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How the Power of ERP Data Can Improve Supplier Performance

 

How the Power of ERP Data Can Improve Supplier Performance


Oct 16, 2018
Manufacturing and Distribution

Supplier Performance for SCM 
Does your manufacturing facility have a process in place for measuring, analyzing and managing each supplier’s performance to ensure they meet your expectations and follow through on their obligations? Sure, you may have supplier scorecards, but without accurate and timely data, you’ll be hard-pressed to start a useful dialogue about improving results.

And results are possible: An Aberdeen study reported that supplier performance improved by an average of more than 25%when standard metrics and procedures were implemented.[1] Leveraging the functionality of enterprise resource planning (ERP) tool can easily provide the data you need to improve supplier performance and foster continuous improvement in your supply chain in the following ways:

Accurate Order Quantities

The most basic of supplier obligations is delivering the quantity of goods ordered. When your buyers place purchase orders, they can easily enter the data into an ERP system so that you can confirm and record the quantities actually received. The reporting functions make it quick and simple to oversee receiving and inventory using information that is available in one place (even on a mobile device or tablet). Electronic data capture helps to eliminate an otherwise paper-heavy process of packing lists, bills of lading (BOLs), advanced shipment notifications (ASNs), purchase orders and other documentation.

On-Time Deliveries

Perhaps you have a supplier that’s been reliably providing materials for years and then, all of a sudden, their shipments repeatedly come in behind schedule. The ripple effects could lead to disrupted capacity on your production line and a delay in speed to market, along with the resulting financial implications and damaged brand reputation. While you could charge the supplier a performance guarantee fee, you’d much prefer your goods arrived on time.

With an ERP system, you’re able to track the receipt of goods in real time, easily run reports to show historically when the issues arose, and show the supplier the comparisons. With data in hand, you can collectively decide how to address lead-time variances and determine acceptable benchmarks or next steps.

Quality Inspections

Today’s ERP systems have a quality feature component to track purchase receipts from suppliers and show the percentage of units that failed inspection. This feature allows manufacturers to proactively address any quality control issues because they can see iterative changes over time.

For example, if the supplier started at a 98% quality rating at the beginning of the vendor relationship and performance steadily slipped several percentage points over time, you’ll have the metrics you need to address the issues. On the other hand, if an order comes in and the specification tolerances are an anomaly, you can look at historical data to know it’s a one-off event that needs to be addressed so that it can be credited or returned.

Cost Improvements

A simple function of an ERP is alerting you if the price on an invoice contradicts the price on the original purchase order, helping ensure you don’t overpay. There are also ways companies can leverage performance metrics when approaching suppliers about costs and contract renewals. If data shows that quality and shipping times have steadily improved over time, it indicates that the supplier has gotten more efficient in their own operations and may be able to offer cost adjustments as a result.

You can also segment suppliers and rank them based on performance to determine a preferred supplier list. This can be leveraged when negotiating contracts and help strengthen supplier relationships.

Ease of Use

Often, when Wipfli meets with key stakeholders within an organization, we discover that multiple conflicting processes are in place across departments, leading to redundancies, errors and frustration. That’s why we help establish protocols and provide training to help ensure consistent processes and accurate outcomes.

The user-friendly dashboards, reports and analytics features of an ERP make it so much more streamlined (and accurate) to assess supplier performance compared to the variable manual processes of the past. At a glance, users can see real-time metrics and run reports with the click of a button. Dashboards come with robust, out-of-the-box visuals and reporting capabilities, but your provider will likely need to customize some of them to more closely align with your unique business functions and internal processes.

Manufacturers rely on their supply chain to get their finished goods out on time and on budget. When issues arise, it can wreak havoc on every department in your organization — from finance and procurement to inventory and production.

Strengthen your relationships with suppliers and your bottom line with an upgraded ERP solution. Contact the ERP specialists at Wipfli for a free consultation to explore how ERP can benefit your organization.


[1]“The Supplier Performance Measurement Benchmarking Report: Measuring Supply Chain Success,” Aberdeen Group, December 2002, http://www.lyonsinfo.com/_resources/aberdeen_spms_report.pdf, accessed October 3, 2018

Author(s)

Suzanne Koss
Suzanne Koss, CPIM
Partner
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