Category Archives: Best Practices

How Do You Identify a Stellar Supplier?

Relating to Wednesday’s post where we asked what is necessary to get a grip on risk before outsourcing to a new supplier, you also want to know how you can identify who is likely to be a stellar performing supplier in the first place. This is also a difficult question, but if you approach the subject from a supplier performance leadership perspective, you have one good starting point, which is mentioned in this recent article over on SIG on “why supplier performance management should be supplier performance leadership” .

Specifically, you look for a supplier that actively self-manages. You want a supplier which measures and reports its own performance against SLAs and KPIs, identifies the corrective actions it needs to take, devises a plan to put those actions in place, and then promptly informs you when it has determined that it is not meeting its targets with an outline of the corrective actions it intends to take, when they will be implemented, when it expects to improve, and when you will get a follow-up report. The supplier should want to not only meet the expectations placed on it, but get to the point where it can exceed those expectations before the contract comes up for renewal. In short, a supplier that talks the talk when it comes to customer service is good, but a supplier that walks the walk is better.

Secondly, you should look for a supplier that wants to collaborate. While it’s great to have a supplier that will bend over backwards to give you anything you want, if what you want is inefficient and costly, it’s better to have a supplier who will work with you to jointly identify opportunities for efficiency improvements and cost reductions. You need to remember that most of the smart people are outside of your organization, no matter how big you are, and if you want to out-innovate the other guy, you have to use all of the know-how available to you up and down your supply chain. There’s a reason the big buys have set up innovation networks to tap external parties — they know they can only do so much. The real winners in today’s economy are not necessarily those that can innovate, but those that can identify the right innovations to incorporate into their products and services at the right times to maximize profit.

And while this may not be everything you should look for in a perspective supplier, if you want a supplier that will lead the pack, this is where you start.

Delivery Success Demands Delivery Planning

DC Velocity recently ran a good article on how “Home Delivery Success Starts at the Order” that had some good pointers on delivery success in general. The article, designed to help retailers, gave the following advice:

  • Steer the Customer to the Delivery Times You Want Them to Take
    If you’re not really setup for next-day service, but you have optimized 2-day service, steer them to 2-day.
  • Upsell Premium, Expedited, or Tighter Time Windows and Value-Added Services
    Delivery doesn’t have to be free, and if it’s low-cost (or free), it doesn’t have to be speedy. After all, the if the customer wants a speedy, free, delivery — he can pick it up in the store (unless it’s Best Buy, where he’ll get to stand around and be ignored by no fewer than three associates before anyone even attempts to serve him). Time may not always be money to the end consumer, but it is always valuable. If you’re working, an evening install is worth a small premium vs. having to sit home all day waiting. And if you’d rather watch the game than drive 2 hours to get something for tomorrow, that’s worth it too.
  • Omni-Channel Retailing Needs Omni-Channel Delivery
    All deliveries should go through one scheduling solution — whether the order was made in-store, on-line, or over the phone.

If you reverse this, you can see how you can optimize your inbound supply chain delivery success when ordering from a supplier.

  • Try to Choose a Delivery Schedule a Supplier/Distributor Wants You to Take
    If you have a set of almost equal choices to you, pick the one that’s the easiest / most cost-effective for the distributor / supplier. Not only will it keep your costs down, but it will maximize the chances of getting the order on time as you will be using schedules (and routes) the distributor / supplier has optimized for.
  • Avoid Unnecessary Expedited Shipping or Value Added Services
    Suppliers will use the same tactics on you that you use on consumers to maximize their revenue. It doesn’t mean you have to buy into them. In many cases, shaving a few days off of shipping time to the warehouse doesn’t make much of a difference, especially if you forecast properly, and paying the supplier to do trade document management that your 3PL can do cheaper with an effective system integration isn’t worth the savings of dealing with one less partner.
  • Single-Channel Ordering Should be Fulfilled, Whenever Possible, by Single-Channel Delivery
    If you are ordering five products from the supplier, and they can all fit (and go) on the same truck, they should all be on the same truck. Delivery density reduces costs.

Pretty simple, eh? Almost as easy as getting the mouse in the bottle …

Maximizing ROI from Technology

Logistics Management recently published a piece on Maximizing ROI from Technology that included some good tips that deserve to be repeated.

The first point to note is that, as stated by Beth Peterson (President of BPE Global), the biggest mistake [companies] make is that they implement a solution without even beginning to measure what they were doing before they implemented it. You can’t maximize ROI if you don’t even know what you’re measuring against!

The second point to note is that expectations have to be realistic. You’ll never achieve your goals if they are unrealistic. Also, as the article suggests, when setting goals, try to be as precise as possible. Is it cost savings? Better customer service? Faster delivery? What are the specific metrics that you are trying to improve and by how much?

In addition, as noted, make sure that the objectives do not benefit one functional area to the detriment of others or to the company as a whole. Otherwise, you’re not going to get much support for your endeavor.

Then select the right vendor. One can start with the vendor evaluation and selection criteria evaluated in the article, but as pointed out in SI’s recent series’ on Technology Trials (Part I, Part II, Part III, Part IV.1, Part IV.2, and Part V, Part VI) and Best Practice Vendor Selection for True Multi-Nationals (Part I, Part II, Part III, Part IV, Part V), selecting the right technology vendor just isn’t that easy. Remember, in the end, it doesn’t matter how strategic the IT Vendor is, it only matters how strategic the solution they offer is.

And get the implementation right. As per the article, Key factors that need to be in place include the flowing: effective user training; management support of and commitment to the initiative; sufficient allocation of resources; and, perhaps most importantly, buy-in from the users. All of these pieces (which have been discussed in the SI Archives) are essential. Forget one, and it crumbles since you’re building a cube, not a pyramid.

Are You Going to Be Able to Control Costs this Year?

Costs are rising across categories and verticals and will likely continue to do so. There are a number of direct and indirect reasons for these increased costs, but the most substantial are the following reasons which could collectively rip a supply chain out from under even the largest of multi-national corporations.


1) Inflation is back with a vengeance

Commodity costs are rising across the board. According to the Royal Bank of Canada, the commodity price index increased for the third straight month and hit a five-month high in September. They increased 8.2% since June! Barley and Corn have exceeded the highs of 2008. The price of Live Cattle is almost 50% more than it was just two years ago. Copper is climbing back to its recent high. And these are just a few examples.


2) Market growth is stagnant and, as a result, so is job growth.

Stagnant growth in their markets can limit a company’s ability to increase the breadth of its strategic sourcing activities and get more spend under management, a critical key to cost control. While stagnant markets should be the bugle call for a company to get more spend under management, the lack of resources, primarily due to lack of hiring of new talent and investment in new technology, has kept many companies from expanding the growth of their sourcing efforts. In addition, stagnant market growth means that volume is not going to increase, and this limits a Supply Manager’s ability to negotiate (additional) volume-based savings going forward.


3) There is a widening gap between risk identification and mitigation.

The amount of research on risk and risk mitigation has reached an all time high, but there has been little or no movement towards the identification and implementation of an effective risk identification and mitigation strategy. In 2008, a Marsh survey found that only 35% of organizations self-reported that supply chain risk management was moderately effective at their companies. Stated another way, 65% of companies did not have a risk management program that was at least moderately effective. In 2011, researchers at Vlerick Leuven Gent Management School and Ghent University did a supply chain risk management study and again found that 64% of
the companies have no one responsible for managing supply chain risks! That’s essentially zero improvement in the last
three years!

And these are just three of the reasons (or fates) costs are rising across categories and verticals! For the other four reasons, the seven elements missing from an average Supply Managemnt organization exposing it to these seven fates, and the ten competencies that every Supply Management organization needs to master in order to acquire the seven elements that will allow a Supply Management organization to fend off the seven fates, remember to download the Top Ten Things to Do in 2013 to Control Costs, a free white-paper from BravoSolution (registration required) authored by Sourcing Innovation.

Five Common Sense Ways to Power Manufacturing Growth in a Down Economy

Last summer, Industry Week ran a short article on Ways to Power Manufacturing Growth in a Down Economy that you might have overlooked, as it was short and ran during peak vacation season, but it is quite important nonetheless. This article provided some easy ways to squeeze more value out of your operations.

  • Reduce Market Uncertainty
    There are two big uncertainties that most manufacturers have to deal with: customer demand and supply availability. In addition, raw material costs can often be unpredictable. But all of this uncertainty can be greatly reduced with long-term contracts. As the article points out, demand certainty at reduced margins is often better than demand uncertainty, especially since innovation and lean improvements can often reduce costs year-over-year.
  • Put Safety First
    Accidents cause downtime and result in reduced yields, both of which increase operating cost and eat up margins. Keeping lines up and yields constant is the best way to reign in costs and get the most out of every dollar.
  • Near-Source
    Reduce shipping costs and gain more control over manufacturing processes and costs by using suppliers closer to your manufacturing facility. It’s a lot easier to work out a problem with a supplier in your own state than with a supplier in a different country, as you can just jump in the car and visit the supplier’s location when a face-to-face meeting is needed to resolve an escalating situation.
  • Redefine Value-Add using Customer Value
    Find out precisely what customers want and eliminate all unnecessary features and functions that are not desired by the end customer. It’s not value-add unless the customer wants it. If the customer doesn’t want built-in auto-correct software that messes up 20% of the time in their smartphone, don’t waste money delivering it to them!
  • Encourage Innovation
    Empower, motivate, and reward employees who identify product and process improvements throughout the organization that increase quality or product value (to the end customer) while holding steady or decreasing costs.

The point is that, even if demand is down, margin can still be up.