Key performance indicators for your suppliers

By Linda Jackson on 30 October 2016

They tell me you can’t manage what you can’t measure! So what about implementing a supplier scorecard for supplier performance measurement? In this article we discuss some key measurements based on best practice.

Let's make sure we are on the same page as it relates to supplier performance measurement. It can be defined as the business process that includes the methods and systems used to collect and provide information in order to measure, rate, or rank suppliers on a continuous basis. Many companies use the term “scorecard” to describe the report that conveys performance information to suppliers.

Supplier Scorecards can assist in using facts to rank the supplier’s relative performance within the supply base and tracking improvement in supplier’s quality over time. Scorecards also provide a data point into any future business negotiations – objective ammunition to use when it’s time for price increases. Following are the key operational metrics that leading manufacturers track in their supplier scorecard:

  • Meeting Service level agreements in terms of lead times and quantities
    o Deliveries received on time.
    o Actual vs. quoted lead time
    o Quantity ordered vs quantity received
  • Cost to budget/price variance
    o Ordered price vs. invoiced price

  • Progress towards achieving and maintaining certification
    o Failed factory audits/total number of audits if already certified)

  • Conformance to requirements in terms of quality and food safety specifications
    o Returns rate

  • Document accuracy
    o All required documents received with the shipment without any follow up requests

  • # of Corrective Actions Last Quarter

  • Average Response and Resolution time for Corrective actions

  • Average response and resolution time for requests for information

  • # of Rework Hours due to Supplier Components
    o # of Downtime hours due to late/short deliveried

  • # of Customer Complaints on Product Quality linked to suppliers

  • Relative ranking of supplier

  • Performance against benchmark

Look out for our next article on implementing supplier scorecards