30 January 2003 | Robin Parker
Businesses are too backward-looking and inconsistent in their monitoring of the quality and ability of their suppliers, according to an international survey of senior supply chain executives.
Less than a third of firms use performance measurement data to predict suppliers' ability to meet future needs and most fail to address potential cost, service and quality problems within the supply chain, the survey says.
In its report, Supplier Performance Measurement Benchmarking, the analyst firm Aberdeen claims that companies with a full measurement programme improved supplier performance an average of 26.6 per cent.
Although 56 per cent of firms surveyed had formal procedures for measuring supplier performance, most monitored less than a third of their supply base.
It said suppliers should be weighed on the type of product, the nature of the supplier relationship, size and geography.
Tim Minahan and Mark Vigoroso, the report's authors, said the entire supply base should be scrutinised.
"Enterprises that grapple with a supply base that is too large to measure are ill-prepared to effectively manage and mitigate risk inherent in that supply base," they said.
They also point to poorly connected information systems between departments - many of which use different measurement criteria - hindering rigorous performance analysis.
In another study, Aberdeen estimates inadequate analysis of spending on suppliers costs businesses $260 billion a year.
• Both studies are available at www.aberdeen.com