Punishments not useful, say buyers

28 March 2007
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29 March 2007

Most buyers still use punitive measures to improve supplier performance, a recent study has found.

Of the firms questioned, 67 per cent imposed financial penalties on suppliers and 55 per cent reduced the size of their orders if vendors were performing poorly, according to a survey of US firms by the Supply Chain Consortium.

But 58 per cent of companies also believed these punishments were ineffective or only marginally effective.

Bruce Tompkins, author of the report and principal at consulting firm Tompkins Associates, told SM: "It is kind of scary that this is the standard approach, as opposed to working with suppliers."

Tompkins said buyers should be moving away from using "the stick" and trying to develop collaborative relationships with suppliers.

The survey also found that most buyers don't run incentive schemes for their suppliers. Only a quarter had a "supplier of the year" award.

Tompkins said more buyers should be using service-level agreements, which set out formal guidelines on the performance expected from suppliers.

The survey interviewed the top 100 US retailers and consumer goods manufacturers.

SMmar2007

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