Here's how you can evaluate vendor performance using metrics.

Quality metrics assess a vendor's ability to meet specifications. Key indicators include defect rates, rejection rates, and returns. For example, track the percentage of defective parts per shipment or bugs in software releases. Customer satisfaction scores also indicate quality. On-time delivery of error-free products is crucial. Consistency in meeting quality standards matters. Some companies use Six Sigma methodologies. Regular quality audits help identify improvement areas. Vendor certifications like ISO 9001 can be considered. The cost of poor quality, including rework and customer complaints, should be factored in. Trending quality metrics over time can reveal patterns or improvements.

Define clear performance criteria, collect relevant data consistently, analyze metrics against benchmarks, provide feedback based on findings, and collaborate with vendors to improve performance.

A few of the most important metrics are: - On-time delivery rate: measures the percentage of deliveries that are made on time. - Defect rate: measures the number of defective items found in a supply. - Strict adherence to compliance: measures the degree to which a company complies with regulations and standards.

Delivery metrics focus on timeliness and accuracy of orders. On-time delivery rate is key, measuring the percentage of orders delivered by the agreed date. The fill rate tracks the proportion of orders fulfilled completely. Perfect order fulfillment combines on-time, complete, and damage-free delivery. Lead time measures duration from order placement to delivery. OTIF (On Time In Full) serves as a comprehensive metric. Emergency shipping requests can indicate poor planning. Tracking delay reasons helps identify recurring issues. Vendor's ability to handle rush orders may be important. Communication about potential delays is assessed. Flexibility in accommodating order changes can be valuable.

Cost metrics evaluate financial aspects of vendor relationships. Total cost of ownership (TCO) includes purchase price, shipping, maintenance, and disposal costs. Price competitiveness compares vendor prices to market averages. Cost savings initiatives show commitment to efficiency. Payment terms impact cash flow. Volume discounts may indicate cost advantages. Price stability aids budgeting. Cost of quality, including inspections and rework, matters. Inventory carrying costs related to vendor performance are significant. Transportation and logistics costs are important for some industries. Energy efficiency and sustainability impact long-term costs. The cost of switching vendors should be considered.

Responsiveness metrics gauge how quickly vendors address issues. Response time to inquiries is crucial. Resolution time measures problem-solving duration. First-contact resolution rate indicates efficiency. Availability of support staff, including after-hours, matters. Escalation effectiveness shows complex issue handling. Proactive communication about potential problems is valuable. Accuracy of responses to queries is important. Flexibility in urgent requests can be critical. Tracking recurring issues helps identify systemic problems. Customer satisfaction with support interactions is key. Quality of documentation and self-help resources can indicate responsiveness. .

Innovation metrics assess a vendor's ability to bring new ideas. New product introduction rate is key. R&D spending shows commitment to innovation. Patents filed or granted measure innovation output. Collaborative projects with customers demonstrate engagement. Time-to-market for new products is important. Adoption rate of new technologies indicates forward-thinking. Efficiency improvements show process innovation. Technology roadmap alignment with industry trends matters. Customer feedback on innovations is valuable. Awards for innovation can be considered. Ability to customize solutions shows adaptability. Participation in industry standards development indicates thought leadership.

Through substantial investment in research and development, by consistently striving to maintain a competitive edge by implementing innovative ideas across various features on product line.

Relationship metrics evaluate overall partnership quality. Strategic alignment measures shared goals. Communication effectiveness assesses interaction clarity. Trust and transparency are crucial but hard to quantify. Conflict resolution ability is important. Willingness to exceed contract terms is valuable. Relationship longevity can indicate satisfaction. Executive engagement demonstrates commitment. Knowledge sharing benefits both parties. Cultural fit impacts collaboration. Flexibility in negotiations shows a partnership mindset. Joint business planning indicates a strategic relationship. Mutual profitability ensures sustainability. Employee satisfaction in joint teams can be a good indicator.

One risk of vendor metrics is that they don't align to overall business goals. A key to defining good metrics for a provider is to ask, how would we measure this if we were doing it ourselves instead of using a provider? This forces the metric to be based on the process objectives and business value because it abstracts the metric away from "who" is doing the work. Once you know the right metrics for the business/process, you will know the right metrics for the provider - and you will ensure alignment of objectives across the business and the provider.

Love what @Joe Wroblewski said below. For me part of "Vendor Performance" includes their Security performance (what is required in the contract/SOW and what is good practice. Metrics (different than stats) can be used significantly to evaluate BOTH compliance to the contract, if there is one and whether the security operations of the vendor is up to great industry security requirements. In my book Converged Security Metrics, use the Supply Chain Security chapter for overarching eval & depending on the role, other metrics referenced in the book can be used. Example: If a vendor has 50 devices with your (customer) data on them, those 50 devices have say 80 pieces of software, we can measure what percentage of that software is patched.