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Q&A: Sourcing
What factors can the factory use to assess supplier performance? Elaborate each in 1-2 lines.
Supply Chains – at Internet Speed
Some factors the factory can use to assess supplier performance are:
-Replenishment lead time (demand might be 10,000-15,000, order 10,000 from fair away supplier and 5,000 from near supplier)
-On-time performance (is the supplier getting things to the factory on time?)
-Supply flexibility (will they allow you to change the order or not?)
-Supply quantity (is the supplier meeting demand?)
-Pricing terms (how much credit do they give you? What are the terms?)
Several factors can be used by the factory to assess supplier performance. Below are a few factors to be considered.
– Replenish lead time- How long does a given supplier take to deliver goods from the time order until the order is received.
– Demand Frequency/minimum lot size – How often can orders be made? Will trucks deliver half full or do they have to be full for delivery.
– Pricing terms – What are the credit terms? Some suppliers give longer credit terms than others.
– Information Coordination Capability – Is our information compatible with the suppliers?
Some factors that factories can use to evaluate supplier performance include:
1. Replenish lead time – how long will it take to receive the next order
2. Pricing Terms – terms on how much is due and when, as well as how much credit is being offered
3. On-Time Performance – are orders delivered when you need them
Pricing Agreements – A factory will not agree to contract with a supplier unless the pricing agreements are up to par with the expectations that the factory has set forth.
Lead Time – Being able to order more on a short notice is very critical for stock level sensitive companies. Those with shorter required lead times will be favored as they can accommodate demands quickly.
Supply Flexibility – This is important when considering the changes that occur with demand. A factory might change orders based on changes in demand that occur after an order has already begun to be placed. The ability to make adjustments with limited interference is crucial.
Some factors that factories can use to evaluate supplier performance include:
– Replenish lead time – how long will it take to receive the next order
– Pricing Terms – terms on how much is due and when and how much credit is being
offered and what are the terms
– On-Time Performance – are things getting to the factory on time?
Supply Quality – do the materials meet the standards agreed upon?
Inbound Transportation Cost – maximizing cost savings in inbound shipping activities from the supplier such as order optimization (consolidating shipments and optimizing loads in a single truckload)
Supplier Viability – accessing supplier’s financial strength to understand company’s longevity and risks
Supplier performance can be assessed by:
On-time performance – do the supplies get delivered and reach the factory just in time or a little bit before production
Supply quality – are the supplies of a high quality that will help differentiate your product
Inbound transportation cost – how much it will cost your company to have the supplies delivered to your factory, want this to be minimized
I think the most important factors to assess supplier performance are:
1) cost of goods and shipping
2) replenishment lead time
3) percentage of on-time deliveries
4) percentage of stock outs
5) quality of goods
Factors can be used to access supplier performance:
Replenishment lead time-The total period of time take to deliver goods from the time order until the order is received.
On-Time Performance- products are delivered on schedule
Supply Quality-products meet the quality standard
These factors assess supplier performance:
1.)Inbound Transportation Cost- It should reduce costs, improve service, minimize delays, reduce confusion and raise performance.
2.) Replenish Lead TIme – The time it takes for an order to be fulfilled.
3.) On-Time Perfomance – The level of success of the service to meet the schedule.