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Supplier deterioration on ten suppliers: the whole arithmetic on one page

The complete supplier deterioration calculation on ten suppliers over six months, small enough to check by hand: each supplier's monthly on-time rate, defect rate and lead time from the receipts and quality files, its own twelve-month baseline per measure, the deterioration rule as two consecutive months worse than baseline by a stated margin on any measure, the state per supplier per measure, the deteriorating list ranked by spend, the supplier that looks bad against the group and fine against itself, the one that looks fine against the group and is deteriorating against itself, and the assertion that receipts equal on-time plus late, so a reader can reproduce every figure and then run it on their own receipts and quality data.

By CoviragePublished 17 September 20265 min read
The short answerTen suppliers, six months of receipts and quality data, three measures each: on-time rate, defect rate, lead time. Each supplier's baseline per measure is its own prior twelve months. A supplier is deteriorating on a measure when the latest two months are both worse than its baseline by more than the stated margin: five points on on-time, one point on defects, two days on lead time. Three suppliers are deteriorating: one on on-time, one on defects, one on lead time. Supplier D, at 84 percent on-time, is below the group but at its own baseline and is not listed; supplier B, at 95 percent, is above the group and four months into a slide from 99 and is listed. The list is ranked by annual spend. Receipts equal on-time plus late. Every number can be reproduced by hand.

Supplier deterioration is a trend per supplier per measure against that supplier's own baseline, and on ten suppliers it can be worked by hand. This page works the measures, the baselines, the rule, the states, the list, the two suppliers the group average gets wrong, and the assertion. Margins: on-time 5 points, defects 1 point, lead time 2 days. Rule: two consecutive months worse than baseline by more than the margin.

The receipts, month 6, and the assertion

Supplier Receipts On time Late
A 40 39 1
B 60 57 3
C 25 22 3
D 50 42 8
E 30 29 1
F 45 38 7
G 20 19 1
H 35 34 1
I 55 53 2
J 15 14 1

receipts = on time + late, every row. Holds.

On-time rate, six months, against baseline

Supplier Baseline M1 M2 M3 M4 M5 M6 M5, M6 both worse by >5?
A 97% 98 97 97 96 98 98 No
B 99% 99 99 98 97 95 95 No: 4 points, under the margin; watch
C 92% 93 91 90 88 86 88 Yes: 6 and 4; M6 is under the margin. No
D 85% 86 84 85 83 84 84 No: at baseline
E 96% 97 96 95 96 97 97 No
F 94% 94 93 90 87 85 84 Yes: 9 and 10
G 95% 95 96 95 94 95 95 No
H 97% 97 98 97 96 97 97 No
I 96% 96 97 96 95 96 96 No
J 93% 93 92 94 93 92 93 No

One supplier deteriorating on on-time: F. C is worse by 6 in M5 and 4 in M6: the second month is inside the margin, so C is not listed this month; it is one month from it. B is not deteriorating by the rule at 4 points; it is on the watch row, because a supplier that has never been below 99 is at 95 for two months.

Defect rate, M5 and M6 against baseline

Supplier Baseline M5 M6 Worse by >1 both?
A 0.5% 0.6 0.4 No
B 0.3% 0.4 0.3 No
C 1.2% 1.1 1.4 No
D 2.0% 2.1 1.9 No
E 0.8% 0.9 0.7 No
F 1.0% 1.2 1.3 No
G 0.4% 0.5 0.5 No
H 0.6% 2.1 2.4 Yes: 1.5 and 1.8
I 0.9% 1.0 0.9 No
J 1.5% 1.6 1.5 No

One supplier deteriorating on defects: H, whose on-time is perfect.

Lead time, M5 and M6 against baseline

Supplier Baseline (days) M5 M6 Worse by >2 both?
A 12 12 13 No
B 8 8 9 No
C 21 22 21 No
D 15 15 16 No
E 10 11 10 No
F 14 15 16 No: 1 and 2, not more than 2
G 30 30 31 No
H 9 9 10 No
I 18 22 23 Yes: 4 and 5
J 25 25 26 No

One supplier deteriorating on lead time: I.

The list, ranked by annual spend

Rank Supplier Measure Baseline Latest Annual spend
1 I Lead time 18 days 23 days $2,400,000
2 F On-time 94% 84% $1,100,000
3 H Defects 0.6% 2.4% $650,000
Watch B On-time 99% 95% $3,000,000
Watch C On-time 92% 88% $400,000

Spend on the three listed: $4,150,000. The largest supplier by spend, B, is on the watch row, not the list; the rule is the rule, and the row says why.

The two the group average gets wrong

Group on-time average, M6: 91.7 percent.

D, 84 percent, below the group by 8 points. At its own baseline of 85. D has always shipped like this, the price reflects it, and nothing has changed. Not listed.

B, 95 percent, above the group by 3 points. Four months down from 99. Against the group, B is a good supplier; against itself, something changed in month 3. Watch row, and a call.

Where it goes wrong, even at ten

Group benchmark. D listed, B praised.

One month. Half the suppliers listed every month, and the list ignored.

One measure. H's on-time is perfect; its defects tripled.

No spend. I and J look the same size on the list.

From ten to ten thousand

The same three measures per supplier against its own baseline, the same rule, the same list ranked by spend, every month. Covirage runs it on the receipts, the quality file and the invoices. The OTIF trend watch list covers the monthly version, and the level and trend comparison covers why the baseline is the supplier's own.

Questions people ask

Why the supplier's own baseline rather than the group?

Because suppliers differ by category and geography. A supplier that has always shipped 84 percent on time and still does has not changed; a supplier that shipped 99 and now ships 95 has. The group average would list the first and miss the second. The group figure is shown beside the row for context, not used for the rule.

Why two consecutive months?

Because one bad month is a bad month: a port closure, a strike, a holiday. Two in a row worse than baseline by more than the margin is a change. Three would catch it later; one would list half the suppliers every month. Two is stated and the same for every supplier.

What is spend at risk?

The deteriorating supplier's annual spend, from the invoices. It is not a loss; it is the volume that depends on a supplier that is getting worse, and it ranks the list so procurement calls the largest first.

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