6 keys for managing supplier performance

You wouldn’t want to remain loyal to suppliers that frequently raise their prices without warning or miss important delivery deadlines. So maybe it’s time to consider starting or updating a supplier performance management program.

Among the organizations that may be reevaluating suppliers right now are Major League Baseball teams, such as the Texas Rangers and Philadelphia Phillies, that recently ran into delivery delays for their alternate uniforms.

But how should you go about making sure you’re using the top suppliers? And what should you do with the data you come up with?

Tracking supplier performance

Experts suggest six best practices to benchmark how your suppliers are doing:

1. Establish key performance indicators. These are price, cost, quantity, quality, service, delivery, payment methods and terms, certifications, value additions, innovation culture, financial stability and contract compliance.
2. Classify your suppliers. Helpful categories for classifying suppliers include product types and geographical location.
3. Centralize your data. Because supplier info can be scattered across business systems in Finance, Procurement, Logistics, etc., try putting all your supplier data into one place.
4. Develop an evaluation approach. Select a performance evaluation period of monthly, quarterly or yearly, and an effective evaluation method that fits your workflow, e.g., contract management, supplier scorecards or Six Sigma.
5. Give your suppliers feedback and collaborate on possible solutions. Regular vendor meetings can turn into wins for your company and your suppliers. For example, the company can pledge a portion of the savings generated from improvements back to suppliers.
6. Create an actionable plan. After meeting with vendor reps, follow up by sending a performance report card to the supplier – highlighting specific action points to fine tune any issues. The goal is to foster communication, define what action steps are feasible and track measurable improvements.

It’s also important to track action items and revise goals regularly for an effective supplier performance evaluation framework.