What are the most effective ways to account for external factors when measuring supplier performance?

2 Apply force majeure clauses

Force majeure clauses are contractual provisions that allow the parties to suspend or terminate their obligations in the event of unforeseeable and unavoidable circumstances, such as war, natural disasters, or pandemics. They are designed to protect both the buyer and the supplier from liability and penalties in case of external factors that prevent them from fulfilling their commitments. By applying force majeure clauses, you can account for external factors when measuring supplier performance, by recognizing that some situations are beyond the supplier's control and that they may need more flexibility and support to resume their normal operations.

3 Conduct regular reviews and audits

Regular reviews and audits are essential to monitor and measure a supplier's performance over time, and to identify any issues or opportunities for improvement. They also help you account for external factors, by providing you with updated and accurate information about the supplier's situation, capabilities, and challenges. By conducting regular reviews and audits, you can assess how the supplier is coping with external factors, how they are affecting their performance, and how they are mitigating their risks. You can also use the reviews and audits to communicate with the supplier, share feedback, and agree on action plans.

4 Benchmark against industry standards and best practices

Benchmarking is a process of comparing a supplier's performance with that of other suppliers in the same industry or sector, or with the best practices in the field. It helps you account for external factors, by giving you a reference point to evaluate the supplier's performance relative to their peers or competitors, and to the expectations of the market. By benchmarking against industry standards and best practices, you can identify the gaps and strengths of the supplier's performance, and how they are influenced by external factors. You can also use the benchmarking data to set realistic and achievable goals for the supplier, and to motivate them to improve their performance.

5 Collaborate and innovate with the supplier

Collaboration and innovation are key to building a strong and long-term relationship with a supplier, and to achieving mutual benefits and growth. They also help you account for external factors, by enabling you to work together with the supplier to find solutions to the challenges and opportunities posed by the changing environment. By collaborating and innovating with the supplier, you can leverage their expertise, resources, and insights, and share your knowledge, needs, and feedback. You can also co-create value-added products or services, or adopt new technologies or processes, that can enhance the supplier's performance and your competitive advantage.