Great Suppliers Make Great Supply Chains

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In Brief

Suppliers have become a vital component to running a business in today’s competitive markets. Successful organizations and businesses alike pay close attention to Supplier Performance Management and Supplier Relationship Management structures. Applying Six Sigma measurement to Supply Chain Management, for example, can see a 15% boost in operational efficiency

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     Mr. Dan Georgescu, Assistant Professor of Operation and Supply Chain Management stated “To make supply chain a successful bid, evaluating and measuring performance is a process that requires continuous improvement. Because the industry is rapidly evolving at present, allowing suppliers to play key roles in running the business is critical to achieving success.

     Thinking about it, many companies have set up automated platforms for procurement, payment, and various procedures to curb unnecessary costs. But when it comes to Supply Network Management, the majority operators resort to freeware, or free software designed to introduce or promote certain features but not in anyway optimized for scalable applications across operational functions. Consequently reflective of such inefficacy, surprisingly to many, Supplier Performance Management has not become an important organizational component as ineffective. Surprising,  as at this day and age into third generation digital capacities tailor made IT platforms, including streamlined database management, are definitive to the very structure and thereby productivity and overall efficiency of both internal and external systems the organization operates upon. In other words, Supply Chain simply doesn’t function properly with poorly designed IT capacities.

     Kent Barnett, CEO of ClientLoyalty, explains that his company puts money where the mouth is by making Supplier Management itself a data-driven device that optimizes  supply chain procedural efficiency with the most cost-effective approach where organizational vision and strategy are streamlined. He also acknowledges interpersonal relationship with suppliers as a key success factor affecting the performance of an organization as a whole.

    Mr. Barnett continues that he sets KPIs for measuring supplier performance as well as other related channels, such as news and social media, as they provide information on trends faster than mainstream pipelines. Since we are in the world of big data and data analytics, why not put available capacity to good use and make the most of the information we have, apply it to supply chain management and approach it with Six Sigma principles.

     Six Sigma is a management technique for Improving business processes through the reduction of the probability of error that may occur. For example, In the automobile industry, Failure Mode and Effects Analysis (FMEA) is a process derived from product life cycle studies. The industry recognizes that FMEA’s results is a key indicator of performance that is constantly analysing available data to enhance work processes. Thus, a lesser chance for error. The system also rates suppliers by collaborative efforts on joins projects, as Six Sigma considers supplier coordination-ability a kept performance indicator, as well.

     Many analysts agree that efficient Supplier Performance Management can add significant value to the overall business process by up to 15%. Supplier Performance Management should not be re-evaluated on a case to case basis. Rather, all available historical data should be analyzed to properly design an progressive solution in a preemptive manner, as opposed to reactive problem solving approaches. When a problem occurs it can be dealt with and resolved immediately, in a systematic fashion.

     In short, great suppliers make a great supply chain. That granted, however we look at it, the supplier is merely one factor among many others that must be handled properly and collectively for the overall operation to function at optimal level. Other factors such as efficient and effective delivery systems, time management or distribution channels that reach consumers all play a vital role in supply chain management.

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Reference and picture credits: forbes.com, lertad.com, santipopbuddeesing.blogspot.com

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