Collaboration with suppliers is vital to effective supply chain management, and central to effective collaboration is clear communication regarding your expectations.
An article on the Supply Chain Digest website discusses how communication plays a critical role in ensuring a highly responsive supply chain. “By not communicating their expectations to their supplier partners and following up by communicating vendors’ performance results, retailers run the risk of an inconsistent and bloated supply chain,” the article notes.
The important message in this article is the need to communicate proactively with suppliers, and inherent in that message is the need to treat your suppliers as partners. That is, to be successful, a company needs to work cooperatively with all of its trading partners, including suppliers. The relationship needs to move from adversarial to collaborative. And true to any relationship, clear communication regarding expectations is vital to its success.
Communicating expectations is easier when you can track supplier performance. Several distribution ERP systems include supplier performance measurements in the procurement area. Good metrics to track include: on-time delivery rates, delivery accuracy, percentage of damaged goods, improper labeling and packaging, and unauthorized substitute materials.
A distribution ERP system is a very good tool for helping a distributor better track how various suppliers are complying with its company standards. However, presenting the results of said tracking in a supplier meeting in the form of punishment is counterproductive.
Beating up a supplier for poor performance in key areas has little benefit. In fact, it is unfair to the supplier if expectations have not been clearly communicated and if problems are not addressed as they occur. Examining performance results and communicating problems or concerns is critical to ensuring that issues are resolved and that measures are put into place to allow for those issues to be reduced or eliminated.
The key to a successful relationship is to treat suppliers as partners, communicating with them frequently and proactively. This will go a long way toward ensuring effective supply chain management.
Source: Supply Chain Digest, August 2013