Nov
3
How to use supplier appraisals and evaluation techniques
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Managing suppliers in a robust way that delivers tangible and measurable benefits to an organization requires various supporting policies and processes. These include the process of supplier evaluation. But what is supplier evaluation? And why, if your not doing already, should your business look to implement it?
My business requires our suppliers to be certified – isn’t that supplier appraisal?
Many businesses use initial selection criteria when sourcing suppliers. This criteria can range from whether the supplier holds externally verified certificates (i.e. BS EN ISO) through to the size of volume of spend vs supplier turnover and increasingly in the world of corporate responsibility whether the supplier has appropriate social and environmental policies.
Using this form of selection criteria can offer companies a screening process which can ensure that appropriate suppliers are selected for RFP and product competitions. The selection criteria ensures that selected suppliers meet or comply with standards. However merely evaluating suppliers based on certificates held is not true supplier appraisal.
True appraisal can be defined as assessment of the proposed supplier and their capability of managing the supply requirement – this will typically include four factors
Quality
Price
Service
Delivery
The supplier appraisal will typically take the form of an assessment or “score carding”. Criteria or rating requirements are established that can be combined into an overall score which can then be analyzed objectively against other suppliers.
Why should you evaluate suppliers?
Supplier appraisal is a helpful tool in de-risking the supply chain. If the supply of product fails, the buying organization may face serious consequences. Selecting the right supplier is a critical step in the purchasing process. Carrying out pre-contract appraisals should be considered good practice that helps to mitigate against continuity failures within the supply network.
Supplier appraisals are not just for the pre-contract phase however and can be used as part of ongoing supplier management and development strategies.
Benefits of using Supplier appraisals post contract award
There are various benefits to utilizing appraisal post contract award – these include ensuring the supplier retains the capacity and capability for supply. Another prominent reason to use post-contract supplier appraisal is to continually monitor performance (cost, quality and delivery) identifying any performance issues that may exist. Supplier evaluation/appraisal should be considered an essential tool in performance and cost management.
What should be measured in a supplier evaluation?
As stated, typically most organizations will focus on four main critiera in pre contract assessments these are
Cost
Quality
Delivery
Service.
In light of recent developments regarding corporate responsibility this may be appended with sustainability/Green buyingrequirements.
For pre-contract appraisal this may be further appended through adding
Performance
Capability (in line with any expansion requirements).
The weighting of each element may vary from industry to industry and company to company and indeed product to product. In some organization e.g. Pharmaceuticals quality is likely to be of optimum importance. In FMCG where quality and delivery are considered a given – cost may become a priority.
Building a model on which to appraise suppliers?
Luckily supplier appraisals don’t have to be over complicated however they require some thought and communication. The first step is to define your assessment criteria. The criteria should be communicated to the supplier (which must clearly understand requirements and how measurements will be made) an audit carried out and assessments made. For post contract appraisal this may mean regular ongoing assessments.
Summary
Supplier appraisal and evaluation is a key tool, which can be utilized both in the pre-contract phase in selecting supplies to source from and also in the post-contract phase in assessing performance.
The model used in the assessment is just that a tool that can be adapted for each organization and one that pays particular attention to their key business drivers. By placing close attention to supplier selection you are far more likely to manage the total cost of the transaction (not just the initial purchase price!).
Finally – post contract supplier evaluation activities are fantastic for improving communication between suppliers and buyers and represent and ideal opportunity to seek out and deploy improvement initiatives.
Nov
3
Key reasons preventing Warehouse Management System usage
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Warehouse management systems (WMS) represent a key supply chain toolset which can be utilized to help optimize logistics functions.
WMS’s primary activities involve
• Processing routine warehouse transactions
• Co-ordinate the flow and storage of materials within the warehouse
• Optimize locations (for putaway and picking)
While there are many associated benefits of WMS many companies remain cautious about investing in implementing WMS. There is various reasons behind this which include
More people rather than software
There is a misnomer that rather than invest in a WMS an alternative is to employ more staff (which are typically at the low end of the corporate pay scale) – throwing people at the job is considred quicker and easier and when contrasted with a software implementation less likely to fail. However this approach fails to address optimization improvements that data systems can bring.
Inhouse vs Buy it in
Many companies attempt to use low cost 3rd party applications or more frequently endevour to build
in-house applications that attempt to manage key activities usually related to WMS systems. This can be considered to be more cost effective however this often fails to assess the risks involved with utilizing in house development teams. Once again this method can fail to capitalize on the key optimization opportunities available with a full fledged WMS system.
Integration woes
It is imperative, for WMS deployment to be a success, that implementation includes seamless integration with existing corporate (often legacy) systems. Many organizations are fearful of this and suspect rather than simply deploying a WMS whole scale system changes will be required, especially where they may be relying on legacy ERP applications which will then result in far greater capital outlay.
Lack of strategy
While WMS usage has undoubtedly grown one issue that is impacting the growth of implementation is a lack of defined business strategy and long term business planning. Organizations are often unaware of both the key logistics functions and the ROI opportunities that WMS can offer and can remain locked in to a low technology base in the Logistics function due to a lack of strategy
A lack of understanding regarding ROI can be a key barrier. Long-terms benefits can appear a mystery and concerns about complexity and their application within smaller warehouse sizes can inhibit decision-making. For some, achieving benchmarked levels of warehouse performance is a lower priority to delivering improvements in other areas of the supply chain (for example procurement) and as a result WMS doesn’t achieve senior buy in and projects don’t get launched.
Fear of failure
For some the key reason that WMS are not deployed is fear that the system will not work. Fears over inability to process and ship orders can significantly inhibit green lighting WMS projects. Where processes are not broken (and need to be repaired) concerns over failure in the logistics function which can bring an organization to its knees can result in a cautious approach to WMS implementation.
The real picture
Warehouse Management Systems can be an undoubted success. Software companies can provide comprehensive and effective solutions that deliver best practice, compliancy and ROI. Most solution providers will help manage the change management aspect (which many businesses remain fearful of) through normal consulting routes
There are many benefits relating to WMS from efficiency to accuracy and WMS can offer intangible benefits also. However, as with any software solution, deployment and implementation require careful consideration of a number of factors including requirements, complexity of process, required results and how the WMS will be deployed through utilizing well planned phased inclusive approach.