The Case for Supply Chain Quality Management: Part 1 – Why Measuring Supplier Performance is Crucialby Kathleen Rohrecker
Supply chain quality management is something we spend a lot of time thinking about at arcplan. That’s because our business intelligence software products align with the needs of supply chain managers, and we’ve had a lot of success implementing arcplan Enterprise at manufacturing companies that needed to reduce the costs associated with poor supplier quality. In fact, later in this series, we’ll post a case study on one such organization that saved $250,000 per year by using arcplan to manage the quality of just one vendor (and then went on to save millions in subsequent years).
But today, we’re exploring why measuring supplier performance is so crucial and why many companies come to arcplan to institute this practice. Studies show that companies that closely manage suppliers on average realize more than 25% improvement in key supplier metrics such as on-time delivery, quality and cost. Moreover, experts say that the Cost of Poor Supplier Quality (CoPQ) may account for more than 10% of an organization’s revenue. It seems that managing supplier performance is simply a smart financial and risk reduction decision.
Companies that measure and closely monitor supplier quality perform better because doing so delivers numerous benefits, such as: