Four key indicators for a better supplier service rate
The efficiency of the supply chain is a major challenge for all companies, and the performance of procurement largely determines it. To control this performance and identify areas for improvement, the key metric is the supplier service rate. This metric measures the overall level of service, including adherence to deadlines, costs, and quality. However, to improve it, it is necessary to closely monitor the indicators that make it up. Here are the four most important ones.
OTD (On Time Delivery): The Essential Indicator!
On Time Delivery is simply essential. It measures, over a given period that the company defines itself, the percentage of deliveries made on time, compared to the total number of orders placed.
The value obtained from the OTD allows for comparing the performance of the supply chain to a competitor in the same sector of activity - as one is not "good" or "bad" in absolute terms, but rather better or worse than others! For example, the average OTD in the aerospace sector is 50-60% and rather around 80-90% in textiles.
OTD is often monitored by supplier, but it can also concern the monitoring of a whole family of suppliers of the same product class, or from the same geographic region, or by the value of orders, etc. There are no limits to the analysis, and the evolution of the OTD easily finds its place in the form of dashboards and graphs that highlight its variations and threshold crossings.
The key point, of course, is data quality! This depends both on the effective entry of information by the various actors in the chain, and on the fluidity of their circulation, and their availability in formats that are easy to integrate into analysis software.
On Time In Full (OTIF): taking analysis to the next level
OTIF is based on the same data as OTD, but also takes into account the reality of the quantities delivered to verify that they are in line with demand. The resulting value is therefore by definition lower or equal to that of OTD, with the objective being to get as close as possible to it.
OTIF allows the measurement of a supplier's, or a category of suppliers', ability to deliver the right product, at the right level of quality, to the right place, at the right time, and in the exact quantity ordered. Many logistics managers consider it the most important indicator to follow, as it corresponds to the customer's view of delivery.
Depth of Delay: A Qualitative Indicator to Monitor
Let's delve deeper with a third indicator to keep an eye on. This time, there is no acronym, but two possible names: the depth of delay or the average delay. It is obtained by dividing the sum of the days of delay (the difference between the agreed delivery date with the supplier and the actual receipt of the product) observed for all orders placed over a given period by the number of these orders.
Monitoring this indicator makes it possible to visualize any potential deviations of a supplier, compare several of them on the same type of deliverables, or even classify them according to their reliability in this area.
By acting to improve this indicator, the procurement manager positively impacts the entire supply chain: production lines, as well as sales, marketing, customer service, shipping department, and billing.
Supplier (Re)Negotiations: An Indicator to Watch
We conclude this overview with a less expected KPI: it is the number of renegotiations and modifications made by a supplier on the terms of the initial order.
There is a difference between a supplier who accepts the order as the company places it according to its operational expectations (costs, deadlines, quality), and one who renegotiates the terms of the order, especially on requested delivery dates or quantities.
Is it better to work with a supplier who has a few days of average delay on orders executed without renegotiations? Or with their competitor, who will present a more flattering result on the axis of average delay, but who will have moved away from the initial expectations of the ordering party?
There is no single answer to this question. Like all the indicators followed by Supply Chain managers that contribute to modulating the supplier service rate, their improvement has a cost. How far are you willing to go, for example, to go from 80 to 85% of SSF? And on which indicator should you focus to achieve this?
Garbage in, garbage out: Reliable and Easy-to-Share Data is a Must
The most sophisticated indicators are only as good as the quality of the data that feeds them. They are worthless if the data is of poor quality and not shared correctly between the various stakeholders involved. Moreover, data must be updated regularly, ideally in real-time.
However, operational staff should not be overwhelmed by information, as this could lead to missing the most important data!
This is precisely why collaborative solutions are needed to simplify and structure the recovery of information necessary for building different indicators. Solutions like Winddle allow for easy "connection" of all stakeholders, different internal teams from procurement to logistics, quality, and external partners like suppliers or carriers/forwarders. They can share information related to the operational execution of Supply Chain flows simply.
Indicators are fed by structured and harmonized data, both in terms of form (IT) and content (informational). Business managers can then "natively" capitalize on this data, focus on strategic actions and the management of resulting action plans.
Finally, the availability of data makes it easier to construct other indicators specific to certain activities. With a software platform that is open enough to other business tools, the professional has no limits to their imagination!