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How global enterprises can leverage data for supply chain visibility and work strategically with their suppliers for operational success.
A healthy supply chain emphasizes visibility, ensuring an enterprise can see and understand what is happening at each stage of the fulfillment process. By tracking, monitoring and sharing supplier data, businesses can avoid late deliveries, product shortages, lost revenue and risky scenarios.
So, practically speaking, what are some best practices for using data to make your supply chain healthier?
One of the most important supplier metrics for procurement leaders to monitor is “on-time in-full,” or OTIF, according to Kristyn Baker, VP of procurement and sourcing strategy at C2FO.
The on-time, in-full formula, calculates the percentage of all deliveries that are shipped on time (when expected) and in full (requested order is fulfilled completely). The basic calculation is:
Industry best practices for OTIF should be at least 95%, particularly if suppliers are dealing with large, complex global organizations.
“One thing to look at is the different trends with certain suppliers being on time,” said Baker. “Are there certain trends with them delivering in full? And then you trace it all the way back through the rest of the supply chain.”
Delayed material delivery and incomplete orders can affect manufacturing schedules and cause kinks in the chain. Poor OTIF percentages can prompt inconsistencies in inventories and ultimately affect customer satisfaction and the bottom line.
In addition to OTIF, understanding where you have flexibility in your supply chain is also important. Do you know which of your suppliers you can substitute for another? “Knowing if you can move from one supplier to another because they offer the same type of product is super important when it comes to product availability and ensuring customer satisfaction,” said Baker.
And keep track of whether suppliers have the ability to move distribution points when there’s a staffing issue, a natural disaster or weather issue, for example.
If you’re a larger corporation, a global sourcing team should be looking at all the suppliers you’re utilizing, tracking their OTIF data in addition to other key performance indicators (KPIs). Baker said this team should look at the following:
Are suppliers delivering on time?
Are deliveries complete and in full?
Are suppliers’ facilities, and fair trade and labor practices up to code?
Are suppliers meeting quality standards and expectations?
Are costs of raw materials, packaging and distribution competitive?
Are suppliers complying with your enterprise standards?
Are suppliers hitting sustainability initiatives?
Your company might also have a separate team to track sales and forecasting, and another to track demand and replenishment. Because these teams may not all be integrated, it’s important that vital information is shared within the enterprise and among the suppliers to maintain visibility across the entire process.
“If you’re a retailer, you’re the last step before the end consumer,” Baker said. “You may not be able to see all of the supplier data, but understanding and having regular meetings to go through forecasts, understanding costs, even with those different components, all of that gives you that visibility.”
Armed with this data, companies can have informed planning conversations with vendors about deliveries and expectations, further fortifying the buyer-supplier relationship.
“If there is a disruption, you’ll know your options to mitigate any impact on your business,” continued Baker. “What other channels did you have? Is there a way to consolidate? Understanding your options within all your suppliers is a huge component of being able to run your business in your supply chain efficiently.”
If a supplier isn’t delivering on time and in full on a regular basis, a platform like C2FO’s can provide supportive data to help analyze where there might be issues. C2FO is an early payment platform that allows suppliers to receive early payment on their invoices at discounted rates at a time of their choosing. Because C2FO analyzes invoices and monitors suppliers’ use of the platform, it can give valuable information regarding an enterprise’s supply chain.
From a high-level view, C2FO could help uncover a supplier that may not consistently be delivering on time and in full. “For example, if they’re shorting a customer often, then there’s going to be more adjustments and credits coming through on those invoices,” Baker explained. “If you wanted to dig in and look at a specific supplier or a specific industry within your business, you could look for trends to see whether one supplier or a group of suppliers isn’t delivering the way that they had historically by analyzing their early payment activity.”
A platform like C2FO’s provides insight on invoice payment history so that enterprises are able to identify trends in payment and ask more probing questions of their suppliers such as: Is a particular vendor experiencing personnel shortages? Are they in financial distress? Are these issues only temporary?
Conversely, the platform can also show which suppliers are serving the supply chain best by accepting consistent payment terms, and meeting deadlines and delivery requirements. “Being able to see that a supplier is consistently delivering could be a way to offer access to capital at a cheaper cost than what the rest of the supply chain is potentially getting,” Baker suggested.
Tracking data through platforms and systems is critical to supply chain health visibility, but it’s just one element of a high-performing supply chain. It’s just as important to have open lines of communication between the supplier and the enterprise. “From a supplier side, the more forthcoming they are with information and the more data they can give, the better off you’re going to be,” Baker said.
Suppliers should be upfront and honest, and likewise, so should buyers. “Make sure the alignment and expectations are the same regarding what to expect and when to expect it,” Baker says.
Learn why focusing on developing strengths in your supply chain, including fostering key relationships, can help manage and reduce risk.
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