Friday, 20 September 2013

Ten Top Tips for Supplier Management

Ten Top Tips for Supplier Management

Superior supplier performance is not a one-time event. It should be a continuous process of improvement. The starting point is to understand current performance and where it can be improved. Here are ten tips for managing supplier performance.

1. Use measures that are appropriate to the type of relationship. Clarify your expectations and priorities for each class of supplier (based on spend value and supply risk or complexity) in ways that are meaningful. For example, suppliers of routine products (such as office supplies) may be measured on price, quality and delivery lead-time. On the other hand, strategic suppliers might be measured on total cost of ownership, quality assurance and process cycle times.

2. Use measures that are linked to objectives. Objectives are the specific targets you set in order to meet your goals. For example, an objective of reducing a purchase price by 10% in the next year can be used to achieve a goal of reducing your purchasing costs. You need supplier measures that monitor these objectives.

3. Use measures that are linked to key processes. A process is a set of tasks and decisions that are needed in order to carry out a procurement activity such as "paying a supplier". Performance measures should tell you when your key processes are under-performing as it may be an indication that they are broken.

4. Use measures that are linked to improvements. Continuous improvement is achieved through an on-going programme of improvement projects many of which will involve suppliers. Use measures that track whether or not these projects will deliver on time and realise the benefits expected.

5. Measures linked to people. All performance measures need to be owned by someone who is responsible for achieving the targets you have set. Allocating accountability and then measuring progress is a key to driving improvement.

6. Assign data collection responsibilities. Not all of the data needed for supplier management indicators will be readily available from systems. In this case, someone needs to be given the responsibility for collecting this data accurately and in a timely manner.

7. Feedback performance measures quickly. The shorter the feedback loop between an action and the measurement of the result, the more likely it is that individuals will learn from their actions and take corrective action for next time. Knowing what went wrong a month or more ago does not help people to find underlying causes of poor performance.

8. Make your performance systems accessible. Speed of feedback is essential. Using web-based performance systems, for example, lets people access performance information as and when they need it.

9. Use dashboards. These are a great way to summarise performance information and relate them to target levels. Colour coding performance (green for good, red for bad) and dials or a scale are great ways of allowing people to see at a glance whether or not they are on track.

10. Keep it simple. Complicated systems will fail from lack of use and from difficulties in maintaining the data needed. So simplify at all times.

Author: Stephen C Carter
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