Chapter 2

The Supply Chain Index

Questions Answered
  • How important is each of our suppliers to our overall business performance?
  • Do we have trusting relationships with our most important suppliers?
  • Are we monitoring and managing the relationship we have with suppliers?
  • Do suppliers value our business and think we are living up to our part of the business relationship?
  • Are we minimizing supplier and partner risks?
  • Are suppliers consistently performing up to our expectations on key measures of quality and distribution?
  • Are we getting good value from our suppliers and do the prices we pay allow them to make a fair profit?
  • Are suppliers controlling key process variables to ensure high-quality goods and services?
Why Is This Information Important?
This question should not need answering if you look at the percentage of your overall costs that go to writing checks to suppliers and partners. When I worked with Air Products and Chemicals in Allentown, Pennsylvania, they spent more money on suppliers (66 percent of their costs) than any other single factor, including their own labor. When I worked with Alcoa, they spent a huge portion of their operating expenses on energy, equipment, and raw materials. Hospitals depend on doctors to do most of their patient care, and doctors are not hospital employees except in a minority of places like the Mayo Clinic. Supplier and partner performance impacts just about every measure of performance in your organization. ...

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