Core Benchmarks Procurement and Sourcing

Transcription

1 Core Benchmarks Procurement and Sourcing The Supply Chain Leadership Forum 2010 Dallas, Texas Track D-4 Facilitated by Justin Brown Principal, Tompkins Associates

2 Session Scope This Session Will Focus On: Outsourcing metrics Supplier on-time availability at shipment origin Supplier on-time delivery Fill rate on closed orders Perfect order received from supplier Supplier quality in PPM Supplier lead-time in days Supply status updates Procurement team metrics 2

3 Outsourcing Metrics Companies are increasingly using contract manufacturers and obtaining raw materials and components from global sources. The percentage of products shipped to global markets is actually decreasing as companies are sourcing or manufacturing locally. 3

4 Supplier On-Time Availability At Shipment Origin On-Time Availability at Shipment Origin Manufacturing 97.1% 90.0% 85.0% 60.0% Retail 95.8% 92.5% 81.3% 55.0% Definition: Orders as a percentage of total orders that are available for carrier pickup on or before the time requested. performing companies have suppliers with on-time availability greater than 95%. On-time availability is not measured by approximately 10% of the companies surveyed. 4

5 Supplier On-Time Delivery Supplier On-Time Delivery Manufacturing 97.8% 93.0% 85.8% 60.0% Retail 97.4% 93.8% 86.9% 66.0% Definition: Percentage of supplier deliveries that arrive at your facility per your requirements. quartile companies average greater than 97% on-time delivery from their suppliers. 5

6 Fill Rate on Closed Orders Fill Rate on Closed Orders Manufacturing 97.3% 91.0% 90.0% 80.0% Retail 97.5% 95.0% 86.8% 60.0% Definition: Order line items with correct product and quantity before the order is closed. Average performance is approximately 90% for all companies participating in the survey. 6

7 Perfect Order Received from Supplier Perfect Order Manufacturing 93.0% 92.8% 90.7% 50.0% Retail 94.3% 90.5% 84.0% 75.0% Definition: Orders as a percentage of total orders that are correct in all respects. Perfect order is now measured by most companies a change from a few years ago when it was rarely used. Perfect order performance of greater than 90% is considered good among the companies that measure it. 7

8 Supplier Quality Rating in PPM Supplier Quality Rating in PPM Manufacturing ,028 20,000 Retail ,102 26,000 Definition: Supplier quality for incoming materials measured in parts per million (PPM) defects. Supplier quality in the 200 PPM defects range is exceptional performance. The average PPM is 2,500-3,000. Many companies are still not using PPM to measure their suppliers performance. 8

9 Supplier Lead-Time in Days Lead Time in Days Manufacturing Retail Definition: Time measured from vendor order acknowledgement to delivery at the destination ready to be unloaded. Continuous efforts to reduce supplier lead-times over the past several years have led companies to breakthrough supplier performance across many industries. quartile performance is no longer uncommon in the 3-5 days range for manufacturing companies and 7-12 days for retail companies. 9

10 Supply Status Updates Timely and Accurate PO Acknowledgement Manufacturing 99.9% 95.0% 90.0% 32.0% Retail 99.0% 96.0% 86.5% 30.0% Timely and Accurate Ready to Ship Manufacturing 99.9% 98.0% 95.0% 50.0% Retail 96.5% 85.0% 70.2% 25.0% Timely and Accurate Advance Shipping Notice Manufacturing 99.9% 97.0% 82.1% 50.0% Retail 96.0% 85.0% 76.0% 20.0% 10

11 Procurement Process Metrics Metric Percentage of Annual Purchases Value from Certified Suppliers Percentage of Purchase Orders Approved Electronically Percentage of Total Annual Value of Goods Purchased from Your 10 Suppliers Percentage of Total Value of Materials and Services Purchased Outside the US Percentage of Order Line Items Transacted Using E-Procurement Enabled Catalogue Suppliers Percentage of Total Annual Value of Purchased Materials Participating in VMI/SMI Programs Percentage of Total Annual Value of Purchased Materials Placed by Non- Traditional Methods (without buyer) Current Performance > 10% Reduction Previous 12 Month Trend 1-9% Reduction No Change 1-9% Increase >10% Increase 82% 0% 0% 25% 25% 50% 90% 0% 0% 72% 14% 14% 55% 0% 0% 60% 40% 0% 19% 0% 0% 20% 60% 20% 22% 0% 20% 20% 40% 20% 12% 0% 0% 40% 60% 0% 17% 0% 0% 60% 40% 0% 11

12 Effectiveness of Procurement Team Metrics Purchase price variance Product quality adherence to specs, recalls and rework, and corrective actions Supplier delivery performance Supplier lead time Year-over-year cost change/savings Product disruptions Cost reduction initiatives 12

13 Discussion Points 13

14 Discussion Points What other measures does your organization use to gauge the effectiveness of procurement processes? What best practices, with respect to sourcing and procurement, has your company adopted? What organizational challenges do you face with sourcing and procurement? What trends or major changes have you seen in the last few months, years? How does sourcing and procurement fit into your overall business strategy? 14