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In our earlier blogs we discussed the importance of supplier management (click here) and the two stages on the path to supplier management excellence.
In this blog we will discuss stage 3 – SUPPLIER PERFORMANCE & EXPECTATION MANAGEMENT
Vast supplier base calls for a stringent performance evaluation system that can track supplier conduct on various parameters as deemed appropriate by the organization. At the same time the evaluation process should be flexible to accommodate changing market situations and supplier expectations. Below are some of the steps organization must undertake for efficient supplier performance and expectation management.
1. Define a competitive framework
- Focus on the objectives that the organization aims to achieve by answering the question “How do we compete?”
- Reshape the routine performance agendas like purchase price variance, cost savings or avoidance, reliable/on-time delivery etc. to the ones more aligned to the organization’s competitive goal.
2. Baseline and benchmark
- Establish performance baselines – where are we today? And competitive benchmarks – where are the market leaders and how rapidly are they improving?
3. Target and design
- Set aggressive—yet realistic—performance-improvement targets
- Design/implement metrics that systematically and consistently drive supplier performance toward the improvement targets
4. Refine and improve
- This stage involves executing metrics, reporting, and actively managing metrics to improve targets.
- The organizations should continually refine targets, benchmarks, and metrics in response to both, what it learns through SPM and external changes.
5. Supplier development
- Those suppliers who do not meet the targets should be given support in terms of knowledge, finance, and process improvement to make them more efficient.
6. Start over
- Complete reconfiguration of metrics if and when conditions within an enterprise or its market change substantially. For example, a change in corporate leadership, advent of new competitors, etc.
Read more: 3 stages of procurement process
Learn More: Vendor Management Guide
