Supplier reliability: trust, but check!

“The long-term relationship between the buyer and supplier is the most profitable from an economic point of view. How can a supplier be flexible and introduce innovations, developing a whole sector of the economy, if he is thinking only about making one-off transactions? ”

Edwards Deming "Overcoming the Crisis".

Reliability of the supplier for the retailer is one of the important factors affecting the success of the entire business. Are you familiar with the situation: the day before the delivery date, the supplier reports any sudden problems or an insufficient quantity of the right product? If such situations with a partner turn around often, the managers should think about changing suppliers and reassessing the reliability of partners.

Everybody defines the concept of "reliability" in his/her own way. As for us, it is the accuracy in order fulfillment, the quality of goods and timeliness of delivery. To assess the reliability of retailers one has to refer to analytical data. This can be done as an independent analysis (manually) or with the help of software products.

The first option is time consuming and requires much effort. In addition, there is always a place for human factor, thus miscalculations and errors may take place. While the second option is optimized, fast and technical.

Supplier Reliability Assessment with ABM Inventory

The supplier’s reliability assessment in ABM Inventory program is done in a separate detailed report. The report contains three tabs:

1. Supplier Reliability- reflects information on all orders of all suppliers and their levels of performance. Filtering is available also.

Fig. 1 Supplier Reliability Tab

When using filters, the report will look like the following way:

Fig. 2 Data filtered by supplier

The table is sorted by the amount of orders to suppliers by default and displays the importance of suppliers for the company.

You can also sort the table by other parameters (for example, by% of accurately completed orders, by timeliness of delivery or overall reliability of the supplier). To sort, just click on the name of the column.

2. Supplier Reliability — Orders— contains information on the orders of a particular supplier.

The first table of the sheet “Supplier Orders” contains information by the selected supplier (group of suppliers) for all orders. 

The second part of the table “Selected orders” provides information on the order is presented with details on each item. The following indicators are especially interesting: the initially placed quantity of goods in the order, its cost and the goods actually delivered.

Fig. 3 Supplier Reliability Tab - Orders

3. Data statistics- contains visualized information (charts and graphs) on the main indicators of supplier reliability. We can conclude the significance and the reliability of a supplier for the company over time. Different periods may be selected for viewing analytics: week, month, quarter, half-year. In the settings, you can go to the third page of the report - “Supplier data statistics”. Here key performance indicators and supplier reliability is displayed.

Fig. 4 Supplier Data Statistics Report

If select all suppliers, you get a brief analysis of the company's work with all counterparties and the dynamics of changes in the company's key indicators:

• Supplier shares in the company's purchases and sales over time. It makes it possible to understand whether the supplier becomes more important with time; whether the share of sales of the supplier’s goods increases or decreases.
• Stocks, surplus, sales, missed sales, turnover on the supplier's goods; their dynamics. It allows you to understand what is happening with the goods of the supplier. The growth of surplus and turnover period is a sign that cooperation with this supplier leads to sticking of goods and it is necessary to reduce the volume and/or frequency of orders.

The opposite happens, if stocks are reduced and lost sales grow

Fig. 5 Remains and turnover

• The level of performance, accuracy and timeliness of delivery orders

Supplier reliability, opinion

Ksenia Wartell, Project Manager, comments:

The report is multifunctional and will be interesting for both the specialists of the purchasing department and category managers, and for the directors of the company. The report can be used for internal analytics as well as during negotiations with the supplier, as the partner is also interested in long-term and effective cooperation with the client. Thus, it helps to answer the question: “Is the supplier justified taking a certain share in the company's procurement?” clearly and reasonably.

The purchaser will find answers to questions about the accuracy and timeliness of order fulfillment, will be able to decide on the need for safety stock, if there is a tendency for constant shortages. 

"A losing strategy in working with suppliers is to try to work with everyone equally."

The category manager receives a detailed supplier profile with key performance indicators. The flexible choice of time ranges allows you to analyze the current cooperation with the supplier and the full dynamics of indicators in retrospect.

The most important thing is that the report can be built considering various categories of goods and receive information on the total sales of the supplier throughout the network and considering a specific category. Thus, it is possible to track the effectiveness of work with the supplier’s assortment and the profitability of working with a specific category of goods for the network.

The dynamics of indicators gives quick and transparent answers to the questions: “Has the supplier become more reliable?”, “Does he deliver the goods more accurately in the same quantity as they was ordered?”, “Has the delivery timeliness improved?”.

For managers, this analysis will help build a negotiating position in the dialogue with the supplier, because in two mouse clicks you can get a detailed visual analytics with key performance indicators of the supplier.

Comparing the supplier’s share in the company’s purchases and sales, timely delivery of orders, supplier reliability will help decide whether or not to continue working with this partner or signal the need to revise the working conditions.