Supply Chain Consortium survey: Many companies missing the boat on supplier collaboration

RALEIGH, NC, February 22, 2007 — Improvements in supplier performance are essential for a growing majority of companies that rely on their supplier base for everything from office supplies to manufactured components and customer-ready goods. Yet, a recent Supply Chain Consortium survey of 100 top retail and consumer goods companies reveals that holding suppliers accountable through punitive compliance programs is not working.

The survey found that 67% of participants impose financial penalties on suppliers and 55% reduce order volumes with suppliers due to poor performance. On the other hand, 58% of the same companies rate their compliance programs as ineffective or only marginally effective.

“It is clear from the survey results that there is a need for sound supplier relationships based on joint expectations,” says Bruce Tompkins, Tompkins Associates Principal and author of the Supplier Collaboration Report. “Today, companies want collaborative tools for communication and real-time information sharing for a more seamless supply chain.”

Survey respondents note their top strategies for improving supplier performance and developing relationships with their supply chain partners:

• Establish expectations with a formal Service Level Agreement (SLA) or less formal written guidelines, depending on the supplier’s performance and history. More than 50% of respondents have an SLA with one or more suppliers.
• Focus on collaboration, improvement initiatives and information sharing. Many companies have already achieved improvements in on-time delivery and inventory reduction. Now the focus has shifted to more collaborative efforts, including order lead time reduction and the sharing of inventory and forecast data. (See Figure 1.)

• Measure, monitor, and evaluate suppliers based on carefully selected performance measures. Formal performance scorecards, adopted by 57% of companies, are influential in enhancing accuracy and speed to achieve the “perfect order.” (See Figure 2.)
  

• Hold suppliers accountable for performance with a balance of punitive and incentive-based expectations.

Other key findings include:

• 33% of SLAs are developed to cover supply chain issues only, while 67% are comprehensive business agreements.
• 61% of companies surveyed meet with their suppliers on a monthly basis to discuss performance and 29% meet quarterly.
• 90% of companies that assess financial penalties to suppliers have done so in the last 12 months.
• 72% of participants monitor the performance of suppliers with respect to shipment of the correct products and shipment of the correct quantity.
• 66% of participants do not have a formal improvement suggestion program with their suppliers, and 76% do not receive feedback from suppliers on the effectiveness of their internal processes.

Media Contact
E-mail Myra Schwartz or call 919-855-5533.

About the Organization
The Supply Chain Consortium is the premier source for supply chain benchmarking and best practices knowledge. With more than 100 participating retail and retail supplier companies, the Supply Chain Consortium sponsors a comprehensive repository of 12,000-plus benchmarks complemented by search capabilities, online analysis tools, topic forums and peer networking for supply chain executives and practitioners. The consortium is led by the needs of its membership and an Advisory Board that includes supply chain executives from Campbell Soup, Hallmark, Ingram Micro, J.C. Penney, Molson Coors, Polo Ralph Lauren, Rite Aid, Target, The Coca-Cola Co., and Whirlpool. To learn more about how your company can become a member of the Supply Chain Consortium, contact John Foley, 919-855-5461 or visit www.supplychainconsortium.com.