Category: KPIs Library.

Introduction

In the challenging and rigorous supply chain management world, the growing demand for transparency and traceability presents significant risks for companies. So, a clear understanding of key performance indicators (KPIs) is crucial for measuring and improving operational efficiency. The Suppliers per item KPI provides valuable insights into supplier consolidation, inventory management, and the nuances to meeting expectations. In this blog post, we will delve into the concept of Suppliers per item KPI, explore its formula, and provide real-life examples to illustrate its significance.

Understanding Suppliers Per Item KPI

The Suppliers per item KPI measures the number of different suppliers providing the same item within a given timeframe. It offers visibility into supplier consolidation efforts, helping organizations identify potential opportunities for streamlining their supply chain operations. By reducing the number of suppliers per item, businesses can enhance efficiency, lower costs, and mitigate risks associated with supply disruptions.

Calculating Suppliers Per Item KPI with a Formula

To calculate the Suppliers per item KPI, follow these steps:

• Determine the total number of items in your inventory.
• Count the unique number of suppliers providing each item.
• Sum up the unique number of suppliers for all items.
• Divide the total count by the number of unique items to obtain the Suppliers per item KPI.

Know it better with a Real-Life Example

Let’s consider a real-life example to better understand the Suppliers per item KPI application. Imagine a retail company that sells electronics, including smartphones, laptops, and tablets. In their inventory, they have a total of 500 unique items.

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Upon analyzing their supplier data, they find 10 suppliers for the smartphone category. For laptops, they have 12 suppliers, and for tablets, they have 8 suppliers. Applying the formula, we can calculate the Suppliers per item KPI:

Total count of suppliers providing different items = 10 + 12 + 8 = 30
Total number of unique items = 500

Suppliers per item KPI = 30 / 500 = 0.06

In this example, the Suppliers per item KPI is 0.06, indicating that, on average, the company has approximately 0.06 suppliers per item across its entire inventory.

Let’s establish specific Objectives and Key Results (OKRs) related to the supplier performance on a per-item basis. The primary goal is to drive improvements and achieve excellence in supplier relationships, ensuring optimal quality and efficiency.

Objective: Improve Supplier Performance

KR 1: Increase supplier responsiveness by achieving an average response time of less than 24 hours for each item

Initiative 1: Implement a supplier communication management system

KR 2: Decrease supplier defect rate by 10% for each item

Initiative 2: Develop a robust supplier evaluation process to assess the quality of products delivered by suppliers.

KR 3: Achieve cost savings of 8% for each item through negotiation

Initiative 3: Evaluate alternative sourcing options, production processes, and materials to find cost-effective solutions without compromising quality.

Benefits of Using Supplier Per Item KPI

Supplier Consolidation

A higher Supplier per Item ratio suggests a fragmented supplier base, which can lead to increased complexity, higher costs, and limited bargaining power.

Inventory Management

A higher ratio may indicate overstocking, redundant sourcing, or inefficient procurement processes.

Risk Management

The Supplier per Item KPI helps organizations assess their risk exposure and develop contingency plans to handle potential disruptions. Maintaining an optimal balance between supplier consolidation and risk diversification is key to building a resilient supply chain.

Conclusion

The Supplier per Item KPI serves as a valuable tool for supply chain managers seeking to optimize supplier consolidation, enhance inventory management, and manage risk effectively. By closely monitoring this metric, organizations can identify opportunities for improvement, establish stronger supplier relationships, and achieve streamlined operations. Embrace the power of the Supplier per Item KPI and unlock new levels of efficiency and competitiveness within your supply chain.

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