, such as overspending in certain areas or parts that are particularly susceptible to having faults or damage on delivery. Suppliers can be chosen to avoid previous pitfalls: for example, prioritising safe delivery measures from suppliers of the materials that are historically most likely to arrive damaged.
Data about potential new suppliers can also be collected and inputted into a cohesive system. This allows you to compare quotes and any past performance metrics if you have worked with the supplier previously anywhere in the business. Suppliers can directly feed in data like insurance information, certification and documentation, allowing you to consider this from a single source of truth and contrast your different options more easily. Begin gathering key data from potential suppliers from the very start, to avoid hidden costs or surprises and identify clearly where there are gaps.
How can Advanced help?
Advanced Supplier Management allows manufacturers to create scoring frameworks and measure their suppliers across all the key data points outlined above. Mitigate risks and make faster business decisions with a complete view of your suppliers.
Advanced Sourcing Management helps you leverage historical supplier data to make informed sourcing decisions. Input new potential supplier data into one location, improving transparency and creating a more comprehensive overview of options, as well as gaining the ability to automatically control costs at the point of purchase.
Both these solutions integrate with Contract Management, allowing you to align sourcing and suppliers with the relevant documentation.
In the world of manufacturing, knowledge is more than power; it's a strategic imperative. Data-driven supplier management fosters visibility, predictability, and control, which are essential elements in maintaining a competitive edge. By evolving your supplier management practices to harness the power of data, you are setting the stage for an agile, efficient, and robust supply chain.
Data-driven supplier management is not a one-and-done approach; it is a continuous cycle of data gathering, analysis, action, and review, enabled by an effective source to contract software product suite.