Consistency
Tom
Waits, the singer/songwriter, quotes Jim Jarmusch with words to live by
(Hilton, 2008). It goes like this: “Good, Fast, and Cheap (GFC); Pick two.”
This is a valid, although simple observation. The reality of GFC is that when
you pick two of the elements, the third falls away. It is a good rule of thumb
when choosing suppliers. Typically, we want something to be good. Therefore we
have to give up either fast or cheap. The bottom line is that time and money
are driving factors, and typically, you
get what you pay for.
According
to The Aberdeen Group (2002), approximately 50% of an organizations earnings
are spent on external suppliers. This cost represents a necessary investment
that a horizontally integrated organization is required to make in order to
produce their product or service. Consistently measuring supplier performance
is a necessary part of managing and maintaining a business.
To
create a solid supplier measurement system, subjective information needs to be
translated into objective data. Subjective data provides “fuzzy” information
that requires “defuzzification.” This will
be discussed in more detail later, as supplier
rating.
In
order to produce consistent measurements, metrics must be standardized across a
business’s supplier base (Maheswari & Kumari, 2012). A broader portion of
the supplier base should be measured and the resources from the suppliers must
be organized to reduce costs, mitigate risks, and avoid liability. The actions taken
to accomplish the above need to put the suppliers in the position of team
members with your business as the customer, in a leadership position. This will
more easily drive continuous improvement. Nothing kills a supplier relationship
like performing aggressive audits like a police force.
The
following questions need to be answered by the organization: is it important to
visit suppliers on a regular basis? How isa supplier rated? How is an objectivescore assigned? How is a supplier base maintained?
References:
Hilton, R.
(2008) Tom Waits Interviews Tom Waits, NPR,
online at: http://www.npr.org/sections/allsongs/2008/05/an_interview_with_tom_waits_by.html
Maheswari, A. U.
& Kumari, P (2012, Sept.) A Fuzzy Mathematical Model for Multi Criteria Group
Decision Making –An Application in Supply Chain Management. International Journal of Computer Applications (0975-8887)
Volume 54 – No. 7
The Aberdeen Group
(2002) The Supplier Performance Measurement Benchmarking Report, Aberdeen Group: iSource.
