Supplier management is a critical component of manufacturing operations. The success of a manufacturing business depends on the quality, reliability, and consistency of the supplies it receives from its suppliers.
In the modern manufacturing industry, data and technology have become an integral part of managing suppliers. With the help of advanced technologies, manufacturers can improve their supplier management processes, increase productivity, and reduce costs.
This article explores the role of data and technology in supplier management and provides insights into how they can be used to boost productivity in manufacturing.
The Importance of Supplier Management in Manufacturing
In the manufacturing industry, supplier management plays a critical role in ensuring the success of a company. The quality, reliability, and consistency of the supplies a company receives from its suppliers directly impact the quality and efficiency of the final product.
In fact, research shows that 70% of manufacturers believe that their supplier relationships are a critical part of their business strategy (EEF, 2018).
Effective supplier management in manufacturing can provide two significant, contrasting benefits – the reduction of risk and the opportunity for enhanced profitability.
Dealing with Disruption – Reducing Risk
If a manufacturer receives poor-quality raw materials from its supplier, the final product may be defective, resulting in a negative impact on the company’s reputation and customer satisfaction. Additionally, if a supplier fails to deliver materials on time, it can cause production delays and affect the company’s ability to meet customer demand.
Statistics show that 58% of UK manufacturers have experienced a supply chain disruption in the past 12 months, with the most common causes being supplier bankruptcy, natural disasters, and quality issues (Chartered Institute of Procurement and Supply, 2021). These disruptions can have a significant impact on a company’s productivity, profitability, and reputation, highlighting the need for effective supplier management practices.
Effective supplier management can help companies identify and mitigate risks in their supply chain, such as disruptions. By having a clear understanding of their suppliers’ operations and performance, companies can develop contingency plans and proactively manage risks to minimise the impact on their business operations.
Powering Profitability
In contrast, effective supplier management practices can lead to several benefits for manufacturing companies. By establishing strong supplier relationships and using data and technology to manage suppliers, companies can ensure that they receive high-quality materials on time and at a reasonable cost.
This can lead to improved product quality, increased customer satisfaction, and higher profits as effective supplier management can also lead to cost savings.
According to a report by Accenture, companies that implement supplier relationship management programs can achieve cost savings of up to 8% (Accenture, 2017).
The Rise of Data-Driven Supplier Management
Data-driven supplier management is becoming increasingly important in the manufacturing industry as companies aim to enhance the efficiency and effectiveness of their supplier management processes. By collecting and analysing data, businesses can obtain valuable insights into their suppliers’ performance and make informed decisions about supplier selection, evaluation, and collaboration.
With the help of data analytics tools, manufacturers can track supplier performance metrics such as delivery time, quality, and cost. They can also monitor supplier risk by analysing data on supplier financial health, compliance, and sustainability.
In the UK, the use of data in supplier management has become more prevalent due to the growth of digital supply chain platforms. These platforms provide manufacturers with access to real-time data on supplier performance, allowing them to make informed decisions and take proactive measures to mitigate risks. For example, a manufacturer can use data analytics to identify suppliers with high delivery lead times and take corrective action before delays impact production.
Data in Supplier Identification
Supplier identification is the process of identifying and evaluating potential suppliers for a company’s needs. Effective supplier identification is critical to ensuring that a company can select the best suppliers who can provide high-quality materials and services at a reasonable cost.
Data-driven supplier management can also help companies identify new opportunities for supplier collaboration. By analysing market intelligence data, companies can identify potential new suppliers that can offer innovative products, cost savings, or other advantages. This can lead to improved product quality, reduced costs, and increased competitiveness.
Data plays a critical role in the first step of supplier identification, which involves determining the company’s requirements for materials or services. This can be achieved by analysing the company’s historical data on procurement, production, and sales to identify the specific requirements for the materials or services, such as quality standards, delivery times, and cost. Data analysis can also help identify any patterns or trends in the company’s supply chain that may need to be addressed during the supplier identification process.
Once the requirements have been ascertained, data can be used to identify potential suppliers. This can involve conducting market research and using data from industry databases and directories to identify potential suppliers that meet the company’s requirements. Companies can also use data analytics and machine learning algorithms to analyse supplier performance data and identify potential new suppliers that can offer innovative products, cost savings, or other advantages.
After identifying potential suppliers, data can be used to evaluate their capabilities and suitability for the company’s requirements. This can involve reviewing the supplier’s product or service offerings, quality control processes, financial stability, and delivery capabilities. Data analytics and machine learning algorithms can also be used to identify any potential risks associated with the supplier, such as financial instability or quality issues.
For the modern manufacturing operation, effective supplier identification requires a data-driven approach that involves a thorough understanding of the company’s needs and requirements and the ability to identify potential suppliers who can meet those needs.
By using data to follow a structured approach to supplier identification, companies can identify the best suppliers who can provide high-quality materials and services at a reasonable cost, leading to improved efficiency and cost savings.
Supplier Selection + Performance
Data-driven supplier management provides several significant benefits, one of which is the ability to identify supplier performance trends. By analysing supplier performance data over time, companies can identify patterns and trends in supplier performance, such as delivery times, quality, and pricing. These insights can help companies make informed decisions about supplier selection and collaboration, leading to improved efficiency and cost savings.
One key benefit of identifying supplier performance trends is the ability to make data-driven decisions about supplier selection. By analysing historical data on supplier performance, companies can identify the best-performing suppliers, those who consistently meet or exceed the company’s requirements for quality, delivery times, and cost. This can help companies reduce the risk of supply chain disruptions and minimise the impact of supplier-related issues on production schedules and customer orders.
Data can also be used to track supplier performance and identify areas for improvement. By monitoring key performance indicators (KPIs) such as delivery times, quality, and cost, companies can identify areas where suppliers are underperforming and work with them to improve their performance. This can result in stronger supplier relationships, better communication, and ultimately better product quality and customer satisfaction.
In addition to identifying supplier performance trends, data-driven supplier management can also help companies forecast future supplier performance. By analysing historical data, market trends, and other factors, companies can develop predictive models to forecast supplier performance and anticipate potential issues. This can help companies take proactive measures to address any issues before they occur, such as identifying alternative suppliers or adjusting production schedules.
Technology-Enabled Supplier Management
In today’s business environment, the use of technology is crucial for managing suppliers efficiently and effectively. Technology offers numerous benefits, such as automating supplier management processes, improving communication between suppliers and manufacturers, reducing lead times, and enhancing the quality of products and services.
Process Efficiency
Technology can be used to automate supplier management processes, such as supplier selection, evaluation, and collaboration.
By implementing automated systems, businesses can streamline these processes and reduce the amount of time and resources required to manage their suppliers. This can help to improve supplier performance and reduce supply chain risk.
Communication + Collaboration
Secondly, technology can be used to enhance communication between suppliers and manufacturers. Electronic data interchange (EDI), for example, allows for the exchange of documents, such as purchase orders and invoices, between businesses electronically. This can help to reduce lead times, improve accuracy, and reduce the risk of errors.
Quality
Technology can be used to reduce lead times and improve quality. Supply chain management systems can help to track the movement of goods and materials through the supply chain, enabling businesses to identify bottlenecks and optimize processes. This can help to reduce lead times and improve the quality of products and services.
Key Considerations for Implementing Data and Technology-Enabled Supplier Management
Implementing data and technology-enabled supplier management can bring significant benefits to manufacturers, such as increased efficiency, cost savings, and improved supplier performance.
However, it is essential to keep in mind some key considerations to ensure successful implementation and mitigate any risks.
Security
One of the most critical considerations is data security and privacy. Manufacturers must ensure that their supplier management systems are secure and that all data is protected from unauthorised access or misuse. This includes ensuring that any personal or sensitive information collected from suppliers is handled in accordance with applicable data protection laws and regulations. Implementing robust data protection measures, such as encryption and access controls, is essential to safeguarding supplier data.
People Skills
Another consideration is the need for skilled resources. Implementing data and technology-enabled supplier management requires a range of technical and analytical skills. Manufacturers must ensure that they have the necessary resources and expertise in place to manage and maintain their supplier management systems effectively. This may involve hiring new staff, upskilling existing employees, or outsourcing some aspects of supplier management to third-party experts.
Technology to Support Strategy
It is crucial to align supplier management processes and the tech involved in underpinning these processes, with the overall business strategy. Frequently, there is a common misconception that technology is the sole driving force behind change when in reality, it should be viewed as a tool to enable change. In other words, technology is the “tail” that should be wagged by the “dog” – which represents the business objectives and needs. Businesses should adopt a strategic approach to technology, where technology is seen as an enabler of change rather than a solution in itself. A successful technology strategy should be based on a clear understanding of the business objectives, and how technology can help achieve them. By taking this approach, businesses can ensure that they are investing in the right technology for the right reasons and achieving optimal results.
Supplier management should be integrated with other business functions, such as procurement, production, and logistics, to ensure a coordinated approach. Manufacturers must ensure that their supplier management processes are designed to meet the specific needs of their business and that they support the company’s strategic objectives. This may involve identifying key performance indicators (KPIs) to measure supplier performance, setting supplier performance targets, and monitoring supplier performance regularly.
Implementing data and technology-enabled supplier management can provide significant benefits to manufacturers. However, you must ensure that you consider critical factors such as data security and privacy, the need for skilled resources, and alignment with the overall business strategy to achieve success. By keeping these considerations in mind, manufacturers can leverage technology to enhance supplier management processes, leading to improved efficiency, cost savings, and increased competitiveness.
How SourceDogg Can Help
Supplier management is critical to the success of manufacturing businesses. The use of data and technology can significantly enhance supplier management processes, resulting in increased productivity and reduced costs.
By leveraging data and technology, manufacturers can identify supplier performance trends, track supplier performance, and collaborate with suppliers more effectively. By implementing these technologies, manufacturers can stay ahead of the competition and succeed in today’s rapidly changing business landscape.
SourceDogg is a cloud-based supplier management platform that can provide numerous benefits to businesses looking to improve their supplier management processes. Here are seven ways that SourceDogg can help:
- Supplier identification: SourceDogg provides businesses with the ability to create a database of suppliers, allowing them to easily search for and identify potential suppliers. This can help businesses to expand their supplier network, find new sources of goods and services, and reduce supply chain risk.
- Single source of data: With SourceDogg, businesses can centralise their supplier data, ensuring that all information is stored in one place. This can help to improve data accuracy, reduce duplication, and provide a single source of truth for all supplier-related information.
- Performance Management: With SourceDogg, businesses can view supplier performance metrics, compliance data, and contract information all in one place. This can help businesses to identify areas where they can improve supplier relationships, negotiate better contracts, and reduce supply chain risk. By having a complete view of their supplier data, businesses can make strategic decisions that positively impact their bottom line.
- Integrating data from other platforms: SourceDogg’s ability to integrate with other platforms, such as ERP systems, can provide businesses with a 360-degree view of their supplier data. By consolidating data from multiple sources, businesses can gain a better understanding of their supplier network, identify areas for improvement, and make more informed decisions.
- Powerful analytics: SourceDogg’s analytics and reporting tools provide businesses with insights into their supplier performance, enabling them to track supplier KPIs and identify trends over time. This can help businesses to make data-driven decisions and continuously improve their supplier management processes.
- Better sourcing and selection processes: SourceDogg provides businesses with tools to automate supplier selection, evaluation, and collaboration processes. By using SourceDogg, businesses can improve the efficiency of their sourcing and selection processes, reduce the risk of errors, and make more informed decisions.
- SRM module for supplier management and performance: SourceDogg’s SRM module allows businesses to manage and monitor their supplier relationships and performance. With this module, businesses can track supplier performance metrics, identify areas for improvement, and work collaboratively with suppliers to enhance performance.
If you’re interested in seeing how SourceDogg can help your manufacturing business streamline supplier management and achieve better supplier performance, contact us today to schedule a demo. Our team will be happy to show you how SourceDogg can improve your sourcing and selection processes, centralise your supplier data, and provide you with a 360-degree view of your supplier network. Don’t hesitate to reach out and discover the power of SourceDogg for yourself!
