As a manufacturing manager, you know that your suppliers are integral to the success of your operations. Every product you produce depends on the quality, timeliness, and reliability of the materials and components you receive.
But how do you ensure that your suppliers are consistently performing at their best? This is where supplier performance management (SPM) and enterprise resource planning (ERP) software comes into play. By effectively managing supplier performance, you can enhance your supply chain’s efficiency, reduce risks, and improve your overall business outcomes.
What Is Supplier Performance Management (SPM)?
Supplier performance management (SPM) is the process of assessing, monitoring, and improving the performance of your suppliers. It involves setting clear expectations, measuring performance against key metrics, and taking action to address any issues that arise. The goal of SPM is to foster strong, collaborative relationships with suppliers that lead to better quality, lower costs, and more reliable deliveries.
In practice, SPM can include a variety of activities, such as conducting regular performance reviews, tracking key performance indicators (KPIs), and using data-driven insights to identify areas for improvement.
By systematically managing supplier performance, you can make more informed decisions about which suppliers to work with, how to negotiate contracts, and where to focus your improvement efforts.
5 Benefits of Supplier Performance Management Software
Managing supplier performance manually is a complex and time-consuming task. Fortunately, supplier performance management software, often included as an ERP module, offers a streamlined way to handle this process, providing you with the tools you need to track, analyze, and improve supplier performance.
1. Vendor Portals
Enhance your vendor relationships by giving them real-time access to your ERP data. For example, Infor SyteLine CloudSuite Industrial offers vendor portals so your suppliers can log in, view purchase orders, respond to price requests, update due dates on purchase orders, and communicate more effectively with your team.
Vendors also get access to their performance data. Vendors can upload documents and make improvements in your system.
2. Data-Driven Decision-Making
With all relevant supplier data in one place, you can make more informed, data-driven decisions. Supply chain management software provides detailed reports and analytics that highlight trends, pinpoint areas of concern, and reveal opportunities for improvement.
Whether you’re assessing a new supplier or reviewing the performance of an existing one, having access to accurate, up-to-date data helps you make decisions that align with your business goals.
3. Improved Collaboration
Supplier performance management software also enhances collaboration with your suppliers. By sharing performance data and setting clear expectations, you can work together to address any issues and improve overall performance. The software facilitates communication by providing a centralized platform where you and your suppliers can exchange information, track progress, and discuss potential improvements.
4. Risk Management
One of the key benefits of using software for supplier performance management is its ability to help you manage risks. Monitor KPIs such as lead times, order accuracy, and quality with ease. The software can alert you to potential issues before they become major problems. This proactive approach allows you to mitigate risks, avoid disruptions, and maintain a smooth, efficient supply chain.
5. Streamlined Evaluation Process
Supplier performance management software simplifies the evaluation process by automating the collection and analysis of performance data. Instead of manually gathering information from various sources, the software consolidates data into a single platform, usually your centralized ERP database, making it easier to monitor supplier performance over time.
This streamlined approach allows you to quickly identify any issues and take corrective action before they impact your production schedule.
The Top Supply Chain Management Key Performance Indicators (KPIs)
Key performance indicators (KPIs) are critical metrics that you can use to evaluate the efficiency and effectiveness of your supply chain. When it comes to supplier performance management, tracking the right KPIs is essential to ensuring that your suppliers are meeting your expectations and contributing to the success of your business.
On-Time Delivery
One of the most important manufacturing KPIs in supply chain management is on-time delivery. This metric measures the percentage of orders that are delivered by suppliers on or before the agreed-upon delivery date. Timely deliveries are crucial to maintaining your production schedule and meeting customer demands. By tracking on-time delivery rates, you can identify which suppliers are consistently meeting their deadlines and which ones may need improvement.
Order Accuracy
Order accuracy refers to the percentage of orders that are delivered correctly, meaning the right products are delivered in the right quantities. Inaccurate orders can lead to production delays, increased costs, and customer dissatisfaction. Monitoring this KPI helps you ensure that your suppliers are providing exactly what you need when you need it.
Lead Time
Lead time measures the amount of time it takes for an order to be fulfilled, from the moment it is placed to the moment it is delivered. Reducing lead times can improve your supply chain’s responsiveness and agility, allowing you to react more quickly to changes in demand. By tracking lead times, you can identify opportunities to streamline your ordering processes and work with suppliers to reduce delays.
Cost Performance
Cost performance tracks the cost of goods or services provided by your suppliers relative to your budget or expectations. This KPI helps you monitor cost fluctuations and assess whether you’re getting good value for your money. If costs are consistently higher than expected, it may be time to renegotiate terms or explore alternative suppliers.
Supplier Quality
Quality is another critical KPI in supply chain management. Supplier quality measures the percentage of products or materials that meet your quality standards upon delivery. High-quality materials are essential to producing reliable, durable products. By tracking this KPI, you can identify suppliers who consistently provide high-quality materials and address any quality issues that arise.
How Does Supply Chain Management Software Help You Track KPIs?
Keeping track of supply chain KPIs can be challenging, especially when dealing with multiple suppliers and complex operations. Supply chain management software offers a range of features that make it easier to monitor and manage these critical metrics.
Real-Time Tracking
One of the key advantages of using supply chain management software is the ability to track KPIs in real-time. The software continuously collects and updates data from various sources, providing you with up-to-the-minute insights into your supply chain performance. Whether you’re monitoring on-time delivery rates or tracking lead times, real-time data allows you to identify issues as they arise and take swift action to address them.
Automated Alerts
Supply chain management software also includes automated alerts that notify you when a KPI falls below a certain threshold. For example, if a supplier’s on-time delivery rate drops below an acceptable level, the software can send you an alert so you can investigate the issue and take corrective action. These automated notifications help you stay on top of your supply chain performance without having to constantly monitor reports and data.
Customizable Dashboards
To make it easier to track the KPIs that matter most to your business, supply chain management software allows you to create customizable dashboards. These dashboards provide a visual representation of your key metrics, making it easy to see how your supply chain is performing at a glance. You can tailor your dashboard to focus on specific KPIs, such as supplier quality or cost performance, ensuring that you have the information you need to make informed decisions.
Integration with Other Systems
Third-party supply chain management software often integrates with other systems, such as your ERP or procurement software, to provide a comprehensive view of your supply chain performance. Alternatively, it comes as a module with your ERP software.
Either way, this integration allows you to access all relevant data in one place, making it easier to track KPIs and identify areas for improvement.
How Do You Know When to Look for a New Supplier?
No matter how carefully you manage your suppliers, there may come a time when you need to consider finding a new one. But how do you know when it’s time to make a change? Here are some key signs that it may be time to start looking for a new supplier.
Consistent Underperformance
If a supplier consistently fails to meet your expectations, despite multiple attempts to address the issues, it may be time to move on. Whether they’re delivering late, providing poor-quality materials, or failing to communicate effectively, consistent underperformance can have a significant impact on your manufacturing business. When efforts to improve the relationship are unsuccessful, finding a new supplier may be the best option.
Increased Lead Times
If you notice that a supplier’s lead times are often increasing, it could be a sign that they’re struggling to keep up with demand or facing internal issues. When lead times start to affect your ability to meet customer orders, it’s time to find a new supplier.
Quality Issues
Frequent quality issues can lead to increased waste, rework, and production delays, all of which can harm your bottom line. If a supplier’s quality falls short of your standards, and attempts to resolve the issues are unsuccessful, it may be time to explore suppliers who can deliver the quality you need.
Communication Breakdowns
Effective communication is essential to a strong supplier relationship. If a supplier is consistently difficult to reach, fails to provide updates, or doesn’t respond to your inquiries within 24-48 hours, it can lead to misunderstandings, delays, and other problems. When communication issues become a recurring problem, it’s time to find a supplier who is more responsive.
Cost Increases
While cost increases are sometimes unavoidable, especially in volatile markets, they should be justifiable. If a supplier raises prices without delivering better quality, service, or reliability, it may be worth exploring cheaper options with more value.
Ask Us How ProphecyIoT Can Help Manufacturers Manage Suppliers
Managing supplier performance is one of the most important aspects of running a successful manufacturing business. Supplier management software and modules can help you increase communication, track metrics, and build stronger relationships with suppliers.
If you feel that your supply chain isn’t performing to the standard it should be, contact our manufacturing software experts at Godlan to set up a consultation. With over 40 years of experience helping manufacturers implement software solutions to boost their bottom line, we’re sure we can help you find a way to streamline your supply chain.
