For its part, ColorCon, a producer of pharmaceutical products, turned to Oracle to help it reduce time-to-customer, which once ranged from eight to ten days. ColorCon's current range is five to seven days, attained in large part because it can provide suppliers with more-accurate demand plans, says CIO Perry Cozzone. "Out goal is to reach five days worldwide," he adds. (What's the effect on working capital? See for yourself with the CFO PeerMetrix interactive scorecards.)
It's essential to strike a balance, however, between satisfying customers quickly and creating realistic expectations. Many expedited orders "might indicate that you need to look again at the time you're allotting in the first place," maintains Scott Wilson, project manager at Strategic Systems International, a supply-chain-management software provider.
Too much emphasis on faster delivery at the expense of careful planning can be a recipe for disaster, says Juniper's Perdikou, especially as companies move to automate more facets of the supply chain. "If you have any problem," she says, "automation just makes it a faster problem. The challenge is finding a healthy balance."
6. You Don't Keep Close Tabs on Your Suppliers
Many companies today don't measure supplier performance frequently enough, says Mansbach of SeeCommerce, and most still use manual processes to do so. Managers may want to rely wholeheartedly on their suppliers, true — but it's also true that it can be easier to let long-term, entrenched relationships continue even if suppliers are not performing optimally, since the pain of switching can be greater than dealing with a couple inconveniences here and there.
Companies that produce supplier report cards once a year, says AMR Research analyst Larry Lapide, aren't watching close enough. "A lot of them are old by the time they're completed" and the company discusses matters with the supplier, he notes. More-frequent supplier report cards allow managers to identify problems before they fester too long. (Exactly what might constitute a problem is often a matter of some dispute between IT and non-IT executives.)
Identifying problems quickly is especially important to ColorCon's Cozzone, who concedes that "We're not an organization that can switch suppliers quickly." Using on-time delivery as a key metric, the pharmaceutical company measures supplier performance, on a monthly and quarterly basis, to determine whether negative trends are developing. If so, "we will do everything we can to work with the vendor to remedy the problem," says Cozzone.
Mansbach adds that even companies that evaluate suppliers more often tend to do so using functional metrics — like on-time delivery — rather than ones that are more closely correlated to customer service. Avoid those "silo-based" metrics, he cautions, and focus on companywide performance objectives.
7. Your Suppliers Aren't Responsive Enough to Changes
Even if you keep close tabs on your suppliers, their inability to respond quickly to operational changes can mean a missed market opportunity. "Companies need to have a strong collaborative relationship with their suppliers to ensure that inventory is going to be where it needs to be to meet future demand," stresses Forrester's Tohmay.
But developing closer relationships with suppliers also means streamlining the supplier base, speeding up the supply negotiating process, eliminating redundant purchasing processes, and above all, aligning internal performance metrics to those of your suppliers to ensure everyone is working toward similar goals. "If you have a metric that is shared with major suppliers, it will cost them less to provide the goods you need to fulfill your customers," notes SeeCommerce's Mansbach. (By contrast, companies that compel their suppliers to adopt certain business practices, such as joining an online trading exchange, could be damaging their supply chains.)
When Sun Microsystems began to outsource more of its procurement activities and depend more heavily on contract manufacturers to assemble its products, managers needed a system to help them track their relationships and communicate with partners more efficiently.
That's when the company turned to collaborative planning applications from Manugistics. The software gave Sun a centralized system that allows managers to share information about more than 100 products — such as demand and supply, orders, and shipments — with its broad supplier network.
What's more, Manugistics' collaborative planning software provides real-time notifications of unplanned events and helps managers better anticipate supply shortages before they become a problem. Since it began using the software, Sun has been able to reduce its product cycle time from several weeks to days.
8. You Don't Consider "Customer Service" a Key Metric
In recent years, many companies intent on improving their supply chain management have focused on capital intensive, upstream processes such as procurement, logistics, and manufacturing. Far fewer have begun downstream, with customer satisfaction levels and demand patterns, then worked their way back up through the supply chain to ensure that demand is met.
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