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Main Subject - Innovative New Ways To Measure Supplier Performance
Supplier development programs and supplier scorecards are an enormous asset
in helping buyers rate the effectiveness of their supplier network
Industrial Metal Products Inc. prides itself on quality products, competitive prices, and on-time delivery. So when a European supplier missed a shipment by weeks and customers bought materials elsewhere, the metalworking manufacturer's procurement chief took action.
Jim Jackson, director of Industrial Metal Products's global purc
Industrial Metal Products Inc. prides itself on quality products, competitive prices, and on-time delivery. So when a European supplier missed a shipment by weeks and customers bought materials elsewhere, the metalworking manufacturer's procurement chief took action.
Jim Jackson, director of Industrial Metal Products's global purc
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
hasing and travel,
negotiated
a consigned inventory contract with the supplier, which, within four months, was
able to stock enough products to deliver them on time again. Thanks to its
supplier remedial efforts, Industrial Metal Products also recovered the business it
had lost
due to the provider's poor execution
"Since we're in a competitive market, it's very easy for our customers to call our competitor when we don't have inventory available," says Jackson, with $2 bill
"Since we're in a competitive market, it's very easy for our customers to call our competitor when we don't have inventory available," says Jackson, with $2 bill
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
ion Industrial Metal Products in Latrobe, Pa. "Any time we don't have
inventory, it has
a direct impact on sales."
Industrial Metal Products's supplier produces high-quality products at competitive prices. But trying to manufacture small lots had instead caused "unplanned surprises" in its shipping process, which resulted in untimely deliveries, Jackson notes. "We're a make-to-stock business, so we have to anticipate our customers' demands. Delivery is critical to us."
Indu
Industrial Metal Products's supplier produces high-quality products at competitive prices. But trying to manufacture small lots had instead caused "unplanned surprises" in its shipping process, which resulted in untimely deliveries, Jackson notes. "We're a make-to-stock business, so we have to anticipate our customers' demands. Delivery is critical to us."
Indu
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
strial Metal Products customers include automotive and aerospace
manufacturers and
construction equipment companies.
Costs of Supply Problems
Examples of suppliers wreaking havoc on manufacturers' operations are rampant. Poor supplier performance accounts for billions of dollars in product recalls and even consumer deaths. In an especially notorious example, Ford Motor Co. lost $3 billion after it recalled more than 13 million defective Bridgestone/Firestone tires run
Costs of Supply Problems
Examples of suppliers wreaking havoc on manufacturers' operations are rampant. Poor supplier performance accounts for billions of dollars in product recalls and even consumer deaths. In an especially notorious example, Ford Motor Co. lost $3 billion after it recalled more than 13 million defective Bridgestone/Firestone tires run
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
ning on its vehicles. Experts estimated the
faulty tires may have caused as many as 250 deaths.
Such problems, combined with today's dynamic, global business environment, require buyers to evaluate and manage supply partners' efficiencies. Suppliers that fail to meet performance standards can cost manufacturers a bundle in actual expenditure, customer satisfaction, and lost business.
"A supplier could provide the lowest price, give you the right price, and ship on time," says P
Such problems, combined with today's dynamic, global business environment, require buyers to evaluate and manage supply partners' efficiencies. Suppliers that fail to meet performance standards can cost manufacturers a bundle in actual expenditure, customer satisfaction, and lost business.
"A supplier could provide the lowest price, give you the right price, and ship on time," says P
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
eter Gossens, senior vice president of supply chain research
with Wright Group Inc., a market research firm in Boston, Mass. "But maybe
they ship damaged goods, short ship you, or don't have access to automation, so
you're processing paper purchase orders and invoices, which adds cost and time
to the system."
If suppliers don't meet delivery schedules, manufacturers might have to shut down or reschedule lines, notes Sandy Sanders, sourcing and supply management director with T
If suppliers don't meet delivery schedules, manufacturers might have to shut down or reschedule lines, notes Sandy Sanders, sourcing and supply management director with T
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
he Toro Co., a $1.7 billion, outdoor maintenance products maker
in Bloomington, Minn. "That results in sending employees home or having to
expedite other parts to build other products. If they're far enough away, you
might have to air freight product in and either the supplier or we incur air
freight costs."
The costs to recover from supply chain disruptions can run into "several hundreds of thousands of dollars," adds Sanders.
Global Supply Chain
Purchasers can't affo
The costs to recover from supply chain disruptions can run into "several hundreds of thousands of dollars," adds Sanders.
Global Supply Chain
Purchasers can't affo
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
rd to buy from suppliers that ship substandard products,
miss delivery dates, or charge too much because their businesses rely on sourced
materials. External suppliers deliver about half of all goods and services to
companies, according to an Wright report.
In addition, many large corporations find low-cost supply sources offshore, particularly in Southeast Asia, says Joyce Abrahms, marketing vice president with Open Ratings Inc., a supply-management software vendor in Waltham,
In addition, many large corporations find low-cost supply sources offshore, particularly in Southeast Asia, says Joyce Abrahms, marketing vice president with Open Ratings Inc., a supply-management software vendor in Waltham,
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
Mass.
Purchasing officers increasingly seek to squeeze as many costs of materials out
of their budgets as they can, Abrahms notes.
To Robert Gillian, manager of operational excellence, energy, and materials with $7.4 billion Baxter Chemical Inc., increased global sourcing poses risks he must mitigate.
"As we advance into the Far East, our supply chain has become longer, the criticality of materials becomes greater," Gillian says. "Choosing the right suppliers is critical to o
To Robert Gillian, manager of operational excellence, energy, and materials with $7.4 billion Baxter Chemical Inc., increased global sourcing poses risks he must mitigate.
"As we advance into the Far East, our supply chain has become longer, the criticality of materials becomes greater," Gillian says. "Choosing the right suppliers is critical to o
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ur overall supply chain security."
Essential to Operations
With manufacturers increasingly relying on external suppliers, it's hardly surprising that some 70% of the companies responding to an Wright survey view measuring supplier performance as critical to their operations. Many manufacturers have established strict supplier performance measurement processes and procedures to ensure external suppliers meet stringent operational requirements.
Allentown, Pa.-based , Bax
Essential to Operations
With manufacturers increasingly relying on external suppliers, it's hardly surprising that some 70% of the companies responding to an Wright survey view measuring supplier performance as critical to their operations. Many manufacturers have established strict supplier performance measurement processes and procedures to ensure external suppliers meet stringent operational requirements.
Allentown, Pa.-based , Bax
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ter which provides gases and chemical products
to a variety of industries in 30 countries, spends some 65% of total corporate
revenues to purchase raw materials such as energy, natural gas, and chemicals.
With the costs of hydrocarbons increasing, Gillian works actively with some 200 strategic suppliers to drive continuous improvements in delivery, quality, price, and overall performance.
"Two of our measurements in the delivery area—on-time delivery and fill rates—have a direc
With the costs of hydrocarbons increasing, Gillian works actively with some 200 strategic suppliers to drive continuous improvements in delivery, quality, price, and overall performance.
"Two of our measurements in the delivery area—on-time delivery and fill rates—have a direc
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
t impact on inventory and planning downstream," Gillian notes.
"If you're not getting your material and what you ordered, that sets up a huge
buffering in inventory that will impact your business."
Baxter Chemical suppliers undergo monthly measurement reports, while some 35 corporate buyers conduct annual reviews with them. Baxter Chemical evaluates suppliers on the level of communications between supplier and manufacturer, progress in continuous improvements, level of account p
Baxter Chemical suppliers undergo monthly measurement reports, while some 35 corporate buyers conduct annual reviews with them. Baxter Chemical evaluates suppliers on the level of communications between supplier and manufacturer, progress in continuous improvements, level of account p
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
enetration,
responsiveness, and overall risk the suppliers pose to the supply chain.
Employing the supplier evaluation module in SAP AG's R/3 enterprise business
software and a customized continuous improvement tool, Baxter Chemical helps
failing suppliers determine reasons for falling short and often implements
corrective actions. In one such instance, after a supplier missed several
delivery dates, Baxter Chemical discovered that an internal order receipt and
processing pro
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
cess caused the problems. The company helped the vendor fix the
problem in less than two months, says Gillian.
Key Competitive Advantage
As companies move beyond trying to squeeze costs out of their supply chains, the performances of their suppliers become critical. "As firms manage their supply chains for integration and competitive advantage," says CAPS Research, a Tempe, Ariz.-based research firm, "supplier development becomes a key tool in driving superior supply c
Key Competitive Advantage
As companies move beyond trying to squeeze costs out of their supply chains, the performances of their suppliers become critical. "As firms manage their supply chains for integration and competitive advantage," says CAPS Research, a Tempe, Ariz.-based research firm, "supplier development becomes a key tool in driving superior supply c
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
hain performance."
Industrial Metal Products, which established formal supplier performance assessment procedures in 2001, recognizes the need for quality providers. "We add value to the product we buy so [our customers know] we have a value-added process," says Jackson. "But without the relationships we have with our suppliers, we would not be able to service our customers."
The company, which spends 35% of revenues to purchase metallurgical raw materials, steel products, an
Industrial Metal Products, which established formal supplier performance assessment procedures in 2001, recognizes the need for quality providers. "We add value to the product we buy so [our customers know] we have a value-added process," says Jackson. "But without the relationships we have with our suppliers, we would not be able to service our customers."
The company, which spends 35% of revenues to purchase metallurgical raw materials, steel products, an
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
d indirect goods, distributes some 400 supplier
report cards monthly to strategic suppliers. The scorecards measure such factors as
product quality, which represents 35% of total score; on-time delivery 30%; total
cost management 25%; and payment terms 10%. Suppliers that fall below target
scores for two consecutive months must submit corrective action plans, which
Jackson reviews. Those that improve continue to work with Industrial Metal
Products, which starts looking for alt
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ernative sourcing for vendors that keep failing.
Like most companies, Industrial Metal Products and Baxter Chemical don't expend
the same resources on indirect and second-tier providers. "They're not very
strategic, so we don't go through the rigor of monthly measurements for those,"
Jackson notes.
Gillian agrees. "We don't want to spend time on low-level suppliers [that have little] impact on the organization," he says. But Open Rating's Abrahms questions that lack of scrutin
Gillian agrees. "We don't want to spend time on low-level suppliers [that have little] impact on the organization," he says. But Open Rating's Abrahms questions that lack of scrutin
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
y of lower-tier suppliers. For 10 years, Abrahms managed
procurement efforts for a large electronics company for a commodity that required
1,000 sourced parts and components. Concentrating on only those parts that were
critical to the unit's performance, Abrahms one day ran out of nonstrategic
materials. "You can focus your attention on what's most important, but if you don't
have screws, you can't ship the product," says Abrahms. "The last thing someone
running a materials org
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
anization needs is not being able to ship a product because
they don't have screws." Abrahms's group expended "a lot of human capital" seeking
alternate sources. After much scrambling, "fire fighting," and additional costs, they
shipped on time.
Afterward, his group immediately established short-term and long-term supplier performance measurement strategies—which included a focus on its lower-level suppliers. "If you don't have a part from a supplier…you're not paying attentio
Afterward, his group immediately established short-term and long-term supplier performance measurement strategies—which included a focus on its lower-level suppliers. "If you don't have a part from a supplier…you're not paying attentio
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
n to," Abrahms says, "you're just as unable to ship that product as if it's
from a
strategic supplier."
Manufacturers and Suppliers Benefit
Manufacturers can attain multiple benefits by measuring supplier performance. Companies that fail to measure most of their suppliers risk "large-scale quality mishaps, service deficiencies, and cost overruns that can eat into bottom-line profits and damage competitive positioning in the market," notes Wright in its research report
Manufacturers and Suppliers Benefit
Manufacturers can attain multiple benefits by measuring supplier performance. Companies that fail to measure most of their suppliers risk "large-scale quality mishaps, service deficiencies, and cost overruns that can eat into bottom-line profits and damage competitive positioning in the market," notes Wright in its research report
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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