SUPPLIER PERFORMANCE MEASUREMENT – EVERY SUPPLY CHAIN MANAGERS TO DO TASKDavid Inbar
Every Supply Chain Manager has an important task of measuring his suppliers performance, providing feedback to the Suppliers and encouraging to improve their performance.
Measuring the performance of suppliers is to be done both qualitatively and quantitatively. Both are important and required. Using both the results, the Supply Chain Manger to come up with the final scoring results for the suppliers and communicate to them. Let us see each of the methods and how to measure Suppliers performance with it.
In this Analysis, all the divisions and employees who are directly or in directly affected by the suppliers are contacted and their opinion collected about the suppliers. This could be users from
Purchasing – Buyers, Warehouse – Inventory Managers , Logistics ,Manufacturing ,Quality Assurance , Customer Service ( Items that are directly sold to customers from suppliers)
A periodic questionnaire survey or Focus groups meetings is to be conducted within the organization to collect the feedback from the above user groups regarding each of the major suppliers. The feedback will in general terms on their interaction with the suppliers and their products.
This analysis will provide the qualitative results needed.
In Quantitative analysis, the actual performance of the suppliers in terms of various data measures as listed below is mathematically computed.
How many times did the supplier respond to the Purchase orders in time. Let us say it expected that the supplier acknowledge to a PO with in 3 days from the date it is released, how many times did the supplier actually respond to the PO and acknowledged in time.
How many times did the supplier accept change requests from the Buyer. This will be the percentage of times the supplier responded to change requests and accepted the same.
How many times supplier delivered in time. If the requested delivery date on a purchase order line item is May 10 2013, Did the supplier delivery the goods between May 7 2013 to May 10 2013. A percentage of this to the total number of line items ordered on the supplier will provide this metric.
How many items supplied by the supplier got rejected in the QA process. How many defective parts per million items supplied
(d) Cost reduction
Is the supplier passing on the learning curve benefits to us. As time progresses, Supplier is expected to add innovation to his business bringing about cost reduction for its customers. How many items out of the total items bought from the supplier has a declining price over the last three years.
A combined score card developed out the above qualitative and quantitative process is to be analyzed and the results communicated to the suppliers. It is also a good idea to publish the top 10 suppliers each 6 months so that suppliers will know where they stand and their customer service executives will monitor these measurements.
In all, supplier evaluation is both an art and science. Using a collaborative platform like TpSynergy.com (www.tpsynergy.com) will help to develop these supplier performance metrics and communicate to them