Any company, irrespective of the industry in which they operate, is forced to rely on other companies in order to achieve its objectives. Some of these companies supply them with certain products or services which enable them to create their own products or services. The supply network of a company is, therefore, one of the most prominent aspects of its design. The company must find ways of designing their supply network in an optimized manner that meets several key principles. The supply chain must be reliable and stable. A company can be halted by a break anywhere in the supply chain. This will cost it large amounts of money if allowed to occur. Second, the supply chain must be cost effective. This calls for the supply chain to be as short as possible in order to reduce the margins added on to the cost. Thirdly, the supply chain must have redundancies. This ensures that even where the breakdowns occur, the company is still able to function adequately. All of this is why a business must invest time and energy into the creation of a proper supplier performance management strategy. In order for the company to ensure that they get the best value for their money, they must shorten the supply chain. The best way to do this is to use a data locator to determine the length of their current supply chain. The intention of using data locators is to visualize how orders are met. This enables them to map out their supply network’s true extent. By creating a supply chain map, they can easily determine areas where there is the possibility of optimization being performed. For example, where their supplier is at a tertiary or secondary level, they can seek the services of a primary supplier. This allows them to ease the costs that are incurred due to the addition of intermediaries between themselves and the main source.
When undertaking supplier performance management, the company must understand that this is a continuous process. It should be measured on a rolling basis; the company can determine the length of the time intervals between the performance reviews of their current suppliers. These should ideally be performed in segments to prevent the entire network from being disabled at the same time. A good interval is based on the structure of the supplier contract. The time between intervals should ideally be the time slotted for the expiry of the contract.
