How can you measure vendor performance beyond traditional metrics?

1 Why go beyond traditional metrics?

Traditional metrics are important, but they are not enough to capture the full value and impact of your vendors. They can also be misleading, as they may not reflect the actual performance of the vendor, but rather the outcome of external factors, such as market conditions, customer behavior, or internal processes. Moreover, traditional metrics may not align with your business goals, such as innovation, sustainability, or customer satisfaction. Therefore, you need to go beyond traditional metrics and use more comprehensive and relevant methods to measure vendor performance.

2 How to define your performance criteria?

Before you can measure vendor performance, you need to define your performance criteria. These are the specific indicators that reflect your expectations and objectives for the vendor relationship. You can use a variety of sources to define your performance criteria, such as contracts, service level agreements, surveys, benchmarks, best practices, or industry standards. However, you should also consider your own strategic goals, such as growth, differentiation, or risk management. Your performance criteria should be SMART: specific, measurable, achievable, relevant, and time-bound.

3 How to use balanced scorecards?

One of the most popular and effective methods to measure vendor performance beyond traditional metrics is to use balanced scorecards. Balanced scorecards are tools that allow you to track and evaluate multiple aspects of vendor performance, such as financial, operational, customer, and learning and growth. You can assign weights and scores to each aspect, and aggregate them into a single performance score. Balanced scorecards help you to align vendor performance with your strategic goals, identify strengths and weaknesses, and communicate expectations and feedback.

4 How to use key performance indicators?

Another method to measure vendor performance beyond traditional metrics is to use key performance indicators (KPIs). KPIs are specific and quantifiable measures that reflect the critical success factors of the vendor relationship. You can use KPIs to monitor and evaluate the progress and results of the vendor's activities, such as innovation, collaboration, or compliance. You can also use KPIs to compare vendor performance with your own or with other vendors, and to reward or penalize vendors based on their performance.

5 How to use qualitative feedback?

A third method to measure vendor performance beyond traditional metrics is to use qualitative feedback. Qualitative feedback is the subjective and descriptive information that you gather from various sources, such as customers, employees, stakeholders, or vendors themselves. You can use qualitative feedback to complement and validate the quantitative data from balanced scorecards and KPIs, and to gain deeper insights into the vendor's behavior, attitude, and culture. You can also use qualitative feedback to build trust and rapport with the vendor, and to address any issues or concerns.

6 How to use data analytics?

A fourth method to measure vendor performance beyond traditional metrics is to use data analytics. Data analytics is the process of collecting, processing, analyzing, and visualizing data from various sources, such as transactions, surveys, social media, or sensors. You can use data analytics to uncover patterns, trends, and correlations that may not be evident from traditional metrics, and to generate actionable insights and recommendations for improving vendor performance. You can also use data analytics to predict future vendor performance and to optimize your vendor selection and management.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?