In an increasingly competitive economy, and recently impacted by the effects of the COVID-19 pandemic, companies need to be aware of different ways to stand out from their competitors, by becoming more productive and efficient (even at an adverse time).
In this context, technology is an important ally to bring agility to processes and projects in the various areas of the organization, by optimizing activities and reducing excess costs.
In the procurement department, this is no different, since there are different methods and solutions to improve the conduction of the stages in this area (supplier management, payments, acquisition of products and services, among others), which generates benefits such as:
- Follow-up of requests, with the identification of their status;
- Access to previous orders, allowing you to look at the history to make a more appropriate future purchase;
- Increased profitability, with greater integration of information from different areas of the company;
- Independence for suppliers, who can enter their information directly into the systems, which brings more transparency to the hiring process.
Given such important benefits, we have thoroughly researched and compiled a list of the ten best software for the purchasing department, recommended by specialized magazines and websites (such as Supply Chain Digital, Software Advise, GetApp and Gartner).
They may be useful to your company – check them out!
TOP 10: software for the purchasing department
1.SAP Ariba: first in the list of software for purchasing department developed by Supply Chain Digital (May 2020 edition), it offers a series of solutions for companies of different sizes, in the areas of supplier management, sales, services for buyers, among others. Through this software, companies can digitalize and simplify their expense management processes, end-to-end, in an integrated cloud platform.
2.Oracle: an important name in the technology sector, Oracle has a solution for the management of direct and indirect expenses and its different stages (contracting, purchase and payment). Its platform also facilitates the relationship with suppliers, through interaction and document sharing devices. There is also the possibility of training and certification for the use of this software on the company’s website.
3.IBM Procurement Services: one of the world’s leading technology organizations, IBM has been developing innovations in the field since 1911, the year it was founded. Its purchasing and strategic sourcing services offer digital solutions linked to the entire process with the use of technology, analysis, cognitive insights and Design Thinking methodologies.
4.Blue Yonder: the company (formerly known as JDA Software) delivers to its customers a platform for the complete optimization of business (planning, execution and delivery of demands; among them, those related to purchase). With the use of Artificial Intelligence and Machine Learning, it provides the benefit of having an optimized and autonomous platform for decision-making in companies.
5.GEP SMART: a unified purchasing software platform that enables improved efficiency and performance by offering solutions for spend analysis, savings tracking, contract and supplier management and accounts payable. In 2019, it received the award for “Best Purchasing Technology” in the World Procurement Awards.
6.A1 Tracker Software: Unlike other software for the purchasing department presented, this one is specialized in contract management, with numerous resources (approval of documents, suppliers, audits, among others). In addition, the contract panels and forms allow users to run analytical reports and update renewals, import and export data and prioritize activities.
7.Promena e-Sourcing: this software offers an efficient platform to monitor purchasing and supplier management activities. Users can maintain all online purchasing processes such as managing purchase requisitions, requesting quotations, approvals and delivery steps. In addition, there is a tool to monitor possible risks in the supply chain and integration with Enterprise Resource Planning (ERP) processes is supported.
8.Procurify: It composes the purchasing department software group aimed at medium-sized companies, and it is also used by financial sectors to manage spending. We highlight the usability and friendly interface, providing an option to track, control and analyze the values used by the company, thus facilitating purchase workflows and centralizing financial data.
9.Precoro: a spending and purchasing management software, helps reduce manual workflows and brings transparency to the purchasing process. Among its benefits, the following are highlighted: the ease of implementation of this software, performed in hours; the customization of its processes, meeting the different demands of customers; and the possibility of purchasing a free trial version.
10.ShippingEasy Software: Our latest purchasing department software tip is an inventory and shipping management solution suitable for small and medium-sized e-commerce companies. Key features include order tracking, label customization, integration with multiple vendor channels, rate comparison, and returns coordination. It is available for purchase with a monthly subscription.
As you can see, there are a number of software options for the purchasing department aimed at automating the processes of companies of various sizes and sectors, from the initial order to payment, thus improving the productivity of this important organizational area. It is necessary to analyze in depth the particular needs of your company so you can select the software that best meets your demands.
Follow Soluparts’ Blog to get up to date with relevant information related to the purchasing department – such as the contents of the articles we selected below:
Having emerged in the 1990s, the concept of sustainable purchasing is relatively new.
What started with the option to purchase ecologically correct products grew and involved social responsibility, overcoming the idea that the purchasing department only purchases recyclable products, involving social and economic impacts, in addition to environmental ones. Learn more!
Sustainable purchasing: Protect society and your brand
Also known as green purchasing, the term sustainable purchasing refers to the policy of considering social and environmental factors when choosing a supplier by the purchasing department, and looking beyond price.
In this type of procurement, materials need to meet corporate needs, but other factors are also considered, such as:
- Longer life of the purchased item: take into account the durability of the material, from the extraction of the raw material to the end of its useful cycle – step by step, from “cradle to grave”;
- Greater electrical and hydraulic efficiency in the production and use of the material: suppliers that maintain effective programs to mitigate water and energy use in their production processes;
- Less use of natural resources: evaluate practices aimed at environmental preservation, such as: conscious exploration and controlled management of natural wealth or reduction of greenhouse gases generated in their factories;
- Less waste generation: management focused on avoiding waste of raw materials or reducing paper consumption are practical examples of how to reduce waste;
- Possibility of recycling or reuse: selective garbage collection or the transformation of waste into inputs or new products reduce disposal – and may even generate revenue for the organization.
It is good to stress that consumers are increasingly choosing companies that prioritise social and ecological responsibility. And in times of technological advances and social networks, they follow companies closely, even using the Internet to express their dissatisfaction with organizational actions they consider unethical – which can negatively affect the brand image.
Obstacles and advantages of sustainable purchasing
It is undeniable that there are barriers to the adoption of sustainable purchasing practices in companies, but they should not be seen as a deterrent for this type of purchasing to take place and generate advantages for the purchasing company and society in general.
The list below points out the main obstacles a company should overcome and shows how this concept benefits organizations.
Sustainable Purchasing Barriers
The main difficulties in implementing a sustainability program are:
- Break the traditional behavior of the purchasing department, focused on lower costs;
- Search for and find sustainable suppliers;
- Ensure that suppliers who claim to be sustainable are indeed sustainable;
- Compare the cost-benefit offered by the traditional supplier with the sustainable one;
- Include factors such as social and ecological responsibility in supplier selection criteria.
To overcome these obstacles the purchasing team needs to gather information that proves the benefits of sustainable purchasing for the organization. It must also count on a wide range of suppliers that meet the requirements of a sustainable process effectively and with the best values.
Sustainable Purchasing Advantages
Companies around the world are already investing in the development of sustainable purchasing. Besides the ethical issue, benefits lead to this option – see the main ones:
- Increase in revenue: sustainable companies can innovate and create new products, increase the price of green label products and services, get income from recycling;
- Risk reduction: working only with suppliers that also value ethics and social and ecological responsibility, the chance of problems with what was agreed in the contract decreases, as well as the risks of having their brand hit by negative practices (such as child labor);
- Easier to be in Compliance: the adoption of sustainable practices, helps the company to be in compliance with the government regulations in force;
- Competitive advantage: compared to other companies in the industry that do not adopt sustainable procurement, the organization creates a competitive advantage, gaining improved consumer insight and improving brand image – according to the World Economic Forum, sustainable companies can have a 15 to 30% increase in brand value!
Adopting Sustainable Purchasing Practices
In times of Industry 4.0, the purchasing department has been undergoing many transformations, which demonstrate its capacity to adapt and adopt new practices, such as the proposals for sustainable purchasing.
We list down below a simple step by step to make the purchasing process sustainable.
1- Definition of a sustainability policy
It is up to the organizational management to decide if this will be the direction of the company. If so, the guidelines and requirements for social-environmental responsibility that will guide all corporate actions must be developed. A good idea is to create a sustainability committee with people from various sectors, and the purchasing sector at the center of this team.
2- Review of Purchasing Planning
Reevaluate the purchase planning, considering the possibility of renting, reusing or sharing resources – with this practice, it is possible to avoid the production of a new product/material, saving natural resources.
The decision should be made by analyzing whether the asset is for temporary use and how often it will be used (today and in the future) – it helps in this reflection, to know the difference and indication of Opex and Capex in your business.
3- Setting criteria and selecting suppliers
The purchasing department should establish criteria consistent with the organizational sustainability policy, for approval of new suppliers and evaluation of existing ones.
One of the most important and complex parts, since every supplier (new or already approved) will need to be submitted to a careful analysis that evaluates commercial aspects and also: social and environmental practices adopted, reputation in the market, risks it offers to the environment, etc.
4- Supplier management
In sustainable purchasing, professionals in the area need to monitor suppliers, making sure they are respecting good social-environmental practices informed during the selection process. This monitoring will ensure greater transparency to the sustainable purchasing process, allowing the whole process to be evaluated and improvements implemented.
How to know if a supplier is sustainable
The selection of suppliers has always been one of the most important steps in the procurement sector.
Creating a spreadsheet with the main items to be evaluated in each supplier – always guided by the social-environmental policies of your organization – is a way to facilitate the process of qualifying your suppliers – see the spreadsheet we prepared to help you in this task.
There are several questions for analysis. We highlight some that should be verified with each supplier company:
- Biodiversity: in this regard, among other items, the company must be assessed whether it has an Environmental Policy, uses recycled packaging (whether paper or wood, do they have a forestry certification?), has received an environmental fine in recent years, respects all care with the environment (within its premises and surroundings), etc;
- Working conditions: if it has a social-environmental education and accident prevention program, if the employees receive benefits and work legally, among other aspects;
- Hydraulic and electrical efficiency: how it is monitored and what actions are taken to reduce consumption;
- Social Responsibility: if you have or collaborate with social projects, hire local labor, encourage employees to do volunteer work, have actions aimed at the health of the employee, family, local community and/or original people, are some examples;
- Digital Security: how you take care of the digital protection of your environment, if you are in compliance with LGPD;
- Reputation: how the company is seen in the market – social networks is a great source of research.
Although social aspects are more difficult to measure, progress is already being made with the establishment of standards such as SA8000. It provides for the company’s actions in the social field, just as ISO 14001 deals with environmental management – and as supplier companies meet these requirements, they can attach them to documentation proving their social and environmental commitment.
Changing the culture of the company and the purchasing department, moving towards sustainable purchasing is a complex but increasingly urgent job, in view of the behavior change of consumers who, in general, prefer a conscious organization – even if they pay a little more for products and services.
Corroborating this statement, Roberto Azevedo, a Brazilian diplomat who was in charge of the World Trade Organization (WTO) for seven years, says that the world’s major investment funds do not just analyze organizational accounting. They also consider criteria such as social, corporate and environmental responsibility of companies. “This kind of evaluation is a trend that is evolving,” Azevedo says.
Implementing the concept of sustainable procurement is a job that requires great commitment from procurement professionals, but you can simplify it by downloading our supplier qualification spreadsheet according to criteria such as sustainability and social responsibility.
With the support of Soluparts, which specializes in indirect material procurement with offices around the world and access to the main suppliers on the planet, it is possible to optimize the purchasing process in your company, leaving time for the manager to devote to other tasks – talk to our experts and learn how!
And your company? Is it prepared for sustainable purchasing? We’ll prepare a Quiz for you to find out. Click and start now – it’s fast and convenient!
With globalization – even as it is slowing down – and the digital transformation, the supply chain is becoming increasingly complex, increasing the pressures for a more modern and efficient process.
Therefore, it is essential to have an intelligent supply chain that exploits the digital and technological resources available today. Understand this scenario better with the following article.
Supply chain challenges in digital transformation
The spread of Industry 4.0 technologies has revolutionized supply chains that are already using the Internet of Things (IoT), automation, artificial intelligence and real-time analysis to optimize, accelerate and predict their operations.
In this scenario, many companies are already rethinking their logistics, taking advantage of digital technologies – and new rules, such as Incoterms 2020 – to keep pace with change and improve their operational capabilities.
Moving from a traditional supply chain to implementing a digital, intelligent format requires a major transformation.
To prepare for this moment, get to know the technological elements that are at your disposal.
Elements of a smart supply chain
Much has been said about using Bots, Artificial Intelligence and Machine Learning to make the supply chain more efficient – about this subject, we wrote an article that shows 4 technologies that are revolutionizing global trade.
All of them are very important indeed. But there are other resources available, like the ones we highlight below.
1. RFID – Radio Frequency Identification
The RFID system consists of an antenna, a transceiver (which reads the signal and transfers the information to a reader device) and an RF (radio frequency) tag, which contains the information to be transmitted – these tags may be present on products, parts, equipment, etc.
It works like this: the antenna emits a signal from the integrated circuit and transmits the information to the reader. It in turn converts the RFID radio waves into digital information, which can be read by a computer, storing this data.
Thus, it ensures professionals can control everything that enters and leaves the factory, which in turn guarantees the updated control of the stock – in real time – and makes tracking the materials a lot easier.
2. Smart sensors
As they are an excellent support for an intelligent supply chain, the sensors make it possible to monitor machines in real time, sending alerts to a control center if any part is defective and needs to be replaced – or even when the production period for any part is coming to an end.
This way, it allows the realization of predictive maintenance, indicating the right time for the acquisition of parts and products. In addition to cost reduction, it increases production efficiency, since it reduces the risks of having to stop the machines for maintenance.
It may sound complex, but tests are already being done using drones for delivery. Besides delivering orders to the buyer’s house, another possibility is the distribution from a truck which, upon arrival at a certain point of its route, releases several drones to deliver orders to places close to the stop.
Using a drone equipped with a camera to scan the items from a stock is also a possible way to improve controls and processes.
Repetitive tasks such as moving products from one area to another from a warehouse can be done with the help of robots, increasing efficiency and freeing up employees for more strategic work.
Amazon Robotics invested in this feature, reducing errors and costs (before, it was common for products and materials to be stored in the wrong place, leading to unnecessary purchase of items already in stock) in addition to improving efficiency – learn about the Kiva system that allowed the use of robotics in the company’s warehouses.
5. Process Integration
An intelligent supply chain needs to integrate steps and teams, creating a real-time communication that can be used by everyone in the production process.
This integration will promote improved communication, anticipation of problems, greater agility in detecting and solving failures. It also favors access to essential data to define strategies and control demands more effectively.
The market offers several options that need to be evaluated according to the needs and particularities of each organization. With Business Intelligence, information from systems in all areas and technologies – such as the Internet of Things – goes to the same dashboard, generating graphs and tables and allowing linked teams to follow the entire process together in real time – in the case of the supply chain, maintenance, purchasing and logistics would share the information in the same dashboard.
Implementing a smart supply chain in your company
The acquisition of new technologies requires good planning, avoiding risks such as acquiring items that do not offer a positive cost-benefit ratio or that are not really necessary for the reality of the business.
And although your journey towards a digital supply chain may require the best and most advanced technologies, remember that much of the success of this operation is connected to people. Companies need to take their employees with them at each stage, preparing their workforce for this new supply chain, through training, for example.
With these precautions, it’ll be possible to see many benefits in the supply chain, some of them being:
- Greater efficiency: better use of productive process time, minimized errors.
- Transparency: an intelligent supply chain allows information to be shared with all stakeholders in real time;
- Properly distributed resources: adequate quantity of parts, avoiding inactive stock or material shortages.
An intelligent supply chain can, for example, integrate data from sensors connected in warehouses and warehouses with information that shows the use of parts, allowing a purchase planning that leads to cost reduction and higher quality throughout the purchasing process.
The term Slowbalisation, created to describe the slowdown in international trade, is on the rise.
Since the early 1990s, when globalization began, it has driven economic growth. Today, however, global trade is slowing down and occurring in more regional terms.
What is the impact of this shrinkage on business and the supply chain? In this post, we will reflect on this topic. Check it out!
Why Slowbalisation is happening
In the 1990s, globalization gave rise to the idea of a flat world, where borders mattered little when it came to the flow of ideas, goods, services and capital.
Development in the technology, communication and transportation sectors reinforced this concept, suggesting a world increasingly connected.
But in recent years this movement has begun to slow down, giving rise to Slowbalisation. Why is that?
A conjunction of factors has led to this condition, among them, geopolitical changes. The advance of nationalist and protectionist governments, especially in the United States, has put globalization in the spotlight.
But that is not the only reason. The technological advance that has occurred in every corner of the planet has leveled products and services, making it easier for the final consumer to find what he or she needs in a place close to where they are located. This is because the same consumer, more aware and demanding, started to create a demand for customized products and faster deliveries.
Another determining factor for Slowbalisation is the high costs involved in purchasing raw materials. Especially fuel, which also interferes with the value of transporting goods.
Price fluctuations in the fuel market, in fact, constantly affect the logistics sector, generating inflation in the final price of products. They act as a kind of domino effect, where carriers increase their values in order to not suffer losses and purchasing companies pass on the same increase to the final price of products, in a compensation that affects the logistics chain.
And we must not forget that globalization has allowed emerging countries to become richer, being able to produce more and, of course, increase the consumption of their own goods – which leads us to conclude that it may have been a victim of their great success.
Slowbalisation X Supply Chain
During the 1990s and early 21st century, many companies defined their supply chains in the use of cheap labor, even if it was on the other side of the planet.
With the shift to just-in-time logistics, however, this type of decision changed, creating yet another reason for Slowbalisation.
The adoption of a model where stock is acquired as needed, operating at continuously low levels, helps to reduce costs and increase efficiency. However, it requires a very careful programming for the demand of products, avoiding shortage of materials – in our blog you find an article that shows what is the most beneficial for company finances in industry 4.0: buying products or services (CAPEX or OPEX)? It’s worth reading to find out!
Instead of large quantities of materials – purchased at lower prices in countries with lower labor costs – we now see came into play:
- local workforce, with greater qualification and knowledge of the production stages;
- technological solutions capable of planning and monitoring each stage of the production process, avoiding waste and interruptions due to lack of parts.
Indeed, regionalization relies on technological advances. The Industry 4.0 supply chain has become much smarter, incorporating data analysis, artificial intelligence and machine learning.
These capabilities generate increased visibility and control of the supply chain, allowing rapid identification of any failure that may affect it, making your operations more efficient and optimized.
And, for the future, it is quite reasonable to assume that new technologies will emerge to develop the supply chain according to the needs of different markets and decrease the dependency on products that today can only be found in more distant places. This is the case of the 3D printer, for example, among other innovative technologies we have already talked about in our blog – learn more about 4 technologies that will change global trade forever!
Reliable Supply Chain: essential in Slowbalisation
One of the main precautions to be taken with the supply chain in post-globalisation is to guarantee the availability of the materials needed for production.
This is already possible with the existing sophisticated technologies, which analyze the chain in real time, ensuring efficiency, agility and cost reduction – in this sense, know a proposal that unites reliability and speed at the time of purchasing your company.
But in the Slowbalisation era it is also essential to have an extended supply chain network. And the best way to guarantee this network is to count on the partnership of a company that can supply any item with the best price and term conditions.
Soluparts specializes in the acquisition of all types of industrial materials for maintenance, repairs and operations, facilitating the entire purchasing process.
Count on experienced professionals to make your supply chain much more efficient – even in times of Slowbalisation. Get a quote and surprise yourself with our service.
Soluparts is an international trading company specialized in purchasing and delivering all types of industrial materials (MRO – Maintenance, Repair, Operations). Our dynamic team and modern systems enables us to offer a fast and reliable service to all our clients. See below what makes us unique.
1- We are agile
Our branches in the US, Germany, Brazil, Portugal and Hong Kong allow us to optimize and leverage materials purchasing and sales logistics, providing our customers with the best supply chain service in the industry: fast, reliable and modern.
2- We connect you to the 5 continents
Soluparts helps you reduce the number of international suppliers, since we have branches in the most competitive markets in the world. Your quotation will reach the most relevant manufacturers on the five continents, and you as our customer will only need the paperwork and time spent on one quotation. Our relationships and connections allow us to find any brand and product you need.
3- Manufacturer warranty
We offer the same warranty as the manufacturer. Should any mishap occur, our customer contacts us directly and we will solve the problem.
4- Experience and trust
Companies in various industries work and trust Soluparts. They know we always achieve expressive results. We have competitive and reliable suppliers in every segment and by decreasing your numbers of registered suppliers you also decrease risks of dealing with many different manufacturers..
We also rigorously check all incoming and outgoing products from our warehouses, ensuring that items shipped to the customer meet their requirements, reducing unnecessary expenses on returns.
5- We are facilitators
We help our customers purchase spare parts and effectively reduce prices, delivery time and bureaucracy. Our customer gathers all their demands in a single quotation request and we will take care of all contact with the various manufacturers, as well as in selecting the best prices and conditions in the market. This reduces ours client’s time in searching and comparing quotes with multiple suppliers. We also do cargo consolidation reducing costs and delivery time, ensuring the best terms.
6- Premium customer service
We have a multicultural and international team, prepared to help you in the best way and in several languages. Each of our consultants knows the needs of each client closely. They are experienced professionals with unlimited access to over 15,000 brands, with the daily mission of offering you the best prices and best market conditions.
Our logistics and purchasing departments are highly efficient, maintaining direct contact with our customers’ logistics departments to ensure all export documents and procedures are following their requirements.
How can we assist you? Do you face any other issues that we do not address in this text? We have experience in solving foreign trade issues and will be able to help you with what you need. Never again will a part be missing from your factory!
On September 20, 2019, the International Chamber of Commerce, ICC, published the latest Incoterms update.
The International Chamber of Commerce has been publishing Incoterms rules for over 80 years, reviewing them every 10 years to keep up with new market technologies and innovations, to better represent new business practices, facilitating and making negotiations more accessible.
Incoterms, known worldwide and translated into 30 languages, define the responsibilities of the exporter and importer at each stage of the import / export process, transferring the ownership of the material.
They provide importers, exporters, attorneys, carriers, insurers and students from the international arena with rules and guidelines that reflect the latest developments in the business environment, aligning different levels of insurance coverage, including transportation arrangements, such as modal, safety-related requirements, transportation obligations and costs, among other points.
According to ICC Secretary General John W.H. Denton:
The Incoterms 2020 rules make business work for everyone, facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions and help build trust in our valuable global trading system.
The updated Incoterms 2020 list contains the rules for 11 Incoterms. They have already been published and will be effective on January 1, 2020. Therefore, their use is suggested from that date. If importers / exporters wish to consider the Incoterms 2010, this should be added to the documents (eg EXW Incoterm 2010)
Here is the updated list:
1- EXW – Ex Works – At the source, at the given location. It represents the minimum obligation for the exporter.
2- FCA – Free Carrier – Free at the carrier at the specified place of delivery. It is now accepted for sea transportation provided it is in container. In addition, BL will now be released on board and terminal shipping will be accepted.
3- FAS – Free Alongside Ship – Free by the ship at the specified port of embarkation. Incoterm used for loose cargo, ie it is not required to be in a container.
4- FOB – Free On Board – Free On Board at the given port of embarkation. It can also be used in cabotage.
5- CPT – Carriage Paid To – Transportation Paid To Destination
6- CIP – Carriage And Insurance Paid To – Paid transportation and insurance to specified destination. It is now possible to negotiate insurance. In the incoterms of 2010, insurance was 10% of the value of the merchandise, now it can be any value, 20%, 45%, 60,%, and so on.
7- CFR – Cost And Freight – Cost and freight at the designated port of destination. Commonly referred to as FOB + Freight and can only be used for sea and cabotage shipments.
8- CIF – Cost Insurance And Freight – Cost, insurance and freight at the designated port of destination. Like insurance, freight cost can now be negotiated, not exempting the exporter from providing it, which remains mandatory. .
9- DAP – Delivered At Place – Delivered to the given destination location. Exporter fulfills the obligation to deliver the unloaded goods to the place of destination.
10- DPU – Delivered At Place Unloaded – Delivered to the specified destination landing location. It forces the exporter to unload cargo at the importer’s destination.
11- DDP – Delivered Duty Paid – Delivered duty paid at the specified destination. Unloading can be negotiated, which does not guarantee that it will be accepted, but the goods must be cleared for importation at the designated place.
Hiring a supplier involves several steps. The first one is a survey, in which all the options of suppliers are evaluated, followed by the elaboration and signing of a contract.
In the contract, all conditions for the provision of service or purchase are established: prices and payment terms, deadlines and delivery terms and other details, everything is agreed in the contract between company and supplier.
However, in addition to the contract, it is essential to follow up on the suppliers’ performance at all stages in which they are involved. This monitoring is not always carried out, mainly because the managers do not know the right way to or what they should accompany. The quality of products in deliveries, delays and problems and even a pro-activity of the supplier are points that can be measured and evaluated, for example.
Check out a few criteria that you need to track to monitor any suppliers’ performance, and how best to evaluate each one:
It is of the utmost importance to establish and maintain quality standards aligned between your company and each of the suppliers. To do so, monitoring the quality of the services provided is essential. After all, if this monitoring does not happen, the supplier can’t know ig the quality standards are aligned, if the company is satisfied and if there is a possibility of disruption of business relations.
One very important quality criterion to keep track of is a quantity of items that are rejected per delivery. This index says about the supplier’s concern to ensure that deliveries are made according to the customer’s request.
For this criterion, companies usually measures in PPM, parts per million, scaling how many PPM were delivered damaged or were rejected. The company should set an acceptable standard of quality problems for each type of delivery, and use this standard to evaluate the performance of each supplier.
In addition to monitoring, it is important to make those standards clear when contracting suppliers. Thus, the supplier who disrespects company quality standards should be penalized and even excluded from the list of service providers, depending on the extent of the situation.
Another set of criteria that should be presented are those related to the performance of deliveries. When you close a contract, it contains the dates on which the products are to be delivered or the services provided, and this date is to be followed strictly.
In the meantime, companies typically engage in a “standard deviation” of delivery dates, about 1 day before and 1 day after the date previously set. This deviation exists to foresee incidents in the delivery, and a margin of error is also established for undelivered goods – about 10% of the total order.
Of course, the ideal scenario would be delivery on the agreed date, in the correct quantity and without damage or rejected parts. In the case of services, the ideal would be that they were provided within the contracted term, without a need for contracting services that were not foreseen.
However, accidents and all sort of events can occur, and therefore, establishing an acceptable deviation is a better way to monitor the performance of your suppliers. So, keep strict control over respect for dates and results, while safeguarding an acceptable range of errors, and assign scores to each supplier on those issues.
On a scale of 0 to 10, for example, a supplier only scores a 10 if their deliveries perfectly match the three requirements: term, conditions and appropriate quantity.
Other evaluation criteria
It is also possible to assess supplier performance through its position on some negotiating fronts. Evaluate whether the vendor is open to reducing costs based on your bids and making payment terms more flexible. This shows the supplier’s desire to maintain a long-lasting relationship with your company.
Another possible option is to evaluate the transparency of the supplier, in the sense of providing previous customer contact information, with which you can seek references, as well as data such as company involvement in labor lawsuits and other charges, for example. That says of the suitability of the company, and your organization only has to gain by doing a full checking job of the suppliers to which it unites.
Analysis of supplier performance
After evaluating suppliers’ performance, assigning notes and making the necessary observations, it is important to analyze these data. For suppliers who provide the same type of service, it is interesting to draw a comparison between the notes and observations, and thus decide on the permanence of both or give preference to one of them.
For all suppliers, it is important to assess the feasibility of keeping them within the company. If a supplier does not perform in line with company standards, it is worthwhile to schedule a meeting and review the terms of that partnership, and even consider canceling the contract.
Providing constant feedback is the best way to pass these evaluations on to suppliers, enabling them to make improvements to their internal processes and keep an eye on the relationship with your company. Thus, it is possible to avoid extreme situations of dissatisfaction between the parties.
These evaluations are also a great way to analyze the workings of the processes involved in managing your company’s supplies, and to find loopholes and problematic points. In this way, the company gains not only by maintaining the best contracted suppliers, but also by constantly testing and optimizing management processes and methods.
How do you monitor supplier performance in your business? In addition to keeping files with this cataloged data, it is also possible to use automated systems and even joint worksheets to group the data and analyze the performance of each supplier.
We hope you have learned a little more about the importance and different ways of measuring the performance of the suppliers you hire. Share this article and help more colleagues improve their relationship with suppliers!
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