Business managers turn to BI to protect margins in supply processes

In a highly competitive manufacturing landscape, good supplier on-time delivery performance has become vital to cost-cutting and operational efficiency.  Factors such as increased outsourcing and reliance on outside suppliers, globalization of supply chains, and volatile supply markets have laid additional impetus on supplier OTD performance in today’s extended enterprises.

Organizations are increasingly turning to business-intelligence (BI) tools for analyzing their procurement processes and emphasizing their supplier’s delivery performance. Managers are using BI tools as their decision aid to determine which suppliers are contributing positively to company’s supply chain and which aren’t.

An important metric of supplier performance is on-time delivery (OTD), the other areas being quality, total cost, contract compliance and responsiveness. Supplier OTD is defined as the percentage of orders delivered on or before a predetermined delivery date.

Typically the OTD varies across and within industries and from supplier to supplier. For example the best performing supplier could be operating at 95% OTD, worst supplier at lower 50% and the average OTD of supplier network could be in lower 80s. Higher OTDs are indicators of better supplier reliability and consistency.

There are many aspects to measuring supplier OTD performance, the key considerations are below:

1. On-time delivery – the basic metric that gives first level estimates of supplier performance. Companies need to define this to suit their requirements of earliest and latest dates of material receipt that will qualify as on-time.
2. OTD in full – In full is an important aspect which ensures completeness by factoring in quantity and quality of supplies and the delivery reliability.
3. Order lead time with supplier – this is a critical parameter that decides the ability of the supplier to respond to critical supplies. A reduction in lead time at suppliers end has a positive impact on OTD performance.

A strong framework coupled with the ability to measure OTD metrics using advanced BI software can be a sure shot way to monitor and improve supply processes and achieve higher levels of delivery performance from suppliers. Today advanced web-based BI applications are available that offer real-time  dashboards to measure supplier on time delivery performance on all effective parameters for assuring that products meet “on-time” and “in-full” delivery requirements, consistently. These new BI dashboards provide all the required metrics for getting a clear picture of supplier on-time delivery performance, out-of-the-box and require minimal IT help to get started.