A key mandate for materials management in a business is to ensure materials are available when they are needed. Specifically, timely delivery of defect free materials.
Suppliers play an important role in meeting that mandate. Therefore, indicators on performance of the suppliers are key leading indicators.
There are four key leading indicators you want to pay attention to. They are the fill rate, on-time delivery, defects, and responsiveness. Let’s take a look at each indicator in greater detail.
The fill rate is the percentage of orders your supplier is able to fill. It is a gauge on reliability. You can’t rely on a supplier that can’t fill your orders.
On-time delivery is the percentage of orders delivered within the committed timeframe. It is also a gauge on reliability. A supplier that can’t meet its commitment is a liability.
Defects can be reported as a percentage of the total order or the actual count. A high defect rate impacts your product quality. It needs to be addressed promptly.
This leads to the last indicator, responsiveness. It is a measure on how quickly your supplier responds to questions and issues. Poor responsiveness impacts your business in many ways. It could be frustrating especially in emergency situations.
When a supplier is not performing on the fill rate, on-time delivery, defects, and responsiveness, you would be challenged in fulfilling your mandate.