The key to managing supplier performance and mitigating risk is to take action, not just measure it.
But procurement functions often don’t take this important step, according to Martin Berr-Sorokin, general manager at IBM Supplier Lifecycle Management Solutions.
Speaking to the CIPS Annual Conference in London last week, Berr-Sorokin said: “It’s not about measuring the risk and the performance, the main point is taking action.
“What I see when I talk to procurement organisations, is it is pretty easy for them to do performance evaluation, and a lot of companies start now with risk management. But when it comes to setting up programmes, projects, actions, assigning responsible people for that, deadlines, tracking maturity levels - making sure this really is executed, risk is really mitigated, and supply base performance is optimised, it is weak.
“A lot of companies have a hard time doing it, because it’s change and will cause additional work, and nobody is crying out for additional work.”
Berr-Sorokin said supplier performance evaluation is not something that can be done by procurement in isolation.
“This is a cross-functional effort. It is usually driven by procurement, but procurement by itself cannot do a proper performance evaluation. You need more people - the quality guys, production, R&D, logistics, because they give you feedback if the supplier is performing well, and then you get an overall picture.
He also highlighted five benefits of carrying out supplier management effectively. These were reducing cost, mitigating risk, increasing performance, ensuring regulatory and corporate compliance and driving innovation.