How to measure how well your suppliers are performing

Time needed: 2 days.

Suppliers performance measurement boils down to 3 key areas: Time, Cost and Quality.

  1. Time

    How quickly does the supplier perform the task you are asking of it? It can often get confusing with different terminology such as Key Performance Indicators (KPI’s) and Service Level Agreements (SLA’s), especially as the two often overlap.
    An SLA is the contractual obligation that supplier has to you. A KPI is usually an indicator of performance.
    Away from actual service delivery, how quickly does your supplier respond to requests you may have? If you need extra information is it hours or months to get a response?
    Another factor is does the supplier cause your operational teams extra work?

  2. Cost

    How much does the product or service cost? Does it represent value?
    But it’s not just the cost of the product – you need to look at the wider costs. Does a small change request always have a charge? Is the product cheap but cost you in compensation or returns?
    Does working with the supplier mean you have to change how you usually work? And does that cost money too?
    Known as the landed cost (all costs combined) it is important to see the whole picture.

  3. Quality

    In its simplest form, how good is the product or the service?
    Does it make you look better as a business or conversely does it harm your reputation? Do customers flood back to you because it is so good or complain all the time?

For further information on supply chain management, seer our Supply Chain Management section.

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