Siemens S. A. suffered a lack of communication with its suppliers which gave rise to low productivity and poor
service levels. Siemens S.A. has introduced greater integration of its suppliers through the internet to achieve an integrated supply chain management network. The suppliers’ performance is measured on criteria such as on-time delivery, availability of materials, environmental aspects - reducing waste - and their adherence to a code of conduct.
This way the supply chain will become more flexible and competitive, market share will be increased, inventories will
be reduced and the service level will be higher than before. These improvements have as a final consequence a reduction in costs.

Due to globalization and the dynamic market where Siemens S.A. works in, the company wanted to achieve good service
levels and a high productivity. The supply chain was accordingly slow to respond to changes (inflexible), and decisions took a long time to make: to sum up, the chain was not as competitive as Siemens wanted.
One of the problems was the lack of communication between the company and its suppliers which was causing delays, misunderstandings, very long lead times, high inventory levels, high costs, etc. Siemens S. A. lacked any kind of measure control and evaluate its suppliers which made it more difficult to take decissions. The main point for Siemens was to ensure the availability of material in their facilities to increase flexibility and speed in the supply chain, but with the short-term relationships with its suppliers was not easy. In addition suppliers needed visibility in the sourcing process to be more efficient in delivering products.
 


Then Siemens decided to change the strategy with its suppliers creating longer collaborations through integrating their suppliers in their processes. They realized that they needed an appropiate communication systems between suppliers and Siemens with an evaluation system that guarantees to mesure the suppliers performance in terms of speed, availability of materials, service level, and so on.

The solution
Creation of a communication system

Siemens S. A. needs to create a competitive tool for managing the supply chain, increasing its market share and creating a well-known supply chain by moving towards Supply Chain Excellence. That meant that the company should collaborate and integrate with its suppliers, who needed to become customer- and process-oriented. The first task in achieving these objectives was to develop a system where suppliers and Siemens S.A. communicated via the internet, because communication online is very easy, cheap and an effective way of sharing information. In this system, the suppliers manage the inventory that Siemens S.A. needs and follow a supplier process evaluation.
The degree of difficulty in using the system is not very great, but as it is a new tool, employees need training to use it properly to obtain the best results.

Supplier Evaluation
Suppliers are evaluated on four different factors: purchasing, quality, logistics and technology. They are given a fulfillment rate for each of these fields and when the evaluation has been completed, the supplier’s performance is marked. KPIs were set for the evaluation process, such as: on-time delivery of supplies, compliance with requested date of supply and delivery, the delivery capability of suppliers, the quality of supplies, requested date quality, availability of material, first pass yield, delivery reliability and capability, etc. Once the evaluation has been completed, a graphic is displayed in which the supplier’s rating is compared against the average of other suppliers.

These tools make the chain become more flexible, because it is possible to choose the supplier that best fulfils a given requirement. Waiting times and inventories are reduced and lead times are improved because it is possible to access information about the availability of various components.

This evaluation is useful not only to assess suppliers, it can also be used as an operational tool to help decide which supplier to choose at any time. The objective of the graphic is to show the deviations of a given supplier compared to its competitors. In addition, Siemens S.A. requires that its suppliers follow a code of which includes:
- Prohibition of corruption and bribery.
- Respect for the human rights of employees.
- Prohibition of child labour.
- Care for employees’ health and safety.

Sharing information
With this evaluation, every Siemens S. A. user can access information about a supplier and choose between different suppliers according to the requirements they need to fulfill. This information-sharing was facilitated by contracts between the parties in the supply chain to ensure privacy concerning their business data.

Challenges
Challenge 1: Suppliers were not very keen on making private information about their businesses public.
Challenge 2: Developing a powerful e-system which was easy to use.
Challenge 3: Developing good processes and KPI´s useful not only for evaluating the suppliers but also as a daily work tool.
Challenge 4: Training people for the uses of the system was a challenge because workers do not like changing their working procedures.

Lessons learned and success factors
- Lesson 1: When a communication system is created and the suppliers are evaluated, the chain becomes more flexible and dynamic, inventories are reduced, lead times are improved, benefits rise for all the agents that belong to it, etc.
- Lesson 2: Measurement to control and compare suppliers provides useful information to the members of the chain.

- Lesson 3: Including suppliers in joint activities is profitable for all parties because sharing information and collaborating improves their performance.
- Success factor 1: Siemens S.A. has aligned with its suppliers to be able to develop the system and to integrate it. They have achieved it through contractual agreement with these suppliers.
- Success factor 2: Regarding the processes, the company needed to standardize the suppliers and the procurement.
- Success factor 3: Siemens S.A. created, developed and implemented an information-sharing system to show information about its suppliers.
- Success factor 4: The company needed to create specialists in procurement. It provided training for employees regarding these issues.
- Success factor 5: After improving the process, relationships with suppliers became better and stronger.

Economic
- Customer service level increases due to reduction of lead time, ordering process time, track and trace order time. It raises product and service availability because of better management of production and deliveries. Customers changed their ordering habits and could manage better and faster with their suppliers thanks to the website. The process becomes more efficient.
- Inventory holding costs were reduced thanks to a reduction in inventory levels. The system keeps customers informed about their suppliers at any time and with reliable information.
- Decreasing costs and sales growth have made it possible for the company to offer high quality products to its customers at a better price. Integration of the different agents in the supply chain has increased the flexibility of the chain, and has made it able to achieve faster responses.

Environmental
- Emissions of CO2 and fuel consumption have been decreased because the number of trucks used has been reduced as a consequence of the improvement in the reliability of deliveries; because fewer mistakes are made, fewer transport journeys need to be carried out.
- The use of paper was reduced by 95% due to the use of the internet.

Social
- Because of the Siemens S.A. code of conduct suppliers must ensure the safety of their employees and take care of their health, they must also respect employees’ human rights employees and they may not hire child labour. Suppliers must also comply with the prohibition of corruption and bribery. The number of trucks used was reduced and accordingly noise emissions have been lowered.

Limitations
This project can be implemented in any country and in any type of sector; no limitations are found.