BLOG

How to Measure Your Supplier Performance in 7 Simple Steps

Mar 2, 2018

supplier performance

Every company invests a considerable amount of time and effort in the supplier selection process, but in the long run, how do they evaluate if the supplier’s performance is meeting the desired standards? And how important is the measurement of supplier performance for a business? Almost all companies are already deploying some form of supplier performance measurement, be it in the form of key performance indicators (KPIs), or more sophisticated data gathering, and on-site assessment programs. Also, when businesses evaluate the performance of their supplier, the shortcomings in the adherence to standards can be easily detected; thus, promoting improvement. Here are seven steps to critically evaluate your suppliers, which can result in meanSE_Demo2ingful outcomes and better return on investment:

Align performance goals

Smart businesses must first have a clear-cut supplier strategy that relates to the overall organizational objectives and goals. In the long run, this will also help them to enhance their supply chain management. To achieve this, organizations can pursue continuous improvement programs and methodologies such as Six Sigma, lean enterprise, lean sigma, continuous improvement, operational excellence, and total quality management. Typically, companies trying to get to the next level of excellence need to have key suppliers aligned with their own organizational direction. Lack of synchronization in supplier activities and organizational goals can adversely impact cost, quality, and delivery.

Choose evaluation approach

Companies must evaluate some of these critical aspects of supplier performance, including financial health, operational execution, metrics business processes, and practices enabling behaviors or cultural factors risk factors. These factors can help review and understand the supplier’s readiness to comply with the organizational requirements and also efficiently meet the supply chain management requisites and guidelines.

Develop information collection method

The methods of information collection regarding the supplier performance include paper questionnaires, web-based questionnaires, extracts from current systems, site visits, and third-party standard certification. However, all these methods have their own challenges and complications. Companies must choose the method that best suits their purpose and gives them the optimal results.

Design a robust assessment system

No matter which components of a supplier performance assessment system an organization develops, a significant challenge lies in creating a system that is based on metrics both relevant to the business and based on generally accepted best practices. Designing and developing a robust supplier performance assessment system requires in-depth business knowledge, familiarity with high-performance systems, and expertise of measurement methodologies. Furthermore, it also requires expertise in adequately constructing the questions to elicit accurate responses and correctly measure performance.

Roll out the system

One of the most significant difficulties in assessment systems is the deployment. Primarily due to the vast number of challenges associated with each of the supplier assessment systems. Survey instrument development expertise, subject matter expertise, and knowledge of IT are needed to avoid the pitfalls in deploying all these approaches.

Provide actionable feedback     

Customer companies need to have a real dialogue and discussion with their suppliers on performance and work on the critical issues of the performance. This requires a two-way flow of information. If the results of supplier performance measurement and supplier assessment are not actionable or expectations of actions are not communicated, those actions will not be put into practice.

Showcase results

Measuring supplier performance is all about understanding, communicating, and then implementing the necessary corrective action for improving supplier performance. What companies need to do is to work with suppliers to develop action plans as a result of assessments. They should then track performance to these plans to close the loop and realize the full benefits of the supplier performance measurement process.


To more about supplier performance measurement and ways to enhance your supply chain managementGet More Info


Related posts

[ess_grid alias=”Blog-studio” settings='{“max-entries”:”8″}’ special=’related’][/ess_grid]

Recent Blogs

5 Pro Tips for an Impactful Procurement Process

5 Pro Tips for an Impactful Procurement Process

What is a procurement process cycle? Over the years, procurement process cycle has received a lot of attention as organizations across the globe have changed their focus from tactical functions to strategic business units. As a driver of major purchasing decisions,...

read more

Industries

Services

Getting Down To Business

We are offering Free Trials to all our customers or prospects who have been impacted positively or negatively by Covid-19 and are looking to connect with prospect buyers immediately.

Contact us

COVID-19

Featured

Overview

Buyers

Diagnostic Test Kit

Additional Resources
Contact

A LOOK INTO THE FUTURE OF THE FOOD AND BEVERAGE INDUSTRY AFTER THE COVID-19 PANDEMIC

Identifying the Top 100 Coronavirus (COVID-19) Test Kit Manufacturers Across Regions

Sourcing and Procurement Market Intelligence Services

Products and Tools

Featured

Services Overview

Category Market Intelligence

Supply Market Analysis

Low-Cost/Best-Cost Country Sourcing

Benchmarking

Spend Analysis

Cost Modeling and Should-Cost Analysis

Total Cost of Ownership (TCO) Analysis

Supplier Risk Analysis

Supply Chain Risk Assessment

Supplier Sustainability Assessment

Commodity Price Forecasting

Category Management

Supplier Negotiations

Contract Management

Procurement Store

Purchase Ready-to-use Reports

SEinsightsTM

Our Robust Procurement Platform

BizVibeTM

Suppliers and Buyers Marketplace

SUPPLY MARKET ANALYSIS FOR A METAL MANUFACTURING COMPANY HELPS ACHIEVE ANNUAL SAVINGS OF $15 MILLION

Industries

Industries Overview

Automotive and Tire

Banking, Financial Services and Insurance

Biotechnology, Pharmaceutical and Life Sciences

Chemicals

Energy

Food and Beverage

Industrial and Manufacturing

ICT, Media and Entertainment

Mining, Metals and Minerals

Retail and CPG

Transportation

INCREASING LOCAL PROCUREMENT BY 28% FOR A COMPANY IN THE METALS AND MINING INDUSTRY – A CASE STUDY BY SPENDEDGE

Resources

Featured

Resources Overview

COVID-19 Resources

Blogs

Case Studies

Whitepapers

Webinars

Press Releases and Media Mentions

5 KEY CORONAVIRUS RISK ASSESSMENT STRATEGIES TO OVERCOME HEALTHCARE SUPPLY CHAIN CHALLENGES

IDENTIFYING STRATEGIC PURCHASING PRACTICES FOR A COMPANY IN THE US FOOD SERVICE INDUSTRY | SPENDEDGE’S LATEST SUCCESS STORY

Clients

Featured

Clients Overview

Who We Serve

Case Studies

SUPPLY CHAIN MANAGEMENT HELPS AN IMPORT AND EXPORT INDUSTRY CLIENT ENHANCE SUPPLY CHAIN VISIBILITY

REALIZING SAVINGS OF $15 MILLION IN PACKAGING SPEND FOR AN FMCG CLIENT – PACKAGING SOURCING STRATEGY

About Us

News

About SpendEdge
Why SpendEdge?
Vision, Mission and Values
Clients
Social Impact
Global Offices

Press Releases and Media Mentions

Upcoming Events & Webinars