Measuring Your Vendor Key Performance Indicators!

April 8th, 2013

What kind of data are your vendors providing you?

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing Inc.

Very few of the suppliers you do business with are hired to perform a service that is nothing more than a convenience with no ROI or process improvement attached to them.  Unfortunately many of those suppliers do not provide their customers with an accurate way of measuring just how good of a job they are doing for them.  By not providing that picture they are actually setting themselves up to have to compete with other vendors for business they already have down the road.

In today’s blog we will be looking at some of the Key Performance Indicators (KPIs) you should be asking your vendors to supply with on at least a quarterly basis if not a monthly or weekly basis should the need demand it.

Issue resolution – Every company and their suppliers eventually run into issues in the course of doing business.   Delivery issues, quality issues, supply issues, service issues are all areas that come up how your suppliers support you during these times is a good indicator of how much they value your business.  Most procurement departments have their own supplier scorecards for this KPI but asking your suppliers to provide them for you as well is a nice way to see if their tracking of your issues matches your methods.

Delivery Performance – Delivery performance is one of the most important KPIs that can be tracked.   Having or not having the products you need is even more important than the cost of that item because if you don’t have the services and products you need to provide your customers what they need, you lose those customers and getting them back may never be an option.  Measuring the length of time from order to delivery all throughout the year will tell you a lot about the suppliers you do business with as does tracking instances were RUSH orders were required and how those suppliers were able to accommodate your special needs.

Process savings – Process savings can be tricky because often they are associated with “soft expenses,” that is expenses that you would have had pay but your suppliers, through some benefit of their service, were able to accomplish for you.  Process savings are important to many suppliers and you should hold them accountable for reporting how they are doing for you on a regular basis especially if their cost improvements are not quite as obvious.  Time saved for your employees due to activities they handle for you, software tools that make your employees more efficient, or consolidated efforts that create central points of communication are things that provide savings to your company and should be prepared by your suppliers and vendors.

Cost Improvements – Many suppliers do a great job of partnering with companies to make sure they are purchasing the products and services they need.  Reducing cost due to analysis of the business is part of of what many suppliers offer.  They will review your business today and make sure you aren’t purchasing items or services that are more than what you need, recommending alternatives that instantly create cost savings.  Improvements, in material, logistics, processes and product sources are all important pieces of this process and should be reported by your suppliers on a frequent basis so that you have a centrally visible point to monitor their effectiveness for your company.

For more information about how we can help you develop KPIs to request from your vendors, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today.

We look forward to your comments.

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