Improve Supplier Performance Management with These Four Strategies

by Michael Koploy on 2011-12-08

In a recent interview with Sherry Gordon, President at Value Chain Group, we discussed creating a shortlist of best practices for effective supplier performance management with scorecards. Sherry’s one of the leading experts in the field of performance management, and she had some great advice on how to effectively use scorecarding with SPM and SRM software (click here for reviews of some of the most popular systems).

Here are four strategies to improve supplier performance management programs:

Align scorecards and business goals - A lot of the discussion within groups is around the “best KPIs” or “ideal communication funnels.” The best programs, according to Sherry, focus on discovering the most pertinent business goals and aligning scorecards to fit within this plan. Without this first step, performance monitoring programs won’t be effective.

Set performance evaluation processes - Once scorecards have been created, thresholds and performance standards have to be established. Performance managers will need to decide at what point suppliers will be rewarded and what levels of performance will determine if the supplier is no longer fit to be a good partner. If data collection isn’t the best method of determining performance, then internal stakeholder surveys can be used.

Work actively with suppliers - Taking action with suppliers is perhaps one of the most important steps in an effective supplier performance management program. From the service level agreement (SLA) to contract re-negotiations, performance managers must communicate with suppliers. This will provide  insights into how improvements have been made in some areas and where lacking areas can be improved, as well.

Share performance data with internal departments - Supplier performance data can be beneficial to much more than the performance manager, but the use of this data rides on internal visibility. For example, performance data can be shared with the financials department to evaluate the susceptibility of the supply base to financial disaster. Without performance data visibility, this evaluation will be incomplete.

For more on this discussion, check out: Four Best Practices to Improve Supplier Performance Scorecarding.

Michael Koploy