You monitor supplier performance
Supplier performance should be closely monitored because it has a direct impact on how your customers will rate your company. Delinquent suppliers that fail to deliver quality-assured items, on time and in full, are your responsibility, so it is important to ensure that suppliers consistently meet all their quality, cost and delivery commitments.
Key Issues
·         The traditional parameters used to monitor supplier performance are:
o     Percentage of good quality purchased items delivered on time to the date agreed on the production plan or supplier schedule
o     Parts per million of items rejected for inferior quality against the number of schedule items delivered on time
o    Cost index that monitors the change in product cost for specified time scales over the negotiated contract price
·         These are relatively crude measures that are useful for comparing supplier performance and establishing supplier league tables
·         These monitors can, however, be supplemented by additional information:
o    The cost of quality – cost of failure, quality assurance costs, internal quality costs and external quality costs such as warranty claims
o    The cost of transactions – management time spent placing orders, resolving problems, investigating discrepancies, finding shortages
o    Lead times - between placing orders and receiving goods for items in production, new product lines, replacement / service parts
·         Your suppliers depend upon your business to behave responsibly:
o    Changes made to customer schedules after they have been agreed are within approved limits and the exception not the norm
o    The bills of materials are known to be current and accurate
o    Quality checks have been agreed and people trained to use them
o    Packaging has been fully considered and provides mutual benefits
·         Purchasing and procurement teams need to compile additional information on suppliers, including :
o    Approvals - scores as a result of initial assessments and audits. also progress on any corrective actions that have been agreed
o    Status of suppliers – preferred supplier, overall spend, cost profile, product lines and primary / secondary supply information
o    Quality assurance status – approvals to deliver without inspection
o    Cost of stocks – delivery frequency, stock levels, payment terms
·         Your aim should be to use measures positively to ensure issues are identified early and ways are found to assist each other to reduce waste and improve performance
Factors for Success      
Factors to  Avoid
1.     Your managers invest time and offer help to develop good suppliers
2.     Your information on supplier performance must be accurate and constructive
1.     Switching suppliers without acquiring an accurate assessment of their performance
2.     Using several different suppliers when making the same parts in low volumes 
Who does this apply to?
Senior managers responsible for sourcing and managing the supply chains
Realisable Benefits
Good, reliable supply base that provides quality products at competitive prices


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