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Vendor-Management Improve the relationship with your supplier - and you improve your operational results!
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Most supplier, producer and wholesaler expect from the ordered product: • Cheap Price • Short Delivery Time • Product need to be in sale- and useable condition • Minimum preparation for the re-sale How do you measure the performance of your supplier that those requirements will be met?  Many companies measure their supplier only with feeling and based on experience made in the past. But some companies have also objective measurement criterias. Find In the following an approach how far supplier can help you to achieve your inventory-goals  and how these methods will improve your results. Readiness for Delivery The ratio of readiness for delivery for customers is measured by the number of products which are delivered before the agreed delivery day or could have been delivered. Example: your customer orders 10 pieces of a product and you deliver these 10 pieces on- or before the agreed delivery day. With this “credit” you increase in your customers attantion the readiness for delivery. If you deliver less than 10 pieces on- or before the agreed delivery day it would be noticed as default of your delivery-readiness. Hence, the ratio of readiness for delivery can be considered as fulfilling ratio of numbers delivered which are provided on- or before the agreed delivery date. Might it now not possible that you can measure your vendor in the same way, because you are the customer of your supplier? The delayed Days The ratio of readiness for delivery is a “passed - failed” test.  Provides the supplier all ordered products in time he get’s so called credit points. Delivers the supplier incompletely (in quality and/or quality), he get’s no credit. Up until this point the ratio of readiness for delivery measures a delivery which arrives two days too late and one, which arrives two months too late as one and the same. It’s just too late and both are just defaults. But are you not more concerned about deliveries which are not delivered for a long time than for a short? A delivery which is two weeks late ist much a bigger problem than a delivery, which is made just two days too late. In order to measure vendors better it needs a comprehensive measurement method. The average number of delays deliveries is calculated as follows: number of days delivered too late in period x / (divided) by number of deliveries in period x The number of delayed days is the time which is between the original agreed delivery day and the receipt of all products or which have been cancelled in the meantime. To measure a vendors performance it is better to apply the number of days delivered too late than the ratio of readiness for delivery, because it quantifies the inconsistency of a vendor. It is important that you qualify for each of your vendors this inconsistency of delivery days. In order to render a best possible customer service it is unavoidable to have a large stock on products in your warehouse as safety buffer for delivery in time, i.e. to compensate inconsistency in delivery services. This additional buffer on safety again increase the inventory and related to this, the operational costs as a result of worser profitabilty of your company. Satisfaction Analysis of Vendors In addtion that products need to be delivered in time and in full quantity, they need to be in reseling conditions. The third measurement criteria is an analysis about the satisfaction. This criteria contains the number of ordered products which could have been not resold or which are not sufficient for manufactoring processes at the right time. Such an analyiss classify each product with a problem for: • Supplier • Article / Product • Problem, which prevents the reselling Typical problems are: • The product was not delivered in time. • The delivered product is not the product you ordered. • A wrong number of products have been delivered. • Necessary description or documentation was not delivered together with the goods. • The product was delivered in damaged condition. • A wrong price has been invoiced. • The package insert or the invoice is not complete or wrong. You should measure periodically the performance of your supplier (at least the key-supplier), as you monitor the following criterias: • Ratio of completeness of the products delivered in time, • Ratio of the products, which had any problem, • Number of events of every problem per product during the last year. Then analyse, whether the problems: • have a negative effect of the service to your customers, • you have been urged to to take more products on stock, • your operational costs increased. Discuss the result with your supplier. Can you help him to solve the problems in future? 1. Collobarative planning - are you able to provide your supplier with better information for upcoming orders? Your supplier may serve you maybe better if he knows, what you will order in the next months. 2. Claim damaged goods - supplier can use this information to improve their packaging or to optimize their shipment process to avoid such damages in future. 3. Incomplete or missing papers - the supplier does not know eventually that incomplete or missing papers makes you impossible to continue processing or to resell. The best way to improve the operational sourcing processes is to reduce the operational costs and to optimize the customer service in a way that claims are managed active in order to include them in the operational process. The analysis of satisfaction for your vendors is a good way to achieve an improvement process for your customers. Contact us, we would be glad to show you the possible opportunities!
Contact
Vendor-Management Improve the relationship with your supplier - and you improve your operational results!
back
Most supplier, producer and wholesaler expect from the ordered product: • Cheap Price • Short Delivery Time • Product need to be in sale- and useable condition • Minimum preparation for the re-sale How do you measure the performance of your supplier that those requirements will be met?  Many companies measure their supplier only with feeling and based on experience made in the past. But some companies have also objective measurement criterias. Find In the following an approach how far supplier can help you to achieve your inventory-goals  and how these methods will improve your results. Readiness for Delivery The ratio of readiness for delivery for customers is measured by the number of products which are delivered before the agreed delivery day or could have been delivered. Example: your customer orders 10 pieces of a product and you deliver these 10 pieces on- or before the agreed delivery day. With this “credit” you increase in your customers attantion the readiness for delivery. If you deliver less than 10 pieces on- or before the agreed delivery day it would be noticed as default of your delivery-readiness. Hence, the ratio of readiness for delivery can be considered as fulfilling ratio of numbers delivered which are provided on- or before the agreed delivery date. Might it now not possible that you can measure your vendor in the same way, because you are the customer of your supplier? The delayed Days The ratio of readiness for delivery is a “passed - failed” test.  Provides the supplier all ordered products in time he get’s so called credit points. Delivers the supplier incompletely (in quality and/or quality), he get’s no credit. Up until this point the ratio of readiness for delivery measures a delivery which arrives two days too late and one, which arrives two months too late as one and the same. It’s just too late and both are just defaults. But are you not more concerned about deliveries which are not delivered for a long time than for a short? A delivery which is two weeks late ist much a bigger problem than a delivery, which is made just two days too late. In order to measure vendors better it needs a comprehensive measurement method. The average number of delays deliveries is calculated as follows: number of days delivered too late in period x / (divided) by number of deliveries in period x The number of delayed days is the time which is between the original agreed delivery day and the receipt of all products or which have been cancelled in the meantime. To measure a vendors performance it is better to apply the number of days delivered too late than the ratio of readiness for delivery, because it quantifies the inconsistency of a vendor. It is important that you qualify for each of your vendors this inconsistency of delivery days. In order to render a best possible customer service it is unavoidable to have a large stock on products in your warehouse as safety buffer for delivery in time, i.e. to compensate inconsistency in delivery services. This additional buffer on safety again increase the inventory and related to this, the operational costs as a result of worser profitabilty of your company. Satisfaction Analysis of Vendors In addtion that products need to be delivered in time and in full quantity, they need to be in reseling conditions. The third measurement criteria is an analysis about the satisfaction. This criteria contains the number of ordered products which could have been not resold or which are not sufficient for manufactoring processes at the right time. Such an analyiss classify each product with a problem for: • Supplier • Article / Product • Problem, which prevents the reselling Typical problems are: • The product was not delivered in time. • The delivered product is not the product you ordered. • A wrong number of products have been delivered. • Necessary description or documentation was not delivered together with the goods. • The product was delivered in damaged condition. • A wrong price has been invoiced. • The package insert or the invoice is not complete or wrong. You should measure periodically the performance of your supplier (at least the key-supplier), as you monitor the following criterias: • Ratio of completeness of the products delivered in time, • Ratio of the products, which had any problem, • Number of events of every problem per product during the last year. Then analyse, whether the problems: • have a negative effect of the service to your customers, • you have been urged to to take more products on stock, • your operational costs increased. Discuss the result with your supplier. Can you help him to solve the problems in future? 1. Collobarative planning - are you able to provide your supplier with better information for upcoming orders? Your supplier may serve you maybe better if he knows, what you will order in the next months. 2. Claim damaged goods - supplier can use this information to improve their packaging or to optimize their shipment process to avoid such damages in future. 3. Incomplete or missing papers - the supplier does not know eventually that incomplete or missing papers makes you impossible to continue processing or to resell. The best way to improve the operational sourcing processes is to reduce the operational costs and to optimize the customer service in a way that claims are managed active in order to include them in the operational process. The analysis of satisfaction for your vendors is a good way to achieve an improvement process for your customers. Contact us, we would be glad to show you the possible opportunities!
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