How to Use Business Intelligence to Improve Supplier Quality Data

By Roland Hoelscher  |  Posted 2010-04-06

How to Use Business Intelligence to Improve Supplier Quality Data

As you investigate business intelligence solutions for your company, it's important to realize that most poor supplier quality costs are not due to defective materials. Rather, they are due to non-material costs. One recent study showed that 67 percent of poor supplier quality costs are non-material.

This is important because that 67 percent is the extra supply chain overhead a company is saddled with for late deliveries, delivery to wrong locations and so forth. If those non-material costs end up causing the manufacture of defective products, the cost is even higher. The company will have to pay the extra overhead for producing the defective product, and then pay non-material costs again to start all over and produce a salable product. So, the earlier that quality issues are caught and resolved, the more money can be saved.

Companies using SAP or any other ERP system know that all the secrets of their supply chain have been long hidden in their systems. They also know the reporting about supplier quality, in particular, has been equally cumbersome. It's slow and partial, even if you can find the right data to begin with. Everyone is used to working around issues.

BI front-end solutions are finally delivering on what ERP systems started out promising they would be capable of (but never managed to do). The key difference is, the reporting is truly functional. This breed of front-end applications can extract the meaningful supplier information from disparate, almost inaccessible sources, and quickly automate reporting in dashboards and scorecards. And here's the kicker: any human on the front lines can understand it.

They are specifically designed to complement any ERP or Supply Chain Management (SCM) software. These are BI tools that can get supplier quality information into the hands of people who might otherwise never get it. Then they can act on it, making the changes that can save substantial amounts of money.

Now, everyone in business has a supply chain, but it might be best served to use a manufacturing example to explain what these BI tools do and what to expect as the gold standard of features. If a manufacturer can use these tools to solve their vast supply chain quality issues, so can anyone.

Four Common Supplier Quality Problems

Four common supplier quality problems

When we understand the problems, we understand the effectiveness of the solutions. The top four supplier quality problems are:

Problem No. 1: Getting information about poor quality from the field

Because it takes so long to extract data, operations managers in the field are reluctant to fill out the SAP data entry screen for reporting problems. They have been conditioned to believe if they enter data, nothing ever happens. So they won't bother.

Problem No. 2: Extracting data quickly and in simple language

The reporting process is manual, often feeding individual spreadsheets. This can take days. So, if a supplier is late or a piece of equipment arrives damaged, it can be meaningless by the time it is discovered.

Problem No. 3: The extreme difficulty in seeing the aggregate view

Often the data is not only in different places but in different applications. So, if a manufacturer with 80 locations across multiple lines of business needs to see an overarching view of supplier quality-good luck!

Problem No. 4: Difficulty in reporting and extracting meaningful data

Without meaningful data reported and therefore extracted in a timely manner, it's impossible to negotiate with suppliers or fix internal problems. Problems can include bad specifications from engineering or purchase orders being cut so late that the supplier has to rush their production. This can all cause poor supplier quality.

Goals and Features of BI Front-end Solutions

Goals and features of BI front-end solutions

The benefits of BI front-end solutions are to decentralize supplier quality information, automate reporting, and save millions of dollars from walking out the door of your business. So, here are some things to look for in BI solutions for supplier quality. Don't settle for less.

1. First and foremost, the software must automate the process of pulling information out of the back-end system and putting it into an overall quality dashboard and individual supplier scorecards. You should be able to get updates as frequently as every few hours. Yes, hours!

2. The system should be capable of alerting you in real time if things go in the wrong direction and immediate correction is needed.

3. The software must be able to provide all the information needed to quickly see the supplier's quality compared to targets, the location of quality problems, if there is one supplier that is causing problems across plants or even lines of business, and show the total cost of poor quality.

4. The software should be able to show the aggregate view as easily as it can for individual location or individual supplier. With this sort of reporting, companies can decentralize their entire supply chain for even faster manufacturing and delivery times, as well as see the overall cost of doing business with national or international suppliers.

In some cases, manufacturers have been able to reduce centralized overseers and improve supplier quality at the same time. The use of this sort of BI tool enables supplier quality to be in the hands of directors at different locations or lines of business.

With the speed of automated extraction and decentralized reporting, the other two major supplier quality problems are solved. The moment a field manager sees that there is an immediate response when he or she fills out the online problem-reporting form, the system starts to work. Once the field managers throughout the company use the system, the meaningful data needed for supplier negotiations is created and real change can happen.

What BI software such as this does is enable productive conversations between a company and its suppliers, where blame isn't assigned but, rather, responsibility is taken by the right people in an efficient manner. Everyone wins when the process is smooth and streamlined, and money is being saved.

And so, it really is prime time for these BI front-end solutions. All these features are available. Don't let your operations managers settle for less. Bring this technology solution to their attention and show them how to save millions of dollars-all by building a better front end.

Roland Hoelscher is the CTO for the arcplan Group. Roland joined arcplan in 1993. As marketing director, Roland was responsible for the market introduction of arcplan's first software solution in 1994 and he established the U.S. subsidiary, arcplan, Inc. in 1997. Roland served as its CEO and president, responsible for corporate development and strategies in North and South America (until he returned to arcplan Information Services AG in 2003). Previously, Roland held many integral positions with arcplan, including director of application development and director of marketing.

Prior to his employment with arcplan, Roland worked for a consulting organization, conducting portfolio analysis to support strategy development of financial institutions. Roland's versatility and various positions at arcplan and other companies have made him an expert in the business intelligence field. Roland holds a degree in Economics from the Westfaelische Wilhelms University in Muenster, Germany. He can be reached at

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