Supplier Performance Management Reimagined in 2022
Global supply chains have always had to operate using complex processes to ensure successful supplier relationships and consumer satisfaction. By drastically limiting global movement and even workforces in many instances, the pandemic came close to shattering these already fragile processes, leaving 57% of companies facing serious supply disruptions.1 In some instances, these setbacks brought early predictions of global trade plunges as high as 13-35% to fruition.2
Issues that especially keenly include a lack of efficiency, visibility, and resilience, each of which points to the fact that post-pandemic supply chain turnarounds largely rest on the reimagining of supply chain processes and the supplier performance management (SPM) that enables their success. At a time when more than 72% of supply chain organisations believe technology is fundamental to a competitive advantage, these changes are most likely to rest in new, sophisticated solutions like modern Electronic Data Interchange (EDI), which stands to drastically improve supplier relationships and SPM oversight by optimising processes that have enabled the electronic exchange of supply documents since the 1960s.3
Improved efficiency and visibility especially look set to reimagine and repair SPM in ways that companies can’t afford to skip. The question is, what exactly does SPM involve, and why should you consider implementing a modern EDI solution to bring its benefit within easier reach?
What is supplier performance management?
SPM is a way to monitor, analyse, and improve the performance levels of suppliers by recognising real-time issues and ensuring the insights necessary to make on-the-ground improvements that prevent supply disruptions. Effective SPM should compare supplier performance with contractual obligations and market expectations, a goal that’s achieved through supplier scorecards which enable the tracking of crucial metrics including:
- Service quality
- Delivery lead times
- Contractual compliance
- Price points
This information should be compared against KPIs (Key Performance Indicators) to ensure the clear identification of gaps in supplier performance, risk factors, and other notable areas of concern. If issues are identified, corrective actions should be taken towards risk management, either through a timeline for improvement or, in cases where issues cannot be rectified, in the complete cessation of an agreement.
The benefits of supplier performance management
With 77% of companies reporting that as many as two out of three procurement issues rest with their suppliers, the overall benefits of SPM are self-evident in the ability to not only ensure stringent vetting, but also ongoing supply monitoring and management.4 Other immediate benefits worth noting include:
- Avoiding supply chain risks and disruption: The in-depth supplier visibility offered by extensive SPM screenings makes it far easier to understand who you’re working with and how they operate, thus ensuring the risk management capabilities you need to function smoothly.
- Improving supplier relationships: Close supplier collaborations ensure coordinated outcomes, as well as trusting supplier relationships based on visibility increases that make it easier to both specify expectations and address arising problems.
- Protecting brand reputation: The stricter vetting and oversight that SPM offers can offset the risks of third-party delays or failures that reflect badly on your brand, making it far easier to ensure quality service and suppliers that reflect your values.
- Increasing efficiency: By ensuring that suppliers are aware of and working within your business objectives and requirements, SPM makes it easier to tailor efficient processes with only compliant, effective partners.
- Avoiding costs: SPM’s ability to centralise supplier performance data and ensure only lucrative supplier relationships can also help to avoid the escalating costs that problematic partnerships can bring, thus freeing further spending to address issues whenever necessary.
Visibility is key
Overcoming supply chain blind spots across inventories, movement, and delivery should be a top priority for businesses. With siloed processes and careless supplier oversight largely fuelling these transparency compromises, efficient and communication-driven SPM processes are, in themselves, a major step towards improvement. However, implementing effective SPM in the first place also relies on the ability to take stock of internal and external inventories, seamlessly communicate across supply chains, and gather real-time insights. For modern suppliers, all of these focuses are increasingly dependent on technological integrations like modern EDI, and the notable performance benefits that the visibility they enable can bring, including:
- Greater inventory control: Easily traceable products across open supply chains ensure understanding of what you have, what you need, and what your suppliers offer.
- Improved customer experience and satisfaction: Seamless, streamlined operations keep customers happy, and are made possible by complete oversight and inter-supplier communications.
- Increased speed to market: Connected, transparent networks are better able to efficiently and seamlessly deliver products according to competitive timelines.
- Improved efficiency and productivity: Monitoring and oversight across supply chains in their entirety makes it easier to address weaknesses, inefficiencies, and strengths with the ultimate goal of simplified, speedier deliveries.
- Reduced costs: Increased visibility across processes and profits makes it easier to use time efficiently and avoid disruptions, delays, or supplier weak spots that could lead to escalating costs.
- More precise data: Easier access to data-driven insights and analysis make it possible to not only implement supply chain improvements, but also to foresee and understand industry challenges and trends.
As we have discussed, EDI solutions that enable seamless and swift inter-supplier communications have the potential to drastically increase supply chain visibility. Yet, with traditional types of EDI often involving complex onboarding and some residual manual processes, true transparency in a modern age requires an updated approach.
At Data Interchange, our modern EDI solution, which we call EDI-as-a-Service, stands to facilitate effective SPM even within the context of increasing global supply chain complexities. Defined predominantly by the integration of cloud-based tools and managed services in a unique hybrid form of EDI, the increased outlook and simplified rollouts that this service offers can transform SPM processes. .
Immediate visibility increases can become a reality with EDI-as-a-Service, opening up a range of notable transparency benefits, including:
- No barriers to implementation: Web EDI positioning and simplified integrations mean that EDI-as-a-Service offers universal standards and protocols that are accessible and understandable across all supply chain partners, including those with little to no EDI experience.
- Cloud tools and dashboards for analysis: Cloud-based tools and dashboards ensure supply chain-wide message visibility, alerts, and reports to guarantee the free flow of information, and the transparent processes that SPM rests on.
- One-source-of truth visibility: The ability to store, analyse, and communicate insights and processes across one-source dashboards enables the efficient communication of expectations, improvements, and issues in real-time.
- Increased collaboration: Consolidated communications across a value-added network, combined with full message visibility and real-time alerts allow tracking and oversight of communications across large supply chains with ease.
The addition of managed services from EDI professionals with decades of expertise furthers each of these plus points, ensuring supply chain efficiency and simplified SPM, regardless of in-house EDI experience.
Suggested reading: For more on how EDI-as-a-Service delivers a competitive advantage to businesses, take a look at our eBook — The Supply Chain Centred Business
Create dynamic supplier relationships with modern EDI
As companies looking to compete are increasingly required to diversify across global supply chains, supplier performance management and the tools that make it possible are becoming increasingly important. The challenges of the past year have also further highlighted the need to improve supplier management, communication, and understanding of partners within the supply chain.
With a combination of digital tools and managed services, EDI-as-a-Service delivers new levels of supply chain flexibility to you and supply chain partners. Get in touch today to see first-hand how EDI-as-a-Service can improve your supplier relationship management and ensure efficiency across your SPM processes.
1How COVID-19 impacted supply chains and what comes next
2Trade set to plunge as COVID-19 pandemic upends global economy
3Gartner Predicts 2021: Supply Chain Technology
46 Benefits of Supplier Performance Management (SPM)