Each end of period, (monthly, quarterly, by semester or yearly), you want to evaluate your suppliers to rate their efficiency and ability to ensure your supply chain effectively and accurately.
This can be done using the below ratios that can highlight your supplier’s performance :
1. Delivery Compliance Rate: Percentage of orders delivered according to agreed specifications and timelines. This would be : Complying deliveries / total orders issued to a specific supplier.
2. Late Delivery Rate: Percentage of orders delivered later than the scheduled date. You can calculate this one either by average late delivery in days ratio or by percentage of delayed deliveries. You can apply one or both of the following :
For each order :
Promised delivery date / actual delivery date (average late delivery in days)
Number of late deliveries / Total deliveries (ratio of late deliveries. Shows the efficiency of your supplier)
3. Product Quality Rate: Percentage of delivered products that meet defined quality standards.
Every PO goes with a technical specifications’ list, approved by all parties before issuing the PO . Therefore, the deliveries must comply to these agreed specs.
Every delivery must be scrutinized and approved upon reception, thus allowing to consider your supplier’s quality compliance ratio.
4. Communication Rate: Efficiency and responsiveness of communications with the supplier.
Do you have to write 4 emails and reminders before getting an answer ? Do you have to chase your suppliers for updates on your orders and their status?
Are you often redirected to another interface, because the person you exchanged with last month already left, or changed position, without you being informed by your supplier ?
This is what you are looking for here !
5. Issue Resolution Rate: Speed and effectiveness in resolving issues by the supplier.
Self explanatory I guess.
6. Total Cost of Ownership: Overall cost including purchase price, transportation fees, storage costs, etc.
Your product’s cost isn’t only the buying cost. You need to incorporate all the accumulated costs to ship your product to your warehouse (and often also your warehousing cost !), in order for you to encompass the effective and actual product cost you are facing.
So all your transportation, Custom fees, Custom’s warehousing fees, forwarder’s fees, penalties and taxes under Customs, conformity certificate costs, etc.
#Supply_Chain #Suppliers #Purchasing
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