Few process plants are vertically integrated. Instead, they rely on suppliers for ingredients and raw materials, as well as vendors intellectual property for new products. Success or failure at these plants is highly dependent on supplier performance — or lack thereof.
Unfortunately, the PSbyM Process Industries Performance Study finds that many suppliers are underperforming. Goods and service vendors are placing burdens on process plants and their workforces that are unacceptable and exhausting unnecessary plant resources. For example:
- On-time performances of suppliers to process plants are just 76.1 percent (average) and 90 percent (median), even though …
- 21.8 percent (average) and (15 percent) median of supplier shipments are expedited, even as …
- 11.5 percent (average) and 5 percent (median) of supplier goods were rejected in the past year by process plants.
Those statistics are bad enough, but costs are even worse: 81 percent of process plants report that supplier prices (per unit) rose in the past three years. A full third of plants saw prices increase by more than 5 percent.
It’s no wonder that process plant managers and leaders are frustrated with supplier under performance. Yet for many, the solution may lie not so much in finding new suppliers, but in finding new ways to manage suppliers — and their own facilities. How can plants adequately monitor and improve the performances of their supply chain if they’re not managing, tracking, and documenting their own improvement journeys?
A modern process plant can’t operate without an effective performance management system as a foundation for improvement. It helps to align, monitor, measure, and make visible operations activities and outcomes — even those of suppliers. A performance management system helps to remedy short-term-focused improvements that fizzle out; siloed improvements that yield narrow benefits but don’t affect company results; broad tool-based improvements that lack a strategic, bottom-line objective; and underperforming and/or disengaged suppliers that go unnoticed.
The Milliken Performance System (MPS) — in use at Milliken & Company for decades and adopted by dozens of companies that have improved performances under the guidance of Performance Solutions by Milliken — is based on strategic clarity and safety, which support pillars/principles that set plant objectives and guide workforce actions (e.g., continuous skills development, daily team maintenance, 5S, quality management).
Over time, MPS establishes a cadence for improvements and transforms a plant’s culture. This allows plant leaders to track supplier performance criteria currently ignored by many or most process plants:
- Delivery (to schedule) — monitored and documented by just 67 percent of plants
- Quality/reliability — monitored and documented by only 63 percent
- Adherence to specifications — monitored and documented by just 62 percent
- Total cost — monitored and documented by 47 percent
- Ethics — monitored and documented by 42 percent
- Productivity — monitored and documented by 41 percent
- Financial stability — monitored and documented by 39 percent
- Service/responsiveness — monitored and documented by 38 percent
- Environmental performance — monitored and documented by 35 percent
- Criteria of supplier’s suppliers — monitored and documented by 35 percent
- Labor practices — monitored and documented by 34 percent
The PSbyM Process Industries Performance Study highlights how process plants need to do more to improve their supply chains. The first step is to get their own houses in order by adopting a proven performance management system, such as MPS. Is your performance management system delivering the supply-chain outcomes you need? If not, sign up here to receive more news and analysis, and to learn how Performance Solutions by Milliken and MPS can help.
 PSbyM Process Industries Performance Study, Performance Solutions by Milliken, June 2019; 153 U.S. process plants.