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Getting to the Root Cause of Poor Supplier Performance

In a recent webinar, Terri Decker from JBT Aerotech sat down with SourceDay’s CMO Sarah Moore to talk supply chain performance. As the Supply Chain Performance Manager, Terri came to JBT Aerotech three years ago with a goal of improving their on-time delivery rates to customers. This led to explore other key performance indicators that could influence OTD rates and how the JBT team might improve them. 

As Decker puts it, “It’s not that we did anything spectacular. This is just good supply chain management.” But her methodical approach to identifying problems, understanding the domino effect those problems could have, and finding simple ways to fix them could certainly be adopted by other organizations as a playbook of sorts. 

Hear from Terri herself by watching the full webinar here, or read on for the highlights as we break down the steps Terri’s team took to drive improvement. 

The Problem JBT Set Out to Solve

In 2018, the biggest problem JBT had was growth. As manufacturers of airport gate and ground support equipment, they saw a boom in demand and struggled to keep up. 

In 2018, those struggles resulted in the following metrics: 

  • 68% of parts from suppliers were on time.
  • 32% of parts were missing at the scheduled production start date.
  • 69% of finished goods were on time to JBT’s customers.

Because of the nature of their supply chain, only about 20% of suppliers accounted for the vast majority of parts they needed. Terri knew that if they could improve performance among that small subset of their suppliers, they’d see huge improvements to the metrics above. So that’s where she focused first, setting out to discover the root cause of late deliveries among that group. 

Root Cause Analysis Reveals Communication Problems

Upon close inspection, JBT found that the primary reason that orders were late was simply due to poor communication. 

“When all was said and done, we found the #1 issue to be communication. Our suppliers weren’t communicating well with us; we weren’t communicating well with our suppliers,” Decker said.  

“We were managing our purchasing activities using spreadsheets and emails and phone calls. We would create these elaborate spreadsheets, telling the supplier what we wanted and when we wanted it, and we’d fire it off in an email. Maybe we’d send that every Monday. Well, by Wednesday, we’d send them another one.” 

Purchase order changes are common for JBT’s business — they happen on roughly 80% of orders. As their customers make changes, they need to communicate those changes quickly to suppliers to avoid ending up with too much inventory. But with all the spreadsheets, it became a challenge for JBT’s suppliers to keep up. 

4:09 Play Video

Measuring Supplier Performance

The #1 behavior impacting OTD.

Adopting New Technology

Terri and the team at JBT understood that modernizing operations would require an investment in technology. They analyzed processes from top to bottom and implemented several new technology solutions, from inventory management to supplier communication. 

One particular challenge revolved around order acknowledgements. According to JBT’s data, “If a PO was not acknowledged, it was not going to be here when we started production — 100% of the time.”

Already customers of SourceDay, the team had fallen back on old habits of sending complex spreadsheets through email instead of using SourceDay’s functionality to manage purchase orders, including PO acknowledgements. When Terri came on board, they doubled down on their commitment to manage orders through SourceDay, paying special attention to acknowledgement rates

Measuring Improvements

After implementing several changes in their operations, JBT began regularly reporting on supplier performance again. Getting back into the swing of things required some tough conversations, but continuing to check on these metrics enabled both suppliers and JBT to make improvements, ultimately strengthening the supplier relationship.

“What gets measured gets improved. For many reasons, JBT had fallen off using supplier scorecards, so we weren’t measuring supplier performance. Once we got beyond the initial finger pointing, then the suppliers started seeing what their performance looked like and they wanted to get better,” Decker said. 

The Hidden Link Between OTD and Manufacturing Efficiency

 And get better they did. 

According to Decker, “We’re able to see out of SourceDay what our suppliers’ performance is. Right now, we’re seeing upwards of 86% of our POs acknowledged within three days. Who would have ever thought two years ago we’d get there?” 

Improving supplier communication had other benefits, too. “At the end of 2018, we had well over $1M in inventory of one supplier’s product. At the end of 2020, it was about $200k.” That’s $800k in savings for only one of their few hundred suppliers. 

Looking back at their big-picture metrics relating to on-time delivery, the results were astounding. 

In 2020, JBT showed the following: 

  • 89% of parts from suppliers were on time (up from 68%).
  • 8% of parts were missing at the scheduled production start date (down from 33%).
  • 89% of finished goods were on time to JBT’s customers (up from 69%).

“Who in the world thought, in the midst of a pandemic, that a company would see improvement in any metrics, let alone supply chain metrics and on-time delivery metrics?” 

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