Mar
7
Are You Too Lenient On Your Suppliers When They Fail To Deliver?
Filed Under Blog | Comments Off on Are You Too Lenient On Your Suppliers When They Fail To Deliver?
The whole issue of how to take action against suppliers who let you down is not an easy one to reconcile. Yes, it is important to take action against any suppliers who fail to deliver. But what action should you take?
For example, if a supplier fails to on a consistent basis and provides little credible evidence of a fault or desire to improve you could consider yourself quite within your rights to source elsewhere.
However, there is a converse to being too harsh and that is being too lenient. For example you may have a supplier that fails to deliver to schedule the first time, but promises not to repeat the offence. Then the supplier fails to deliver for the second time, and a third time each time suggesting that next time will be better. If you just keep on forgiving the supplier and being lenient, then they may well place you at the bottom of their priorities concentrating their efforts on making sure that customers who are more vocal will get deliveries on time, every time.
Suppliers are only human and if they think that a particular customer will not complain or will not be too punitive, if they miss a deadline, then they will be more likely to miss that deadline and meet others. That is not to say that they are being disrespectful, they are simply making judgment calls, according to what they think will bring them the least amount of hassle.
Ultimately however, being either too punitive or too lenient is not a good thing and there are lots of difficulties associated with both. Perhaps the best way to be is to be firm but not too firm, in other words applying an appropriate process that sets the expectation of buyers requirements to the seller whilst establishing grounds for corrective action (or damages) in the event of failure.
For example, Wal-Mart are taking action with regard to suppliers who fail to deliver. ‘Failure to deliver’ can of course be about delivering too early or delivering too late. Usually we all think about failure to deliver on time as being about late deliveries, but if you have a delivery made a week too early, it is often viewed as a fail as it ties up cash and other ‘processing’ resources.
Thus Wal-Mart have come up with a new system whereby suppliers need to have their goods delivered in a 4 day ‘window’ which culminates in a MABD, which is an acronym for Must Arrive By Date. If the goods have a MABD that is on a Thursday, then they can deliver Monday through Thursday of that week. If they consistently fail to meet this deadline, then they will have a penalty charge, which set at a % of the invoice. This acts as a way of ensuring the supplier knows the requirement and sets a contractually agreed rate to apply damages if errors occur.
By ensuring that buyer and seller have a process to follow, KPI’s and contractually agreed terms in case or failed delivery/quality both buyer and seller know where they are – there is no ambiguity (other than who’s fault the failure is) and it isn’t a case of being either too lenient or too draconian depending on the situation all suppliers are treated the same.
Mar
7
How Your Business Strategy Is Influenced By Your Supply Chain
Filed Under Blog | Comments Off on How Your Business Strategy Is Influenced By Your Supply Chain
Business strategy is tacitly linked and strongly influenced by the supply chain. From global supply networks, delivery streams, through to performance management and instability. The supply chain can be a key constraint in how businesses targets growth and product development.
Most business strategies will consist of goal and policy setting. Typically goals will relate to products and strategies targeted toward gaining market share and increasing customer value both of which requiring increasing levels of competitiveness and agility.
Whilst strategy has a significant part to play in setting the requirements and objectives on business functions the instability of the supply chain can act as a significant constraint (or accelerator) setting the speed at which the business moves and reacts.
Instability, often associated with supply chains, and business strategy are not commonly seen as being easily combined. For example, strategies targeting business growth may be a key part of the business strategy, but business growth will be difficult if the supply chain is constrained by capacity or the supplier network (let alone obsolescence or broader commodity issues).
Once a strategy has been defined careful management will be required to reach objectives ensuring that issues in terms of cost, quality and delivery are kept to a minimum. Objectives may well necessitate change – be this at a supplier level (e.g. lower costs) or at a sourcing level (for new products) or within the broader logistics channels to target reducing lead times to the customer. Many manufacturing organization’s business strategies are tightly coupled with commodity markets. For example, when wheat rises by 45% in only a very short time, then the business strategy of a pasta making firm is almost as directly affected than that company’s supply chain.
With broadening compliancy and environmental policies many business strategies include responsibility targets which while are not exactly attuned to the physical product may well require re-configuration of the material flow.
The close interdependence of the business strategy and supply chain needs to be openly acknowledged, so that the two can be viewed in the context of how they affect each other. There are a myriad of different ways in which the supply chain and business strategy are closely intertwined and if a company thinks that the supply chain and the business strategy are independent from each other, then this can severely hamper the implementation of any plans that are established or goals that are set.