May 8, 2017

How to Create a Simple and Scalable Supplier Performance Management Process

Cumbersome and complex.  This is too often used to describe supplier performance management and supplier scorecards.  So whether you have an existing strategy and process or you are looking to build one, make it simple and scalable.  This post will share insights to doing this.


Start with a strategy and then build a process.  A measurement strategy and process for supplier performance is not a scorecard template. It is understanding what types of data to measure, when to measure them and from whom you gather this information.   It also encompasses outlining the breadth and depth of applying this to your vendors as not all vendors should have the full scope of this strategy and process.  Finally, it means having the ability to adapt the strategy and process to fit the diversity of your supplier base vs. a once size fits all model that might not be meaningful in many situations.


When it comes to data, initially collect the data that is easiest to gather.  Most of the time, these are surveys.   Keep in mind over 50% of surveys are done on mobile devices so keep them simple.  We suggest using Net Promoter System (NPS) as a valid, reliable measurement model to gather survey data to measure supplier relationship health.  You can also use basic surveys to measure performance and risk too.  While this may not be perfect and precise, roughly reasonable is okay.  Further, surveys tend to be more of a leading vs. lagging indicator.


Construct a small, well-balanced set of KPIs (key performance indicators).  By small, we mean around 10 and by balanced we mean some that are from unique categories (ex. cost, quality, time, productivity, revenue, safety, innovation, customer satisfaction, risk).  The data may come from surveys, operational metrics, third party scores, etc. but focusing on a concise set of KPIs is a great way to achieve simplicity and scale.


Determine collection and reporting cadence.  In the spirit of simplicity, gather feedback data on a monthly basis so you capture the pulse of the relationship from your team and the vendor.  Gather operational metrics on a quarterly basis so there is enough data to warrant a review.  Combine the data into a quarterly scorecard.  If the scorecard is organized around the KPIs and they are small and balanced then it will be simply to compile and analyze.  Use color coding to further make your reporting easy on the analyst.


Add technology to automate the simple process.  Use an automated email system to send out monthly feedback requests.  Use CSV uploads to add in quarterly operational metrics.  Use automation to take data from various sources like surveys and operational feeds and put them into a standard scorecard.  Finally, automate the sharing of a subset of the scorecard with your suppliers to avoid the burden involved in scrubbing internal reports.  Automation will reduce effort, increase reliability, and permit scalability.


To maintain the spirit of simplicity and scalability avoid the following:  a) using too many surveys or lengthy surveys, b) gathering hundreds of KPIs, especially if they are from a single type (ex. all cost KPIs), c) creating a scorecard that has a complex point system, d) creating a scorecard that has a complex weighting system, e) reporting results without a point of reference to complement the actual data (ex. no goal, trend, or benchmark), f) reporting results without any color-coded guidance, g) using the same depth of data collection and reporting for strategic suppliers as you do with non-strategic suppliers, h) maintaining an internal dataset and a scrubbed vendor data set, and i) using disparate tools (ex. survey tool, spreadsheet, shared drives) as opposed to a single, consolidated tool to manage the process.


Many organizations begin with great vision but that can easily transform into something complex and cumbersome that will not scale over time.  Begin with strong strategy and process and maintain it with centralized technology automation.  In the end, you’ll have a robust, flexible and repeatable supplier performance management process.


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