‘Collaborators’ going it alone - performance out of the window!

Continuing our collaboration KPIs theme we describe a situation where two small businesses had worked together for over 10 years. One was a manufacturer of technical equipment and the other a specialist logistics company. The relationship was strategically and financially important and had originally been formed over a handshake between the CEOs. However, there was no formal or informal contract, communications were ad-hoc and there were no common performance measures, quality standards or monitoring systems. Processes were informal such as ‘no notice’ orders for stock and as a result forecasting was poor.

 “They have no 'faces'. They are known as 'they'. We have no shared view of what we are delivering, we have to second guess what they want. Performance concerns focus purely on test results. We used to meet regularly but these have petered out. Even an annual review would be useful.” Supplier MD

 “Why can't we get all our components tested by our partner? We have an engineer who does nothing but testing. We now learn that they have built tests into the products and guarantee a 98% pass rate compared to 30% previously!” Customer Ops Director

“It’s no wonder that they have problems with reliability and developing a new product because they continue to use obsolete components and make expensive mistakes.” Supplier Engineer

 “I was wandering around their production department on a Friday afternoon and one of the engineers casually mentioned that they needed 800 of a particular item next week. I was taken aback because these components have a 3-month lead time and we only had 50 on hand!” Supplier Sales Representative

 After a communication drought that had lasted some years discussions between the two companies resulted in the following:

 - Joint initiatives to formalise processes and hold regular planning meetings

- Joint product reliability action saved £40k annually on in-house testing

-Early involvement of the supplier in new product design brought lower cost, improved design reliability, better asset availability, more functionality

- The Customer replaced disparate IT with new, integrated system to improve asset control, marketing and requirements forecasting

 Over the next 3 years the development and time to market of a new product was achieved in record time. Customer revenue rose by 38.5% pa and Supplier revenue doubled.

 “We are now concentrating on solving the issues rather than shouting at each other.”