Seven Steps to Measure Supplier Performance
Seven Steps to Measure Supplier Performance
Introduction:
The aim of the supplier assessment tool is to estimate the total quality environment of the supplier. Measuring supplier performance is an important purchasing tool. Organizations have attempted to measure supplier performance in a number of ways as a part of their quality management program, based on customer requests, or as part of the effort to manage supply chain risk. Companies who evaluate their suppliers find that they have better visibility into supplier performance, uncover and remove hidden cost drivers, reduce risk, increase competitive advantage by reducing order cycle times and inventory, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers.
There are seven steps to measure supplier performance:
Step (1): Align Performance Goals:
Organizations should have a supplier strategy that relates to its goals; because if it has not the drive to allocate the resources to measure and improve supplier performance will be less strong. So, organizations trying to get to the next level of excellence by applying improvement programs such as Six Sigma, which need to have key suppliers aligned with their own organization direction.
Step (2): Choose Evaluation Approach:
Success companies should evaluate the below aspects of supplier performance:
• Financial health:
It is important for companies to monitor the financial health of their suppliers. Interruption of a critical supply source, due a supplier’s bankruptcy or weak financial position, can be devastating to the firm’s ability to meet customer needs. The monitoring should be for financial strength which includes factors such as sales, profitability and liquidity.
• Operational performance metrics:
Which cover large number of criteria, such as:
On-time delivery Quality Lead times Responsiveness
Inventory turns Customer service calls response time
•
Introduction:
The aim of the supplier assessment tool is to estimate the total quality environment of the supplier. Measuring supplier performance is an important purchasing tool. Organizations have attempted to measure supplier performance in a number of ways as a part of their quality management program, based on customer requests, or as part of the effort to manage supply chain risk. Companies who evaluate their suppliers find that they have better visibility into supplier performance, uncover and remove hidden cost drivers, reduce risk, increase competitive advantage by reducing order cycle times and inventory, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers.
There are seven steps to measure supplier performance:
Step (1): Align Performance Goals:
Organizations should have a supplier strategy that relates to its goals; because if it has not the drive to allocate the resources to measure and improve supplier performance will be less strong. So, organizations trying to get to the next level of excellence by applying improvement programs such as Six Sigma, which need to have key suppliers aligned with their own organization direction.
Step (2): Choose Evaluation Approach:
Success companies should evaluate the below aspects of supplier performance:
• Financial health:
It is important for companies to monitor the financial health of their suppliers. Interruption of a critical supply source, due a supplier’s bankruptcy or weak financial position, can be devastating to the firm’s ability to meet customer needs. The monitoring should be for financial strength which includes factors such as sales, profitability and liquidity.
• Operational performance metrics:
Which cover large number of criteria, such as:
On-time delivery Quality Lead times Responsiveness
Inventory turns Customer service calls response time
•