Why Supplier Performance Management Should be a Priority

Today, everything is measured—including your suppliers and their performance. The overall purpose of supplier performance management (SPM) is to identify any problems or concerns and what caused them early on so they can be resolved before they get out of control.

This, in turn, helps reduce risk, cuts costs, and encourages continuous improvement through an evaluation process. This process can be intensive and is often outsourced to platforms built specifically to take the burden off the procurement department.

Perhaps just as crucial as the performance measurement itself, managing supplier performance has continued to rise in priority and importance at the CPO and executive leadership team levels.

Platforms that specialize in supplier performance management have built a process to efficiently collect and analyze the data, measure it, and help to improve the performance of their suppliers. ?

Businesses depend on timely delivery, reasonable prices, good quality, and excellent service to produce quality products that earn good profit margins. SPM programs ensure that suppliers understand their customer’s needs and expectations.

Supplier performance KPIs are divided into hard and soft metrics. Hard can include account management, call-out time, delivery accuracy, product and service quality, number of rejects, and warranty claims service. Soft KPIs often include cultural fit, customer service, ethics, and professional relationships.

However, don’t try to measure all KPIs. Choose those that are most important. Most of our clients measure at least five, which will give you plenty of information and data to grade your suppliers’ performance.

Many benefits come from implementing an SPM program with an outside resource such as SupplyHive’s (SH) platform. Some of them include:

Make data-driven decisions: An SPM platform can give insight into your suppliers and their ability to meet your requirements. The resulting data on your KPIs will allow you to make the best decisions on where to direct spend and get the most value.

Avoid supply chain disruptions and the associated risk: When you become knowledgeable about your suppliers and where they may have performance issues, you can help develop a plan to limit disruption and thus avoid risk.

Limit your costs: If you struggle to get timely supplier information and don’t know when you will receive shipment or delivery, it can hold up your production schedule, wasting time and costing you money. Having an SPM in place can help avoid that and do the opposite—help achieve savings.

Encourages collaboration: Collaborating with your suppliers can help create additional value for both sides by providing your business with critical information that builds trust and relationships through transparency and feedback.

Improves your brand’s reputation: If one or more of your suppliers are causing production delays and missing deadlines, it can have a critical impact on your reputation. Using an SPM program can protect your brand’s reputation not only with your customers but also with your suppliers.

Build or improve your internal processes: Optimizing your SPM program is easy with a technology-based solution like SupplyHive. This process, internal to your company, creates a level playing field for all your suppliers and encourages diversity.

When making a case and presenting it to the c-suite or others regarding your need to incorporate an SPM program and platform like SupplyHive, here are some questions for you to answer. Which business needs determine your strategy for supplier management? How will it deliver benefits to your company? What are those benefits, including financial, post-contract? What processes will be changed as a result, and how are they a benefit?

We meet you where you are

Whether your company has experience or is just starting its supplier performance program, SupplyHive has the knowledge and expertise to take the complex, distill it down, meet you where you are, and get you on your way to where you want to go.

Let’s get to know each other better. We can be contacted here.