Remember how you felt when grades came out in school?
Now manufacturers are giving report cards around the clock to suppliers and expecting them to measure up. Get ready for your customers to do the same.
Chrysler Group, the North American unit of auto manufacturer DaimlerChrysler AG, for instance, recently announced plans to provide its suppliers with online access to their performance scorecards as well as those of their competitors.
The scorecards are posted on the Internet and rate each supplier on cost, quality of parts, on-time delivery and quality of paperwork, as well as how well and how quickly the supplier responds to a problem. This gives suppliers a constant means to evaluate their own performance against that of rivals, and a tool to use when contracts come up for renewal.
“It’s sort of like a decathlon,” says David Barnas, a spokesman for Chrysler Group. “If you’re (ranked) first or second across the board in these categories, you’re going to be looked at for more business. If you’re at the bottom, you’re obviously going to know you’re at the bottom and you’re going to know on a 24/7 basis.”
How suppliers adjust to this notion of daily or more frequent evaluations will play a key role in determining whether or not they maintain their existing customer base.
Chrysler Group has provided hard-copy evaluations to its roughly 900 top-tier suppliers since 1998, says Barnas, a method that was not only much more time-consuming but also left considerable gaps between reporting periods.
Within the last year, Chrysler started using hosted software developed by SeeCommerce, a Palo Alto, Calif.-based performance-software provider, to pull data from its systems.
At first, Chrysler called suppliers to deliver the information, but by February Chrysler’s top five suppliers will be rated daily and online. More suppliers will be added in a phased rollout, with the top 250 having full access into the SeeCommerce software and the next 300 to 500 having limited access, says Tapas Majumdar, SeeCommerce’s senior director of professional services. Chrysler will continue to add additional suppliers. The company handles 300,000 parts from more than 2,000 suppliers
“We like to say that information is good if it’s used right,” says Chrysler’s Barnas. “If it’s online, suppliers have the ability to see where they stand at any time and adjust accordingly.”
It’s an adjustment that Chrysler Group and other manufacturers are counting on in these dour economic times. Rather than brazenly demanding price cuts on parts and materials as many Fortune 500 companies—particularly automakers—have done in hard times past, Chrysler Group is counting on a more natural, self-policing shift to lower prices, and equal or better quality to occur.
Suppliers will be able to see how they stack up against the competition, although antitrust constraints will keep them from seeing exactly which named competitors scored higher or lower on their specific pricing information.
