Keeping the best suppliers being 'best' requires knowing how each is performing. For companies with small supply chains that include just a very few suppliers, it’s possible to track and evaluate each individually on a periodic basis. But most retailers have many suppliers. That makes keeping up with each one a near impossibility without enlisting a large staff of experts who watch over the daily activities of orders. The more viable alternative is to enlist the services of an outsourced provider that can lighten the load and increase the overall performance of your supply chain.
Compliance optimization is the term normally associated with the practice of monitoring and advising suppliers of their performance. The goal is to identify possible issues at a detailed level and address them before they impact order performance. In the long-term, this kind of oversight improves relationships between retailers and suppliers because they keep the partnership on track and profitable. On occasion, calling attention to problems can ruffle feathers and cause tension. But, the long-term benefits are much more important than any hurt feelings or power struggles.
Tracking and identifying performance issues means sifting through information about orders, shipments, delivery status, documentation, and everything else that makes up an order. In the increasingly complex world of omnichannel retailing, and even in more traditional distribution center-based transport, the data is complex and voluminous. Reviewing spreadsheets and paper documents just isn’t a viable solution. And even if it were possible to review and correlate the information, taking action on findings would take place long after the fact. The best mitigation strategies are ones that take steps to resolve problems in real-time.
Big data in play
The volume of data contained in a single EDI order is impressively large. In addition to the initial purchase order, there are many subsequent documents sent between every party associated with the order right up until it is delivered. Even after delivery, there are invoices and other documents that add to the pile of data. Multiply the information required to complete one order by the thousands of orders and the hundreds or thousands of suppliers, and it’s easy to see how any kind of analysis can get mired in detail.
What is needed to do real-time, in-depth analysis of supply chain performance is specific data processing structures that can consume, store, manipulate, and report findings efficiently. This kind of facility is something most retail organizations are not equipped to manage simply because it is not a part of their core business.
What is provided
While big data in general is a hot topic in the computer world, making use of it properly is still not simple. This is not consumer level technology and requires resources beyond just the large disk drives needed to store the data. Also needed is the computational power that transforms the data from individual documents from multiple sources into standardized data structures that can be cross-matched and analyzed quickly. This requires lots of computers and very sophisticated software, all of which needs to be managed and updated frequently.
Once the data is stored and available in a standard format, the software that does the analysis can go to work. And it’s that software that is the key. Very specific rules and processes need to be created that match the purpose of the work. And a variety of scenarios need to be programmed that look for changes and anomalies. Those are the things that will be reported and acted upon once found. Those are the reasons for doing this work in the first place.
What is needed:
Email announcements to suppliers
Email announcements to the retailer
Resolution facilities for suppliers to take action
Escalation of incidents based on history and severity
Automated calculation of chargebacks/invoice reductions
Detailed and specific reporting of violations with documentation
Reports and Dashboards
Vendor scorecards are typically used as a shorthand method to assess vendor performance. Scorecards are typically produced for meetings and discussions and are useful for recapping just how well or poorly a vendor has been able to meet the agreed upon processes and procedures established when the trading partner relationship was established.
While scorecards serve a purpose, they are ultimately too abbreviated—and are developed after the fact—to be of real use in resolving issues. The live reporting produced by compliance optimization systems is much more useful in spotting and resolving problems before they ever become part of the vendor scorecard.
Creating a monitoring and reporting system is not a simple task. The companies that have put these tools together have spent considerable resources and devote ongoing support to maintaining the systems. Moving ahead of the rear view mirror of the vendor scorecard requires the tools and facilities that an outsourced monitoring system can provide. More importantly, since these systems already exist, implementing them is a matter of connecting your supply chain data to the system provider and reaping the benefits.
-Daniel Ford, DiCentral