A Well-Designed Supplier Performance Management (SPM) Process

Today, there is a renewed focus by supply chain management leaders to drive up supplier performance. The only way to do this right is by using the power of data and digital transformation. Manufacturers have to build strategic partnerships with their key suppliers in order to derive maximum benefit from the relationship. We share detailed insights and approaches on this for SCM leaders in our recent whitepaper – Data and AI-driven Supplier Performance Management to Drive Competitive Advantage.

This blog is a short excerpt from this whitepaper.

4 Aspects of A Performance Management System That Works

A well-designed supplier program and performance management are crucial for any organization, but especially necessary for companies with complex supply chains. The following four aspects can help SCM leaders design a performance management system that works:

1. Performance design: Suppliers should be part of the process of designing the performance management system. They should discuss and arrive at the right KPIs and also design a supplier scorecard with relevant dimensions covered. Performance management works best when it is bi-directional. The company must take all steps necessary to design programs and processes to support supplier performance.
2. Active collaboration: It is critical to build a continuously improving supplier relationship process. Your suppliers must be treated as if they are an extension of your company’s manufacturing operations. It’s not “us versus them”. A siloed approach is doomed to result in failure and must be avoided at all costs.
3. Transparency for risk mitigation: Transparency of the entire supply chain will help all stakeholders involved mitigate risks with a data-driven approach to risk management.
4. Thinking long-term: SCM leaders must show a strong commitment to supplier success so that suppliers are willing to invest in the company’s long-term success.

Understanding the risks associated with supplier performance and proactively designing an action plan for risk mitigation is of vital importance. One methodology supply chain leaders are adopting now is supplier benchmarking. By assessing the long-term reliability of the supply chain and comparing supplier performance against a set of pre-determined benchmarks, SCM leaders can enable continuous improvement.

This was an excerpt. Read detailed ideas and approaches for SCM leaders to embrace digital transformation, data, and, possibly even Artificial Intelligence (AI) to drive supplier excellence in our recent whitepaper: Data and AI-driven Supplier Performance Management to Drive Competitive Advantage