How Estimating ROI for Adopting Technology Can Help Streamline Supplier Quality

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Organizations have certain expectations and apprehensions when adopting a technology solution for suppliers. When it comes to automating a process, in terms of its usability, its benefits, and of course, returns in lieu of the investments made, it is common to see tensions rising high within your organization. However, such a solution would not only streamline the organization’s supplier quality across product lines, geographies, and industries, but would also elevate it to achieve a sustainable business environment.

To keep a lid on the anxiety and making sure that all boxes are checked during this process, there are a few things that you can keep in mind. Firstly, you need to understand that the list of features/ functionalities can be exhaustive, of which you would have to segregate the set of “must have” from “desirable” features. Based on these categories, you need to identify the most appropriate and flexible software platform that would meet your expectations.

To maintain a cordial relationship with your global partners and to build a sustainable base of business operations, with metrics and parameters around quality and compliance, it is vital for you to have a clear view of your organization’s overall goals and objectives. In today’s fast-paced and competitive business landscape, manually managing supplier quality may not be a good idea. It can be time-consuming and challenging for you to track, consolidate, and view open and recurring non-conformances and related corrective actions across various tiers of suppliers. Furthermore, it is difficult to gain an understanding of supplier capabilities with a paper-based approach, where the data cannot be analyzed for any supplier insight. Another challenge that you will face is inconsistencies in the data gathered to monitor and measure supplier performance metrics, which also baselines quality parameters.

Technology has enabled organizations to manage all supplier information and supplier contracts, including their SLAs and product information in a centralized repository, fetching numerous benefits from easy supplier segmentation to reduced non-conformances and huge cost savings on corrective actions. Amongst all the advantages of adopting a supplier quality management tool, below is a list of the top 10 parameters to measure the Return on Investment (ROI) over a period of 12 months.

  • Established basis for supplier segmentation and audit prioritization
  • Structured supplier rationalization
  • Minimized on-going audit cost of new suppliers
  • Significantly reduced non-conformance and CAPA
  • Decreased inventory of products with quality and compliance issues
  • Reduced cost of order replacement
  • Savings from supplier chargebacks
  • Improved inventory availability
  • Reduced quality checks
  • Less customer complaints

ROI analysis offers potential benefits for an organization with multiple brands, LOBS, and suppliers, based on the determination of “must have” and “desirable” features. For an organization, this helps to develop a consensus regarding revenue boosters, efficiency improvements, cost savings, and business process change. ROI analysis also involves identifying the measurable variables and quantifying them into actual gains.

To learn more about the multiple factors and assumptions, that has to be taken into consideration while deriving a reasonable value and benefit. The insight here describes the assumptions listed out for ROI calculations. And based on these assumptions, these values may vary with the span of suppliers each organization is dealing with, and the operational scope of each organization.

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