Measuring the performance of suppliers is vital to ensuring a well-functioning supply chain. From a lean enterprise view of supply management, the supply chain is full of waste and hidden cost drivers. And from a global perspective, supply management is fraught with risks as companies deal with increasing numbers of offshore suppliers.
Companies who perform supplier evaluation find that:
• They have better visibility into supplier performance
• Uncover and remove hidden cost drivers
• Reduce risk
• Increase competitive advantage by reducing order cycle times and inventory
• Gain insight on how to best leverage their supply base
• Align practices between themselves and their suppliers
Companies pursuing supplier evaluation commonly see over a 20% improvement in supplier performance metrics. Thus, conducting supplier evaluation can be challenging, costly, inefficient and inconsistent. From an analytics perspective, many approaches are inadequate and unable to provide the insight needed to drive better decision making and performance improvement. They tend to provide after-the-fact results rather than identifying root cause of performance issues without which improvements are difficult to drive. Understanding supplier performance can both prevent problems and facilitate performance improvement.
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