In this article, we discuss how supplier performance management can align global supply base. So far, there has been an overwhelming dependence of organizations on local suppliers, which has led to an underutilization of offers from global suppliers. But with advanced supplier performance management technology, organizations can rely on global supplier base much easily.
A globally dispersed supplier base offers specialization that helps competition to drive down cost. To achieve a global supplier base, a company has to start with aligning its supply chain with the company’s overall objective.
In the current business environment, firms are trying to migrate from a reactive approach to more of a strategic approach to establishing supplier partnerships. Therefore, a strategic approach to collaborative partnerships is a market-driven approach that looks at the entire supply base with a focus on improving specific supplier activities. Reactive, on the other hand, is often the result of dedicating resources to repairing problems after they occur.
As companies move toward a strategic based view of implementing supplier collaboration, having a set process can ensure success. The process must be flexible, considering the dynamic nature of the situation; however, it is important to follow the outline to measure the success of the implementation strategy. This is where SPM helps in providing the backbone to the alignment process.
SPM is a business practice used to measure, analyze, and manage the performance of a supplier’s performance to cut costs, alleviate risks, and drive continuous improvement. The process ensures a sustainable supply chain. Good supplier performance enables organizations to achieve business performance excellence. Some of the reasons for the increased spotlight on SPM are:
In addition to the above, an on-going supplier performance monitoring and measurement can realize some benefits for the organization. Consider an organization that faces 80-100 supply disruptions per year. besides that with an average cost of disruption per year being $50000, the potential monetary benefit of preventing even 50% of the above disruption will work out to $2.25 million in savings.
Finally, for an effective supplier performance management program not only encompasses risk mitigation but also helps in the prevention of problems. It is therefore SPM programs that can benefit organizations by improving collaboration between suppliers and the organization. As a result, there’s an increase in efficiency and productivity for the organization through saving time and money.
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