What metrics should you use to measure vendor relationship success?

1 Cost metrics

Cost metrics are the most obvious and tangible indicators of vendor relationship success. They include the total cost of ownership (TCO), which is the sum of all direct and indirect costs associated with acquiring, using, and disposing of a vendor's product or service. Cost metrics also include the cost savings or avoidance, which is the difference between the expected and actual costs, or the costs that were prevented by using a vendor's product or service. Cost metrics can help you assess the financial value and return on investment (ROI) of your vendor relationships.

2 Quality metrics

Quality metrics are the measures of how well a vendor's product or service meets your specifications, standards, and expectations. They include the defect rate, which is the percentage of faulty or non-conforming products or services delivered by a vendor. Quality metrics also include the customer satisfaction, which is the degree to which a vendor's product or service meets or exceeds your customer's needs and preferences. Quality metrics can help you evaluate the reliability and consistency of your vendor relationships.

3 Service metrics

Service metrics are the indicators of how well a vendor supports and responds to your requests, issues, and feedback. They include the delivery time, which is the duration between placing an order and receiving a product or service from a vendor. Service metrics also include the resolution time, which is the duration between reporting a problem and resolving it satisfactorily. Service metrics can help you monitor the availability and responsiveness of your vendor relationships.

4 Innovation metrics

Innovation metrics are the measures of how well a vendor contributes to your competitive advantage and growth. They include the number of new or improved products or services, which is the count of novel or enhanced solutions that a vendor offers or develops for you. Innovation metrics also include the value of new or improved products or services, which is the estimated or actual benefit that you gain from using or implementing them. Innovation metrics can help you track the creativity and collaboration of your vendor relationships.

Measuring vendor relationship success is not a one-size-fits-all approach. You need to choose the metrics that are relevant, meaningful, and aligned with your goals and expectations. You also need to collect, analyze, and communicate the data regularly and transparently, and use it to improve your vendor management processes and outcomes.

5 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?