Why We Love Supplier Performance (And You Should, Too!)

supplier-performance-448767-editedHave you ever gone into a job interview with a mental playbook of the questions that you are about to be asked, ready to beat the system?  One of the classic interview questions is the age-old: “What would you say is your biggest weakness?” The clever person likes to trade honesty for cunning in their response by saying something like, “It would probably be my attention to detail” or “Some people say I am a perfectionist” or “I probably put in too many hours.”  All of these represent a textbook humble brag, where we mask self-complimenting with self-deprecation.

                When describing our organization to others it is tempting to fall into this same pattern of trying to talk up our strengths.  This is especially true when discussing our supply chains.  We like to focus on our top-of-the-line warehousing practices, our extremely skilled workforce and the distribution channels that we have carefully built.  Few of us, however, talk about our supply base as a source of strength.  Suppliers typically fall into that dirty little secret classification that everyone believes is the main culprit for all supply chain problems (this is well documented in the “Unwritten Rules of Supply Chain: 4th Edition” (not a real book)).  Only world-class supply chains feature a strong collaborative system with high levels of supplier performance.

                Wait a minute there.  Doesn’t everyone want to have a world-class supply chain?  If we are going to operate under this assumption, then we have to pull out all of our suppliers, dust them off and showcase them for the burgeoning stars that we all know they can be.  Nobody puts baby in a corner.

 


 

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Supplier collaboration and the resulting improvements are critical requirements for implementing lean across the supply chain. In this 1-hour webinar, learn how to start developing your suppliers to drive results in cost, lead time, and material availability.

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So how do we achieve supplier performance levels that would be worth showcasing?  How do we make them a core strength that gives us a competitive advantage in flexibility, agility and consistency?  Let’s take a look at a few ways:

  • Creating Multi-Party Visibility – Using tools that highlight a blend of logistical information and material planning, we can create a platform that connects planners, transportation and suppliers enabling us to “see as a group, know as a group and act as a group.”  For example, if the material planning team knows of a short shipment from the supplier before the freight delivers to their dock, they can respond before it reaches critical mass.  Also, if this visibility is centralized and cleaned up, it greases the wheels of communication and shines light on traditional blind spots within the supply chain.  Supplier performance improves as a by-product of breaking down these hidden factories.
  • Establishing Consistent Management Systems – We’ve all heard the phrase “you get what you measure.”  If we expect our suppliers to reach a high standard of performance in traditional supply chain areas such as fill-rates, process compliance and ASN (advanced shipping notification) response timeliness, we must measure them in these arenas.  And not only must we measure them, but we must do it consistently, accurately and with high levels of transparency.  If we prepare dashboards and metrics that articulate supplier performance for our material planning and purchasing teams, this will make problems so visible that we can’t afford not to solve them.   And in an even better scenario, we can give each supplier their own performance statistics in real-time to help them see what is happening.  Let’s give them a scoreboard to watch rather than make them wait until the end of the game to find out how they played.
  • Performing Co-operative Problem Solving – In the book, Building a Lean Fulfillment Stream by Robert Martichenko and Kevin von Grabe, the authors indicate that “waste in supplier relations exists because of behaviors from both the supplier and the customer.  Both parties must agree to seek opportunities to uncover waste and take responsibility to remove it.”  Achieving improved supplier performance requires a great deal of alignment.  The first two bullet points above are both great sources of uncovering the waste that our suppliers and customers must work together to eliminate.  To do this properly, a combination of formal problem solving techniques (A3 thinking, 8D’s, scoping), Gemba walk time, process mapping and kaizen may be needed depending on the issue.  Rather than commanding the supplier to just “fix it,” we need to try to be part of the solution.  Leading us to our next point…
  • Building the Team Environment – The supply chain is like the football equivalent (either type, for those of you who like to poke holes in analogies) in the businesses as sports world.  To be successful, we cannot rely on one star component to defeat the forces that would try to see us fail.  It requires all of the pieces to work in unison and will surely expose weak links in the process.  We want our supply base to be invested in this outcome. So, rather than treat them as a purely transactional partner, we need to communicate their value to them as part of the team and involve them in such a way that our successes and failure are shared.  Having standardized PDCA and a willingness to have true, two-way communication will lead to overall learning and allow decision making that supports future success.  Supplier performance roadblocks can be communicated and, instead of being hidden, they can be translated into action items and improvement initiatives.

Ok.  So you might be thinking, I get the nice idea of having suppliers perform well, but why should it be a priority?  Great question.  You were reading our minds with that one.  Here are just a few of the key advantages that strong supply bases can provide:

  1. Strong supply bases ship to plan more often than poor ones.  This reduces the number of times that you need to plan an order/shipment and thus cuts down on the waste resulting from re-created or inefficient logistics plans (i.e. multiple trucks when only one should have been needed).
  2. Poorly performing suppliers cost the organization money that is clearly measureable.  If suppliers cannot hold up their end of the bargain, we run into manufacturing schedule changes, line-down situations, and logistics expedites.  Unless we charge them back for literally everything, we end up paying for it.
  3. Poorly performing suppliers cost the organization money that is not clearly measurable.  There is an intrinsic cost associated with issue resolution that eats into team member productivity and morale. Issue resolution can cost team members a significant amount of working hours per year.  Unless dealing with these headaches is a primary requirement of an employee’s job, it’s difficult to properly budget for it.

                At the end of the day, we want to be proud of how we manage our supplier relationships and we should see business results from their performance.  If we can transform this part of the supply chain to an area of strength, we will be ahead of the curve.  And, when we are talking with others in the industry about said supply chains, we can flip the script on the narrative.  Questions about negative supplier performance that often receive negative responses can be asked in a positive way: “Yes, actually our supplier fill rate improvements are leading to us uncovering some inefficiencies in our logistics planning”, or “Our long lead times have been reduced due to our suppliers’ problem solving efforts”, or maybe even “We have lowered our high inventory levels as a result of collaborating with our supply base.” 

                Once you reach this level of supplier performance, humblebrag all you want.  Even though improving the supply base is only one small step in the right direction, you are already miles ahead of your competitors.  Did you see what we did there?  We used a long-winded, average at-best blog post to “change the game” of supplier performance and persuade a host of readers to rally behind the cause!

 

Webinar July 14: Supplier Perofrmance - The Keys to Collaboration

Supplier collaboration and the resulting improvements are critical requirements for implementing lean across the supply chain. In this 1-hour webinar, learn how to start developing your suppliers to drive results in cost, lead time, and material availability.

Watch Now & Download Slides

 

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Related Posts:

Supplier Collaboration

Supplier Performance

Posted by Clint McCrystal

Training and Development Manager at LeanCor | I am an individual with many interests, and I like to leverage both my creative and analytical skills.

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