Evaluating Supplier Performance

Your company cannot satisfy customer demands and maintain operations without reliable suppliers. Suppliers provide product, and without product, you have no profit. If your suppliers cannot fill orders within a given timeline, productivity falls. Therefore, supplier performance is a key element in the success of your company.

Now, more than ever, performance is critical. Leaving suppliers whom you may have worked with for years is not a trivial decision. In some cases, the decision may have been made for you due to COVID-19. Reviewing a few key components will help determine if suppliers should stay or go:

Develop a metric system to measure performance

In order to measure supplier performance, you must first determine what criteria defines quality performance. These criteria will depend on the needs of your company and industry. Some general metrics to consider are:

• Delivery time
• Quality control
• Production capacity
• Error frequency

A high-performing supplier should be able to produce required quantities in a short period of time and consistently deliver quality products on a deadline with very few errors. 

Create an evaluation method

Now that you have determined what criteria defines a quality performance, you must create a method to measure these criteria. Some of the most common ways to measure whether a supplier meets your criteria includes forms, surveys, and software applications. Craft a survey and ask your employees to rate your suppliers. Here are a few questions to include:

• Does Supplier A fail to meet deadlines? If so, how often?
• How often do we return damaged or faulty products?
• Has Supplier A ever failed to produce large quantities in a timely manner? If so, how often?
• How often do we request corrective action?
• How often do we receive negative customer feedback regarding a product?

Build a mutually beneficial relationship with your suppliers

One of the best ways to remain proactive and ensure your suppliers are consistently contributing to the success of your company is to build a relationship with each of your suppliers. Divide your suppliers into categories, then assign each category an account manager. Each account manager should communicate with their assigned suppliers regularly to address any concerns or check on the status of an order. If you find that a supplier is unable or unwilling to build a collaborative relationship, it may be time to cut ties.

The professionals at Floro Business Strategies specialize in supplier performance evaluation. We can assist you in identifying high-performing suppliers, developing an evaluation method, and bridging the communication gap so you may build a better relationship with your suppliers. Interested in learning more? Contact us today!