Rethinking Supplier Performance Metrics: value-based intangibles matter

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Working with procurement teams over the years, I am still amazed at the lack of focus in the area of supplier performance metrics. Many of the mid-cap and small businesses fail to manage suppliers at all and have limited key performance indicators (KPIs). When pushed to discuss supplier metrics, the response is normally “we measure cost, delivery and quality.” Further investigation almost always reveals vague, inconsistent and inaccurate measurement processes.

When developing KPIs, you must assure the metrics are consistent, meaningful and focused on performance improvement. Cost, quality and on-time in-full delivery performance are critical and must be specific and accurately measured, but these metrics are equally important and often over looked:

  1. Speed of response
  2. Disaster recovery plans and risk management processes
  3. Innovation delivery and capture
  4. Supply chain mapping and integration
  5. Business plan alignment
  6. Continuous process, cost and business improvement

Key Performance Indicators are:

  • Quantifiable/measureable and actionable
  • Measurements critical to the success of the organization
  • Tied to business goals and targets
  • Applied consistently throughout the company

Key Performance Indicators are not:

  • Metrics that are vague or unclear
  • “Nice-to-knows” or metrics that are not actionable
  • Reports (e.g., top search engines, top keywords)
  • Exhaustive set of metrics
  • Refutable

Driving metrics that enhance performance is the responsibility and accountability of the sourcing and procurement professional. As we have evolved our profession, it’s now necessary to evolve our metrics to enhance relationships, improve supplier and add value metrics to our businesses.

Are you measuring value delivery?

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