Get great performance from your suppliers
Filed Under Blog
Suppliers can make or break an organizations performance. Poor quality materials or an inability to meet delivery schedules can result in severe consequences (manufacturing lines on stop, angry customers to name but two!). But how can you manage supplier performance and can you predict which supplies are more likely to perform badly?
Tell your supplier what you want!
First things first – establish clear performance criteria with your suppliers – this should be done at the outset and included within any contract. Explain what you want and how it will be measured to ensure zero ambiguity. Embed KPI’s as part of your contracts and avoid suppliers becoming satisfied with varying degrees of performance.
Source from appropriate suppliers
Perhaps the key aspect in achieving supplier performance is sourcing from appropriate suppliers in the first place. Whilst there is no guaranteed method of selecting a perfect supplier there are a number of elements that can help you anticipate potential problems – for example – consider the following:
Vendor Competency – are you procuring your materials/services from a supplier that considers your requirement their core competency? For example are you using a machining supplier for the manufacture of complex parts where there area of specialism is simple high volume parts? Purchasing outside of core competency can significantly increase performance risks.
Experience –can the supplier demonstrate a successful track record of delivering against similar specifications, to similar customers whilst achieving lead times and price requirements? A successful and demonstrable track record can instill confidence.
Capacity Constraints – Understanding what capacity your supplier has in terms of resources (people, equipment etc) is important. Capacity represents the available “engine room” to fulfill your requirements. When placing orders/contracts understand how the supplier will allocate equipment and people in order to meet your orders. For ongoing relationships how will the supplier cope when it receives new orders, understand its planning process and how it prioritizes its work. Where needed, how will the supplier expand (for example can it add to its shift patterns or bring in new equipment.)
Appointed your supplier? Ensure you have regular reviews
Once you’ve awarded your contract to the supplier. Regularly reviewing their performance is a key activity for both supplier management and in mitigating related issues that are affecting the organization. Establish joint KPI’s with your key suppliers that can be regularly reviewed. Ensure that the data is credible and set time aside to discuss both performance and any improvement initiatives that may be required. Be prepared for criticism (and an action plan) if some of the issues are self inflicted (i.e. poor specification, ambiguous delivery schedules.)
While there are many things you can measure when reviewing supplier performance many organizations start with QCD (Quality, Cost and Delivery) these are the cornerstone basics that drive performance. However they are not the only things and should not be considered in isolation. When it comes to what data you should review consider what the key drivers are for the success of your business – for example consider:
• Quality – Right first time and levels of defects
• Cost
• Delivery Performance/Schedule adherence
• Service – are there key issues with the service you receive that you can discuss using objective data
• Innovation – Are you looking for your supplier to innovate? For example reduce levels of obsolescence,
• Compliancy – do you have stringent compliancy requirements you can measure?
• Sustainability – does your supplier have to meet any sustainability or corporate responsibility requirements?
Remember that your organizations performance can contribute greatly to the performance of your suppliers. This can be through drivers such as effective communication demand signals (coupled with delivery needs), payment, specifications etc.
Summary
Vendor performance can be complex with many factors influencing the outcome – determining your requirements and having appropriate processes to deliver them is key. Businesses must also not overlook the importance of adequate supplier selection which can significantly de risk supply chain efforts.