Mistakes or oversights in supply chains can cost companies major bucks, but oversights are just that--something that's difficult to notice before a major issue occurs. Here are 4 common oversights companies make when it comes to their supply chains, and a few tips on how to avoid them.
1. Lack of Supply Chain Transparency
Almost everything we as consumers purchase travels a long and winding road. Some roads are longer than others, but everything comes from somewhere, and the subject of supply chain transparency and traceability is a big topic of discussion when it comes to our food supply.
Numerous issues are forcing companies to look deeper into their supply chains and fully understand where their products’ raw materials come from and the conditions under which they were produced, especially as consumers’ demands shift to more wholesome food choices.
Topics like sustainability, GMOs, food allergies, foodborne illnesses, fair working conditions, etc., are all things manufacturers need to pay close attention to, especially as the final rulings for FSMA loom over the industry. Companies that don’t have full transparency into their supply chains open themselves up to greater risks, be they social, environmental, or economic.
Creating a fully visible supply chain can be a very expensive task, but for starters, make sure you get to know your suppliers and actually visit them. You can never get a full view of your suppliers until you actually set foot in their facility. And depending on your internal risk assessment, you can determine which suppliers need more frequent visits, and which suppliers do not.
2. Not Choosing the Right Supply Chain Partners and Vendors
Vendor management is identifying the short-term objectives and simple metrics like delivery cost, quality, and performance. It’s not enough to simply source the cheapest options available when looking for new partners and vendors. Companies need to look for partners that are willing to be just that—a partner.
According to Bill Michels, President, ISM Services, a specialty training and consulting company that focuses on procurement and supply chain management, "Supplier relationship management works across the business process, spots waste, and finds new ways to add value. You’re no longer just focused on price, but on removing true cost from the system and sharing those cost-benefits across the supplier relationship. Supplier relationship management is a much more transparent and trusting relationship that results in higher value for both parties."
A successful relationship starts by truly understanding your suppliers and knowing what their strengths and weaknesses are. This allows you to focus on more of a strategic partnership. It’s key to really understand what areas a supplier excels in, but it’s also just as important to know what the supplier’s priorities are as well.
3. Not Fostering Communication
Collaboration is vital when it comes to an effective supply chain, and communication is a key ingredient in a collaborative environment.
One key piece to fostering great relationships is having trust. And starting with open communication regarding process and potential challenges is a great place to start. This way, if an issue does arise, you have a solid foundation for correcting any problems.
4. Not Scorecarding Suppliers
If you want to really understand how well your suppliers are performing in regards to your specified standards, you need to actively scorecard them. And we’re not talking about simple scorecarding, where price and on-time deliveries are enough for supplier ranking. We’re talking about a detailed scorecard in which you have a 360-degree view of your suppliers.
Every company needs to have its own formula in evaluating supplier performance. For a food manufacturer, an example of that formula can include anything from how well suppliers respond to purchase order acknowledgment (POA) requests, to how well their CoAs meet specifications. Additional performance metrics can include whether the product is received when promised, the condition at receiving, whether third-party and in-house testing validate or conflict with the supplier provided CoA, and whether the product caused issues even though it successfully passed all previous hurdles.
If you want to read more about scorecarding suppliers, check out our latest blog post: Supplier Scorecarding: What It Is, Why You Need to Do It, and a Few Best Practices.
At the end of the day, it all comes down to how you are perceived by your customers. Creating a transparent and collaborative supply chain helps to build that trust.
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