Supplier collaboration always sounds like a good idea, but in tough times like the ones most companies are facing today, it is tempting to forgo supplier relationships in favor of more performance-based priorities. This is a grave mistake—even though it is made regularly—because collaboration with suppliers is often the best way to achieve the supply chain performance boost companies are looking for.
Investing in supplier collaboration is hardly an altruistic effort; it delivers improved transparency, communication, and competitive advantage. Realizing these benefits is made possible, at scale, with the support of supplier portals and dashboards.
Supplier Performance Transparency
Supplier performance (or lack thereof) can have widespread impact throughout an organization. Procurement needs real-time visibility into supplier performance and service levels so that risks can be prevented from turning into disruptions. One of the most effective ways of increasing supply chain transparency is through the use of supplier performance scorecards, but what should those scorecards measure about individual suppliers and where should the data come from?
In too many cases, companies try to measure their suppliers’ performance as a separate activity, rather than taking performance data from a ‘single source of truth’ system to manage ongoing supplier transactions. Selecting the right type and number of KPIs makes it possible for procurement to meaningfully track and measure their suppliers’ performance over time. The data associated with those KPIs should be drawn from systems that provide objective, real-time information. Whenever possible, procurement should benchmark individual and collective supplier performance using industry standards such as The Hackett Group’s finding that 90% of order transactions should be ‘perfect.’ Consistent, predictable supplier scorecarding eliminates the risk of multiple interpretations of performance and builds relationships through the addition of regular face to face meetings that combine data with discussion and context.
The rate at which information and updates pass between suppliers and buyers has a direct connection to the performance of the overall supply chain. Emails and phone calls may be convenient, but they present a risk to everyone involved – especially when it comes to supporting supplier performance over time. If a supply chain is to operate smoothly, systems have to be in place to make it easy for everyone to stay up to date, especially when conditions are uncertain.
Purchase orders naturally change. SourceDay has found that 52% of all POs change at some point, and each change represents supply chain risk or more specifically revenue risk. Collaborating with suppliers through a consolidated platform prevents misinformation from further complicating operations. Collaboration must be a two-way effort; suppliers need to be able to add their perspective through, and about, the performance review process, and buyers should be open to that feedback. It is easy to forget that a process like scorecarding ‘communicates’ something to the supplier—how fitting the KPIs are, how often they are updated, and how accurate the information is suggests the importance of the task. Suppliers need to know that each performance target is based on mutual accountability between buyer and supplier.
Actionable Collaborative Improvement
Supplier visibility and actionable collaboration based upon ERP-generated demand data helps create a more holistic picture of supply chain performance and mitigate supply chain risk. Since purchase orders change over half of the time, performance improvement can only be achieved when buyers and suppliers work together and are aligned on demand and fulfillment. Both sides need to be working from the most up-to-date information, preferably managed in an automated fashion so that it remains efficient and avoids human re-entry errors.
SourceDay’s supplier portal supports two-way communication from the day a PO is issued until receipt and invoice payment—despite constant and unavoidable changes. Using this platform for supplier scorecarding in addition to functions such as AP Automation and RFQ collaboration demonstrates to suppliers that they are key team members, enabling automated collaboration on the exceptions that create risk and impact revenue. Responsiveness and acknowledgment rates are measured automatically, updated in real-time, and remain visible to buyers and suppliers. Recognizing the realities of frequent changes and the need to be able to focus on specific line items, rather than being forced to process the PO as a whole, gives everyone the granularity they need to improve performance and strengthen the buyer-supplier relationship at the same time.
Supplier performance is a key element of supply chain performance made possible, efficient, and scalable with the right solution. In fact, if the right solution is in place, it will measure supplier performance as part of the course of normal business, allowing everyone to see how they are doing and making it clear where that information is coming from.
If you are interested in learning more about how Supplier Portals foster Better Supplier Collaboration and Adoption, watch this on demand webinar.
About the Author
Tom Kieley is the CEO and Co-Founder of SourceDay. He founded SourceDay in 2013 after leading a supply chain group at Dell and go-to-market teams at enterprise software companies like Boomi and Pervasive. He and his co-founder started SourceDay to transform how manufacturers, distributors, and retailers collaborate with their suppliers in order to solve common supply chain & procurement challenges that both faced early in their careers.