How To Measure Supplier Performance? – Definition
It is essential to measure supplier performance in order to ensure that products and services are delivered as promised. This can be used as a basis for selecting vendors, renegotiating contracts, and developing better relationships with suppliers. Measuring supplier performance is not always an easy process, but having the right metrics and tools in place can help make it easier. In this article, we will discuss how to measure supplier performance, what metrics can be used, and why it is important.
Supplier performance criteria
There are a few key performance indicators (KPIs) you should look at when assessing supplier performance. These KPIs will give you a good idea of how well your suppliers are performing and where there may be room for improvement.
1. On-time delivery: This is probably the most important KPI when it comes to supplier performance. You want to make sure that your suppliers are delivering products and materials on time, as this can have a major impact on your own production schedule. Track the percentage of orders that are delivered on time, and set target levels for your suppliers to meet or exceed.
2. Order accuracy: Another important KPI is order accuracy. This measures how often suppliers fill orders correctly, without errors or omissions. This is important because it can lead to delays in production if supplies are not available as needed. Track the percentage of orders that are filled correctly, and set target levels for your suppliers to meet or exceed.
3. Quality: Of course, you also want to make sure that the products and materials you receive from your suppliers meet your quality standards. This KPI can be measured in a number of ways, such as by customer complaints, returns, or defect rates. Set target levels for quality that your suppliers should aim to meet or exceed.
How to measure supplier performance?
In order to measure supplier performance, you will need to consider a few key metrics. These could include supplier on-time delivery, quality of goods or services, price competitiveness, and responsiveness to customer inquiries or concerns. You will also want to establish thresholds or benchmarks for each of these metrics so that you can track progress and identify any areas where improvement is needed.
Once you have collected data on these metrics, you can start to assess supplier performance. This can be done using a simple scoring system, where each metric is given a certain weighting and suppliers are then ranked accordingly. Alternatively, you could create a more sophisticated scorecard that takes into account multiple factors and allows for a more nuanced assessment.
Whatever approach you take, it is important to communicate with your suppliers about your expectations and what you are looking for in terms of performance. This will help them to understand your requirements and give them the best chance of meeting (or even exceeding) your expectations.
Key supplier performance indicators
There are various key supplier performance indicators (KPIs) that can be used to measure supplier performance. Some of the most commonly used KPIs include: delivery performance, quality performance, cost performance, and customer satisfaction.
Quality Performance: This KPI measures the quality of the goods or services delivered by the supplier. It takes into account factors such as product defects, return rates, and customer complaints.
Customer Satisfaction: This KPI measures how satisfied customers are with the goods or services received from the supplier. It takes into account factors such as reaction to complaint handling and post-purchase support.
Measuring supplier performance is an important part of managing any procurement process. By understanding what factors are important to your suppliers, and tracking those metrics over time, you can better understand the overall effectiveness of your supply chain. Regular review of these metrics will help ensure that you select the right supplier for each purchase and continue to receive high quality products on-time. With the right measurement tools in place, it’s possible to keep track of a variety of different criteria and quickly identify areas where improvements could be made across all levels within your supply chain.