Vendor performance reporting and analysis is a crucial part of managing vendor contracts and ensuring that they deliver the expected value, quality, and service. In this article, you will learn about some of the tools and methods that you can use to monitor, measure, and improve vendor performance metrics and outcomes.
Vendor performance reporting and analysis helps you to track and evaluate how well your vendors are meeting their contractual obligations and goals. It also helps you to identify any issues, risks, or opportunities for improvement and take corrective or preventive actions. By regularly reviewing and analyzing vendor performance data, you can ensure that your vendors are aligned with your business objectives, standards, and expectations, and that you are getting the best return on your investment.
We all know the saying, “We don’t know what we don’t know”. This plays true for vendor management and analysis. We need to know that we are always aligned with fair market values, that we are seeing a return on investment, and that we are keeping up with innovation. Being able to do regular analysis checks is vital to growth and success.
The first step in vendor performance reporting and analysis is to define the metrics and indicators that you want to measure, as well as how you will collect and report them. These metrics should be relevant, specific, measurable, achievable, realistic, and time-bound, and should reflect the scope, deliverables, and outcomes of the vendor contract. Common categories of vendor performance metrics and indicators include quality (how well the vendor meets quality standards), cost (efficiency and effectiveness in managing costs), time (timeliness and reliability in delivering products/services), service (responsiveness and communication), and value (the benefit the vendor adds to your business).
When collecting vendor performance data, you can use different methods and sources depending on the type, frequency, and level of detail needed. Contract documents like the statement of work and service level agreement can provide a baseline for measurement. Additionally, you can ask the vendor to provide reports on their progress, achievements, challenges, and issues. Surveys and feedback from internal stakeholders can also be used to collect data. Audits and inspections of the vendor's processes, systems, products, or services can help to check compliance with quality standards. Lastly, benchmarking and comparison with other vendors or industry standards can help identify strengths and weaknesses.
Once you have collected vendor performance data, you must report it in a clear, concise, and consistent manner to inform decision-making and action-taking. Different tools and formats can be used to report vendor performance data, depending on the purpose, audience, and frequency of the report. Dashboards and scorecards are useful for monitoring trends, patterns, and deviations, while reports and summaries provide a detailed analysis of the data. Presentations and meetings are also important for communicating with stakeholders, sharing insights, and agreeing on next steps.
Analyzing vendor performance data is essential in order to understand what it means and what it tells you about the vendor's performance. There are various methods and techniques that can be employed to analyze the data, depending on its complexity, variability, and reliability. Descriptive analysis can be used to summarize and describe the data with measures such as mean, median, mode, range, standard deviation, frequency, or percentage. Inferential analysis is useful for testing and comparing the data through methods such as hypothesis testing, correlation, regression, or ANOVA. Finally, predictive analysis can be used to forecast and estimate the data through trend analysis, scenario analysis, or simulation.
I do find it helpful to challenge metrics from your vendors when they seem even slightly off or even a stat that never changes. It's easy to overlook anomalies like these and they can turn into bigger problems later.
One think I have found helpful is to establish KPI/KRI indicators early in the relationship or ensure they're worked into the contract. This positions both parties to have a clear understanding of expectations of reporting deliverables