Supply Chain Visibility and Supplier Scorecards: What You Need to Know
What does this mean for F&B?
Companies face increased pressure all along the value chain. Food and beverage executives see better supply chain management as a critical business strategy to survive in a highly competitive market. Supply chain initiatives can cut millions of dollars in costs, providing a much-needed competitive advantage.
While there are many elements to effective supply chain visibility, brands look for significant value from execution-based supply chain management.
Gaining executive insight into supply chain performance and monitoring KPIs generates data that drives lean manufacturing approaches, including Theory of Constraints (ToC) and LSS (Lean Six Sigma).
Directors, managers, and C-level executives can analyze data in real-time, and across multiple and disparate data sources, as opposed to waiting for pre-defined reports, which don’t support short-term issue resolution.
Supply chain visibility provides full scalability across all departments to allow analysis and exposure of unseen opportunities.
These data range from a sales and operations planning (S&OP) process, inventory management, supply chain operations, analyzing sales, production, inventory, and customer lead time (backlog) plans. Supply chain visibility also improves food and product delivery, reducing overall costs.
In fact, at recent GS1 U.S. Conference, speakers described visibility in the supply chain as critical. Why? In the fresh foods industry, an integrated traceability process could represent at least $3 billion in savings. Speakers also concluded that supply chain visibility represents a shared product view, which can boost sales and customer loyalty. They achieve this by cutting out-of-stocks by and meeting FSMA compliance requirements.
Suppliers and scorecards
An excellent way to predict potential risks is through a risk-forecast model. Because no one has identified a single, industry-wide model, companies use various sources to forecast and prevent threats internally. Food and beverage industry executives are increasingly working to devise a potential framework for identifying and prioritizing product risk. Manufacturers can leverage data captured in the repository to develop criteria essential for identifying targeted products and developing scorecards.
The risk assessment includes market intelligence on supply and demand distortions. And industry experts conduct simulations to predict future threats. Finally, the model tweaks the assessment based on the “riskiness” of a supplier. This process helps to identify existing risks as well as predict emerging ones. It’s not a one-time procedure, but an ongoing rating process that brands must review and reprioritize periodically to remain relevant.
Robert J. Trent reported in Supply Chain Management Review that the types of scorecards in use typically fall into three categories — categorical, weighted point, or cost-based performance across different categories.
For relatively unimportant items, this can be an effective way to evaluate supplier performance. As it relates to supplier scorecards, most supply chain organizations use a weighted point system that includes a variety of performance categories, provides weights for each group, and defines the scales used for scoring within each category.
The third type — cost-based systems — is used least. It attempts to quantify the total cost of doing business with a supplier over time. Some companies use a hybrid system comprising several of these approaches.
Supply chain visibility
Companies using a system like TraceGains, however, can scorecard their suppliers on anything. Because TraceGains can provide a complete view of a supplier. It’s relatively easy to create a supplier scorecard formula that considers every performance metric that’s important to you and your company. You can then run reports to show the scorecard score for each supplier across all suppliers or generate a specific supplier scorecard for individual suppliers.
In any case, a supplier’s performance can and should be compared to a competitor’s and against expectations. Customers should schedule a business review with the supplier and discuss the report’s details to ensure a supplier understands the scorecard results. During this discussion, it’s vital to identify key result areas where gaps exist, and improvement is needed. Weaknesses can be relative to immediate customer needs, competitors in a peer group, and expectations. It’s then essential to schedule a follow-up to reassess performance.
Find out how TraceGains can help your company mitigate risk by downloading “Managing Risk in the Global Supply Chain.”