How to manage suppliers performance?
What is supplier performance management?
Supplier performance directly affects the quality and efficiency of the whole supply chain. It’s essential you look to establish a way to enhance it, accelerate its improvement, and to ensure the quality of services and products. Supplier performance can be assessed by evaluating a few characteristics which can include:
- Product or service quality
- Percentages of incoming rejects
- Delivery accuracy
- Warranty claims
- Customer service
- Delivery lead times
- Account management
- Accessibility
- Commercial costs
There are also some ‘soft’ indicators to consider, which can include ethical issues, professional relationships, and cultural fit. It’s important that the objectives and targets you are monitoring have been initially agreed in the contract.
How to manage supplier performance
There are a few ways to manage and monitor your supplier performance. It should first involve your central organisational admin team to design scorecards and reports on the work that your suppliers do. Stakeholder feedback and participation in scorecards is important as it encourages more feedback. It’s also essential to cleanse the system of cards and reports that are no longer relevant, to reduce the complexity for the users. Management support is also needed to encourage participation and communication plans.
Look below at how supplier scorecards, general metrics and KPIs (Key Performance Indictors) can help you monitor your supplier’s performance.
Successful supplier performance management
So how do you manage performance successfully? Here are a few hints and tips to help guide you to success.
- Gather objective information about supplier performance, such as lead-times, quality standards, pricing compliance and anything else that is laid out in the contract.
- Obtain the experiences of customers relating to service, attitude, and response rates.
- Consider the supplier's experience of working with your organisation. This must be included in the evaluation, as it might be that they are facing obstacles or dealing with difficult people.
Advantages of supplier performance management
Manging your supplier’s performance will help you monitor the quality of products, which helps the whole supply chain. Here are some additional benefits of managing supplier’s performance.
- Will help you to reduce supplier numbers to as few as possible, whilst maintaining high-quality supply.
- An effective method of evaluating supplier capabilities and helps you with future decisions. It helps to build a solid foundation of continuous improvement and you to identify any future cost savings, improves quality, increases flexibility, or improves delivery.
- Helps suppliers to have ongoing access to the same information used to evaluate their performance. It enables multiple people from different organisations to access consistent, relevant, authorised information.
Challenges of supplier performance management
When looking at implementing some performance measures, it’s important to be understand that there is no ‘one measure fits all.’ Different organisations require different measures, so trying to find one that suits your business can be challenging. Here are some other challenges to consider when managing supplier performance.
- There are no standard measurements that can be universally applied across several industries.
- Can sometimes offer an insufficient dynamic evaluation of supplier performance.
- Can be inefficient due to the lack of control and regulations.
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