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Supply Chain Governance Solution
Adopt Supplier Performance, Quality and Risk Management Process as an Integral Part of your Manufacturing and Supply Chain Strategy
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Business models around the world are changing dramatically from “Source Local” to “Source Anywhere and Build Anywhere” model. Firms have shifted away from a hierarchical, one-dimensional supply chain entity to a fragmented network in favor of strategic partnerships with external entities. Many businesses facing such model are experiencing challenges and are struggling to compete in this new landscape. Supply Chain Governance can help organizations to streamline and manage their supplier quality and supplier performance. In addition, it enables organizations to identify, mitigate and manage supplier risks for key procurement and manufacturing process.

Internal Audit Management - The Challenges
Most companies are already feeling the heat of the current financial meltdown, putting CPOs, Supply Chain Manager and their teams under intense pressure to reduce costs and improve cash flow while simultaneously managing an increasingly vulnerable supply base. Supply chain disruptions or discrepancy in supplier quality can significantly reduce company's revenue, impact market share, increase production cost, threaten brand image and reputation, and lead to high Cost of Poor quality (COPQ).

Overcoming Challenges
Integrated supply chains are becoming an integral part of the competitive landscape as firms seek to create strategic advantages. Many firms are developing codes of conduct as a way of managing a number of partner behaviors within the supply chain. Supply chain models have gone from the stage of integration to disintegration and finally are reintegrating through adoption of Supply Chain Governance.

Importance of Supply Chain Governance

  • Enable or sustain the heterogeneous models of collaboration between the decentralized supply chain agents
  • Allow rapid integration of new partners into existing supply chains
  • Allow the different parties to communicate and coordinate their activities in support of the endcustomer fulfillment objectives
  • Measure and manage suppliers for contract and SLA compliance
  • Manage supply chain network agent failures and minimize
    • Loss of revenue
    • Loss of market share
    • Brand erosion

 

Supplier Performance Management
Supplier performance management is a critical initiative in supply chain governance for organizations dealing with multiple suppliers. The globalized manufacturing and sourcing mantra has made companies focus on their core competencies and outsource the rest of the non-core business to suppliers across the globe. Companies in service industry such as banking, financial services and IT have also started realizing significant advantages in sourcing good and services from multiple suppliers while benefiting through improved pricing and enhanced services.. Companies are becoming highly dependent on their suppliers and have to assess and manage their supplier's performance to reduce business risks and revenue losses.

MetricStream Supplier performance management solution can help companies to have better visibility into supplier performance and offer benefits to uncover and remove hidden cost drivers from poor quality, increase competitive advantage by reducing order cycle times, chargebacks for nonconforming material and supplies, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers.

Key Capabilities of MetricStream Supplier Performance Management Solution

  • Supplier Management
    • Define key suppliers in the supply base
    • Define and create contracts for goods and services from suppliers
    • Link suppliers with the contracts for performance management against contracts
    • Define quality, financial and operational metrics in the contracts
  • Supplier Performance Management
    • Define Service Level Agreements for contracts
    • Define metrics and key performance indicators (KPI) for contracts
    • Manage the certification status and compliance requirements of their suppliers
  • Supplier Performance Scorecards
    • Evaluate and measure supplier performance through supplier scorecards
    • Define metrics and key performance indicators (KPI) for contracts
    • Manage the certification status and compliance requirements of their suppliers

    Supplier scorecards are an integral part of the supplier performance management process. The solution offers capabilities to define categories or groupings of metrics/KPIs by which suppliers will be measured such as cost of poor quality, delivery cost, inventory cost, response index, order fulfillment score, order visibility score, returns/charge-back score and can be extended to custom categories such as risk, innovation, customer complaints and corporate social responsibility.

    Supply Chain Risk Management
    Organizations are experiencing rapid supply chain expansion with decentralized supplier base. Although expanded supplier base in supply chain have helped organizations in gaining major cost advantage and market share but it has resulted in more unstable supply chain. Supply chains are vulnerable to various types of disruptions caused by uncertain economic cycles, consumer demands, and natural and man-made disasters. Consequence of an unstable supply chain has increased risks in conducting business operations and raises concerns on continuity of manufacturing or service delivery operations. Supply chain risk management needs to be adopted as best practice for supply chain governance to minimize impact on financial strategy and profitability.

    Businesses can face multiple risks across its entire supply chain such as supplier, process, regulatory, intellectual property, political and economic risks.

    Supply Chain risks which can be measured in solution:

  • Supplier Risks
    • Early/late shipments or delivery to wrong location
    • Non-conforming/wrong product or quantity
    • Supplier processes
    • Sole source supplier
    • Deteriorating performance
    • Credit/financial problems
    • Labor practices
    • Long-term investment in capacity, innovation, performance, etc.
    • Capacity ramp/rollout problems
    • Undesirable events (storm, flood, earthquake, etc.)
    • Contract, legal and regulatory non-conformance
    • Information system failure and compromises
    • Supplier country political stability

    MetricStream solution allows organizations to adopt a risk framework for its supply chain processes to identify key risks, manage, mitigate and minimize the impact on business performance. Some of the steps in supply chain risk management process include:

  • Risk Analysis and Risk Self-Assessment: Document and evaluate risk framework for entire supply chain processes. It should include
    • Key processes: Procurement, Manufacturing, Order fulfillment, Customer complaints and returns
    • Risks: Supplier, Legal, Intellectual Property, Demand Chain, Regulatory
    • Events: Automated or manual assessment of events such supplier non compliance with SLA
    • KRIs (Key Risk Indicators)
  • Control Design and Assessments: Define a set of controls to mitigate supply chain risks
  • Loss Tracking and Key Risk Indicators (KRIs): Track loss incidents and near misses, record amounts, and determine root causes and ownership. For an example supplier’s failure to deliver raw material can result in market share loss and revenue loss.
  • Issue Management and Remediation: Manage issues arising out of supplier assessment, audits and loss events and enable systematic investigation plan for issue remediation and risk treatment.
  • Risk Scorecards and Dashboard Reports: Get visibility into the risk analysis, key risk metrics and risk heatmap to proactively identify areas in supply chain which needs attention.

    • Supplier Quality Management
    Supplier Quality Management is a critical business process for manufacturers who source components and parts from suppliers, whether the suppliers are just across the street or a continent away. World-class manufacturers are realizing that to truly leverage a global supply base to reduce costs, a sophisticated supplier quality management system, that gives the manufacturer real-time visibility into the supplier's process and product quality, is necessary. MetricStream offers the most advanced and comprehensive solution for supplier quality management in the industry today. Leading companies are replacing their point solutions and paper-based systems with MetricStream solution to achieve complete automation of supplier quality management and gain real-time visibility into their suppliers' quality processes resulting in significantly lower cost of poor quality.

  • Supplier Corrective Actions: MetricStream solution enables to
    • Implement a proactive approach to supplier corrective action requests (SCARs) or corrective/preventive action requests (CAPAs) across the supply-base
    • Perform root cause analysis
    • Assign follow-up actions while effectively track and route cases from initiation to closure
  • Supplier Audits: MetricStream provides capabilities to plan, schedule and conduct audits, allows audits finding to be analyzed and enables the initiation of follow-up activities such as corrective action requests and re-audits. Supplier audit help in ensuring that suppliers meet the established product and process quality requirements and the audit process drives continuous improvement
  • Supplier Charge-backs: MetricStream supports recovering both - material costs and processing costs associated with the nonconformance. It allows users to manage the end-to-end chargeback process - aggregate all costs from an incident, route for approvals internally and to the supplier, collaboratively resolve the disputed recovery amounts, and notify back office systems for financial closure. Charging cost of poor quality back to the supplier helps in business discipline and accountability into the supply chain.

    • Key Capabilities of MetricStream Supply Chain Governance Solution

    Supplier Performance

    • Automate global end to end supplier performance processes
    • Eliminate traditional sourcing models and move to “anywhere-anytime reporting and scorecarding”
    • Gain visibility through score cards and control spend
    • Enable supplier scorecards and measure suppliers against metrics and KPIs.
    • Enable a green supply chain through enhanced corporate social responsibility
    • Enable contract compliance across supply chain processes
    • Drive ethical practices in supply chain processes such as Disclosure of conflict of interest

    Supplier Quality

    • Streamline global procurement and manufacturing process across the globe
    • Eliminate paper based dealings with suppliers and automate critical supply collaboration process
    • Enable charge-back program to capture cost of poor quality
    • Enhance product quality through continuous improvement at the supplier by enforcing discipline and responsiveness on quality issues
    • Monitor product quality and process capability in real-time
    • Implement Supplier Corrective Action to enforce closed loop process
    • Accelerate issue resolution by proactively identifying, tracking and resolve quality issues

    Supplier Risks

    • Identify and record risks in the entire supplier network
    • Perform supplier risk analysis and classification
    • Enable risk integration and evaluation
    • Perform supplier risk Treatment for risk mitigation
    • Generate Supplier risk heatmap and scorecards
    • Generate executive dashboard reports to manage and mitigate supplier risk using control based approach

    Conclusion
    Supply Chain Governance solutions enable companies to create a transparent environment to proactively identify, track and resolve supplier quality and performance issues. Early identification of supplier performance and quality issues can help in mitigating supplier risks for smooth and continuous business operations. Organization will have to adopt an integrated supply chain governance system with interlinkages between supplier quality, performance and risks.

    Key Benefits of Supply Chain Governance System

    • Automate global end to end supplier performance processes
    • Streamline global procurement across the globe through supplier quality management capabilities
    • Eliminate traditional sourcing models and move to “anywhere-anytime reporting and scorecarding”
    • Eliminate paper based dealings with suppliers
    • Manage and reduce risks in the entire supplier network
    • Audit suppliers and ensure compliance
    • Gain visibility through score cards and control spend
    • Enable supplier chargebacks to capture cost of poor quality
    • Enable a green supply chain through enhanced corporate social responsibility
    • Enable contract compliance by enterprise-wide document management system
    • Drive ethical practices in supply chain processes such as Disclosure of conflict of interest and Report and measure ethical labor practices