Chuck LEAN Business Consultant
With all of your current suppliers, how do you choose the best supplier?
In order to best track and evaluate suppliers’ performance, your team needs to align on criteria, in which suppliers will be continuously evaluated upon.
So, where to start?
A first step to developing supplier performance criteria is to ensure that you’re taking a holistic approach to performance evaluation. This means you need to take into account KPIs that will cover various stakeholder disciplines. You can’t solely be concerned with evaluating performance criteria that will deepen sourcing & procurement insights into supplier performance.
You should use this KPI building exercise as an opportunity to align common goals within the broader business organization; taking into account the goals/performance indicators of sustainability, quality, risk, supply chain, production, marketing & sales in relation to the broader supplier base.
Finding the right levels of granularity to your evaluation/performance criteria is important. At Kodiak Rating, we aid customers to evaluate supplier performance within six parameters with various sub-parameters that belong to each of those six.
Kodiak Rating’s Key Six Supplier Performance Parameters:
- Quality Performance
- Supply Chain Performance
- Commercial Performance
- Proactivity
- Innovation Capacity/Performance
- Sustainability Performance
Under each of these performance areas, you should look to identify sub-parameters for supplier performance. Of course, the more granular of performance evaluation you’d like to do, the more you should be taking into account the supplier group or supplier type (Producer, logistics, IT, Marketing, Agent/Trader, Contractor, etc.). It’s important to evaluate supplier performance in line with that supplier’s relevancy to your organization; pretty much make sure you’re comparing apples to apples, and not oranges to apples.
Better Supplier Evaluations = Better Procurement Intelligence
Q2 comes to an end, and your CPO looks in your direction.
What supplier has performed best in Category X, Y & Z? What supplier do we have the highest spend within Category X, Y & Z? Of those suppliers that have the highest spend level, and are the highest performing, which contains the most business risks from an environmental & social perspective?
Sure, you can try and shuffle through the rows and columns of your Excel Hell, build custom algorithms, and visualize a bar chart. But, within this scenario lies a question you must pose to yourself, and your broader procurement organization. Are you building procurement intelligence & insights that are driving supply chain performance forward, or are you simply reactionary in the way you obtain and utilize your supplier data at hand?
The interesting thing about asking the question ‘Who is your best supplier?’ is that it’s simply a preluding factor in determining ‘Who is your worst supplier?’
The means for obtaining the answer to these two questions should look very similar.
Adopting solutions & frameworks for modern supplier evaluation will automate your ability to create procurement intelligence & data insights, based upon the criteria your organization has aligned upon to evaluate. There are 3 things you need in order to modernize supplier evaluation, and truly gain data-driven buyer insights, and those are as follows: