Supplier Performance

Supplier PerformanceThe march toward globalization of the world's economy has accelerated the growth of international trade. It has also stimulated greater competition among producers of standardized goods. Today, intensifying competition is putting great pressure on organizations to either improve their operating methods or withdraw from the market. The perfection of lean thinking was the manufacturing industry's response to a discernible expansion of global competition. Lean is the enabler of efficiency, and the deployment of its concepts has led to many positive changes with respect to improving efficiency and profitability in critical manufacturing processes.

The core concept of lean is to focus on eliminating wasteful steps and actions within a product development cycle in order to create a more frictionless work flow. Success at it means that customers do not have to pay a premium for a manufacturer's waste and inefficiency.

Among the more vital of the manifold bastions and citadels of lean thinking is the science of lean logistics. Lean logistics is a process that looks at the entire picture, not just the "bigger picture" encompassing a manufacturing organization's operations. The goal of lean logistics is to contribute to the optimization of the organization's supply chain, and thereby deliver a higher value experience to the customer and better operating results to its stakeholders.

Lean logistics engages every area of an organization, inbound and outbound with the objective of squeezing out inefficiencies and improving performance and profitability. It accomplishes this by seeking to empower every member of a team so all personnel can achieve their full potential and contribute accordingly. A diverse assemblage of tools is utilized to enforce lean logistics within an organization; chief among them is the process of supplier performance evaluation and management.

Until you measure something, you cannot accurately evaluate it. Supplier performance management is a process that concerns itself with ranking, rating, and measuring the performance of an organization's suppliers with an eye toward quantifying and comparing the relative status and values of each. The things that a supplier performance management system can measure and track include quality metrics, on-time delivery history, invoice accuracy, complaint resolution history, communications reliability, conformity and nonconformance, and of course, price. Advanced supplier performance evaluation tools can also be used to appraise certain intangible factors that can make a supplier either a pleasure to deal with or a nightmare. These secondary factors although difficult to quantify, are important to the organization in achieving optimal results in evaluating the value stream within a supply chain. These intangible factors include processing cycle time, Industry Data Exchange Association (IDEA) membership, key pain points analysis, credit cycle time, environmental impact, and metrics for taking measure of the sanctions, fines, and penalties associated with regulatory compliance and the supplier's commitment to good corporate governance.

The supplier performance evaluation methodology helps organizations track their way to profitability by allowing them to isolate and identify the suppliers that have the biggest impact on an organization's bottom line. The principles and techniques of lean are embedded in every good supplier performance evaluation system. The system works by enforcing continuous monitoring of key performance indicators of the firm’s most important vendors and suppliers. In so doing, it supports management's objectives of delivering on its promises and achieving the sustainable competitive advantage it craves.

Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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