A Guide to Supplier Performance

Poor-performing suppliers can be detrimental to the reputation and profitability of your business. Finding ways to improve the performance of your supplier will not only benefit your bottom line but also keep your customers happy. 

Although some supply chain bottlenecks are unavoidable, there are measures you should take to avoid them. 

In this article, we’ll cover how to evaluate supply chain performance, what measurements you should consider using, how the supply chain affects business performance, and ways you can improve your supply chain.

How to Evaluate Supply Chain Performance

Supply chains are the backbone of many industries. When supply chains are working well businesses are able to operate at full efficiency. 

The performance of a supply chain can be evaluated by the ability to transport goods and maintain supplies. That also means not overproducing. 

A high-performing supply chain is able to produce goods and bring them to customers in a timely manner when demand is high and adjust when demand and supply is low.

Measurement

The performance of a supply chain can be measured. This is good news for businesses looking to improve their shipping services and make transporting goods more efficient.

Supply chain performance is measured using key performance indicators (KPIs)  that help define and structure data sets to create action steps.

The Importance of Supply Chain Performance Measurement

Tracking the performance of your supply chain is important for maintaining smooth operations. When you keep a close eye on supply chain analytics and distribution metrics you’ll be better equipped to make important changes to improve your bottom line.

Organizational performance is also improved when implementing supply chain management. You’ll be better able to track and maintain your business’s supply chain and where your production and shipping efforts are.

How to Measure Supply Chain Performance

The first thing to do is identify key metrics. These metrics should align with business goals and be actionable and traceable.

You can use metrics like inventory turnover to track the health of sales and adjust production levels or warehouse inventory to improve your business's bottom line.

To get started, evaluate what metrics you’ll have access to and start with a smaller list of KPIs that are important to your business. Some metrics will require daily upkeep while others may be a weekly or even monthly check-in.

Supply Chain Performance Metrics & KPIs

The supply chain is made up of a lot of links. It’s hard to know where to start tracking KPIs. These are just some of the supply chain performance KPIs you can track:

• Order accuracy
• Inventory turnover
• Transportation costs
• Warehousing expenses
• Production cycle time
• Fulfillment cycle time
• On-time delivery
• Lead time

Each of these can be tracked in different ways, but they each interact with each other in some way. Inventory turnover can affect warehousing expenses and order accuracy can affect the fulfillment cycle time.

The DMAIC Strategy

The DMAIC strategy is a beneficial tool that helps businesses improve in a lot of areas, including your supplier processes. The components of the DMAIC strategy are:

• Define: define and identify the problems you wish to solve
• Measure: collect data on the current status of your operations
• Analyze: analyze the data to identify the root of the problems
• Improve: come up with ideas that could fix the identified problems
• Control: design a plan to make sure your new strategy can be put in place effectively

Developing an effective strategy will give you an edge over competition, keep your customers happy, and reduce expenses.

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How The Supply Chain Affects Business Performance

When supply chain issues arise it’s easy to see how business performance is affected. However, small bumps across the chain can cause ripples that affect business performance in ways that are harder to notice.

For example, if your warehouse inventory may be taking up more space than you need. If you optimize the amount of goods you store in the warehouse you can decrease warehouse costs, improve cycle times, and decrease transportation costs. 

Drivers of Supply Chain Performance

Throughout the supply chain, there are key areas that drive performance. Depending on your business model and location some of these will be more or less important.

• Production: When production lines are open they can pivot to meet fluctuations in demand. This could mean improving facility capacity and manufacturing techniques.
• Inventory Management: Finding that line between overstocking and understocking takes a deft hand. When you find that sweet spot you’ll be saving money on warehousing costs and production.
• Location: Depending on your business you may be able to move locations or open a second location to improve proximity to customers. Anything that decreases transportation costs is a welcomed change.
• Information: Trends can change a lot. During the tail end of 2020, it was virtually impossible to find mozzarella cheese because Gigi Hadid posted about her vodka sauce noodle recipe. Trends and schedules drive performance and should be optimized.
• Transportation: Transportation across the supply chain drives performance. If you’re struggling to bring supplies to manufacturing facilities then you won’t be able to pivot when production levels need to change. And now customers expect faster-than-light delivery speeds.

Supply chains are more effective and responsive when all of these drivers work together.

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How to Improve Supply Chain Performance

Improving your supply chain can only happen after you’ve collected a lot of data. Before making any big changes, make sure the data you’ve collected is enough to make conclusive judgments.

Take a look at how your KPIs are performing and consider what drivers are negatively affecting your supply chain performance. 

Here’s an example of improving supply chain performance:

• After tracking KPIs for some time now you’re noticing that your on-time delivery is low. This also affects the length of the fulfillment cycle and is affecting your bottom line. Thanks to your data tracking efforts you notice that many of the late deliveries are occurring in the same region. You decide to fix this by improving your location driver and decide to open a warehouse in that region.

Issues across the supply chain can be improved by focusing on the key drivers that affect those KPIs.

How Open Road Can Help You

The last mile of delivery is where all of your supply chain efforts should be focused. Bringing products to customers is the most important part of the process. It’s also the part you're being graded on.

Open Road is dedicated to making the last mile of delivery as effortless as possible. Our platform gives businesses access to a growing fleet of hotshot truckers who can meet your transportation challenges.

When you use Open Road you won’t need to wait for a full truckload or the perfect timing. Open Road is shipping simplified. Sign up to see the difference Open Road can make.