Impact of data on supply chain decision making
Filed Under Blog
All businesses have to make decisions – it will typically come down to one of two things – subjective argument (“I think this”) or analysis of data (“I know this”).
Let’s think about a few examples
Supplier performance
Subjective – “My production manager is always complaining that they are waiting for parts – my supplier performance must be bad – I’ll send a complaint email to my biggest volume suppliers and tell them I want improvements”
Analysis of data – “I’ve analyzed on time delivery from my suppliers and last month we had 1000 deliveries of which 901 were on time 29 were early and 70 were late. Of the 70 were late – 70% came from a single supplier.”
Supplier quality
Subjective – “The production manager says that we have to scrap large quantities of material because it doesn’t meet spec.”
Analysis of data – “Of 1000 deliveries received 960 passed inspection from our quality engineers, a further 40 were sent back to the supplier as they failed to meet our purchase order criteria.”
With these simple examples it’s easy to see where the robust decision making sits – data analysis should always provide a better platform for decision making than subjective argument however what happens if your system data is flawed and you simply don’t trust it?
How good is your data? Data for decision making
Confidence in your organizations data is key! – arguing with a supplier for improvement in delivery is all well and good but its an all too common experience to find yourself sitting across the table from your supplier with two different sets of data portraying two different situations of reality.
Where does your data come from?
Most companies will have a number of computer systems for executing business transactions from procurement to financial through to human resources – this is where most data is extracted for reporting purposes.
Data integrity can become an issue where incorrect data is entered for transactions (for example the expected delivery date of purchase orders) – without a suitable ongoing data checking/cleansing activity incorrect data can become a real problem affecting decision making.
Getting the most from your data – 6 point plan
1/ Use one system – everyone transacts on the same system (no hidden spreadsheets or databases!)
2/ Check for data integrity issues (run reports!) – if the data’s wrong – fix it!
3/ Centralize management information – get data from one place which means one version of the truth that everyone uses
4/ Adherence to process – focus on clean data being entered into the system (should include system training as appropriate)
5/ Adequate controls over who can enter what data
6/ Data integrity is seen as a serious issue by business leadership
The purchasing process is perhaps typified by the activity of raising a purchase order – the document that tells the supplier I want this item and I want it delivered at this time. In the wrong hands, purchasing processes can be complicated and bureaucratic with intricate exchanges of information and authorization requirements. Getting to the point of raising an order and getting signed of can in some extreme examples feel like you’ve run a marathon! But as most buyers will tell you, once the purchase order has been released that is not the end of the story. What happens after the order being dispatched is as crucial, in many ways to getting the order raised in the first place.
Order Acknowledgements
An order acknowledgement is a document that is raised by the seller upon receipt of your purchase order – it signifies acceptance of your order (maybe with caveats if documented). If you had any specific commercial requirements check acknowledgements carefully as it is common practice for companies to issue acknowledgements subject to their own terms and conditions rather than the buyers!
Order acknowledgements mean
• You have a contract in place
• The supplier has my order
Its commonplace for buyers to be responsible for chasing order acknowledgements from their suppliers.
Order Amendments
Remembering that the purchase order, when acknowledged/accepted represents a formal contract between the buyer and seller, changes should not be taken lightly – however – amendments are a common example of what can occur following the purchase order being raised. Examples include:
• The buyer requires a greater quantity of parts
• The Buyer requires different parts
• The buyer requires commercial changes
Where it is decided that a new order will not be raised – amendments to an existing outstanding order will take place (but will require additional order acknowledgements from the supplier).
Expediting
One of the most common tasks is in chasing parts due delivery. Complex, mission critical parts may require a close level of planning and communications between the buyer and seller to ensure that items remain on program. In severe cases – day plans may be instigated tracking each step of the manufacturing and logistics process to ensure that the part is meeting its lead time – highlighting an early stage where parts may not be delivered to schedule.
Rescheduling
In some cases where business needs necessitate order schedules may be amended – this may be pushing requirement out to a later delivery date – or conversely – bringing the item forward. This will typically be administered in close consultation with the supplier to ensure that the revised schedule can be achieved.
Summary
Various tasks should be undertaken following issuance of the purchase order. Many of these tasks are carried out by the same buyer that raised the order – with some tasks crucial to ensure problem free continuity of supply.