The KISS principle is well known to everyone, and while "keeping it simple" is beneficial in almost any situation, it is particularly beneficial for supplier performance measurement. In order to attain the best degree of dependability, quality, and performance while minimizing risk, supplier performance measurement assesses supplier performance against predetermined metrics. The program keeps track of whether vendors complete their work according to the specifications set forth in your contract, statement of work, service level agreement, or key performance indicators. Your data will be harder to manage the more intricate the KPI is.
Set goals that reflect the most crucial requirements for your organization after giving them significant thought. Setting and tracking 20 KPIs is not necessary just because you can. Lack of time for analysis, which is necessary to comprehend supplier performance, results from being overwhelmed by data.Make a list of potential KPIs and choose the ones that are most important to your company. Start evaluating supplier performance against KPIs that are very important, then work your way down to supplementary objectives.
Because each supplier is unique, so too should the standards you use to evaluate them. By subjecting all suppliers to the same performance criteria, their distinctive features go unappreciated.It makes little sense to gauge timely delivery from a supplier who is never late. Even if the provider is consistently on time, frequent mistakes can result in reworks, problems, or complaints. A KPI assessing quality is more relevant in this situation.
The same monitoring performance measures should be used, even if KPIs may vary from one provider to the next. Comparing suppliers on an apples-to-apples basis is made possible by standard metrics.Setting supplier-specific targets while measuring and reporting performance in the same way is possible with a solid standard measurement system. It assesses performance in relation to cost, pricing, and other outside standards. Additionally, it makes reporting to other stakeholders and inside the company simpler.
Don't establish KPIs to evaluate the performance of your suppliers only to forget about them afterwards. The most effective supplier performance measurement programs routinely assess performance.Most businesses evaluate their suppliers' performance periodically; some do it yearly. Whatever time range you select, it's critical that you do it frequently and inform your providers of your findings. These evaluations support continual improvement by tracking trends, modifying targets, or adding new objectives. Process changes can only be made after all stakeholders are aware of the KPIs and how their own performance compares.Strong KPI measuring programs boost supplier performance and spark suggestions for ongoing development. It can reduce your risks, expedite administrative tasks, and identify issues so you can take immediate action.For more details you can check our Measuring and Monitoring Suppliers Performance training course