Until a decade or so ago, the criteria used for assessing the performance of suppliers involved in the supply chain, were quite straightforward. Did they produce the goods when they said they would? Were the goods fit for purpose? Was the price right? Were there any problems? If the answers to these questions were satisfactory then a supplier continued to be used unless a cheaper supplier could be found.
But now the relationship between the supplier and the customer is much more complex and it seems as if there are so many factors to be taken into account when analysing the performance within the field of the supply chain, that it can seem confusing. So what are the key or critical supply chain performance measures?
While traditional QCD measures are still very much the staple diet of supply chain executives – efficiency has become more and more important, there are a number of sub-criteria. Efficiency is more than simply supplying goods and items in a manner that is timely, with products meeting quality management requirements.
It encompasses the whole process of supply. So there is a need to ensure that the supplier makes it easy to order goods. Is the process easy and straightforward? How long do orders take to process? The cycle time of purchase orders is important and it can make quite a difference operationally in terms of what constitutes a good supplier.
In addition, there can be issues at the end of the process. When do the invoices get sent in? Are invoices easily processed, or are they set out in such a way that a lot of resources have to be devoted to sorting out whether the goods have been received and there suitability?
Responsiveness is important, because if there is a good relationship between the supplier and customer and the supplier is a responsible supplier, then there will be capacity for the supplier to be able to respond to sudden demands for additional items or products.
Quality Systems and Management Tools
It is important to ensure that any supplier has robust quality systems and management tools in place to ensure that the products supplied will meet quality standards. This should not be left to chance, there needs to be some sort of analysis to check that these policies are actually in place.
The product range that suppliers produce is also a key performance measure. Research has shown that the companies who have a very narrow product range will be those who are most likely to actually introduce new and different products. So if a company has a very wide range of products, then they are more likely to retain their status quo and be less innovative in terms of new products. This in turn can lead to a lack of responsiveness if the customer’s needs change, so it is worth measuring performance through looking at the product range.
Scheduling tools are critical. If suppliers do not have very effective scheduling tools then they will be unable to cope with sudden demands for more stock and supplies, so although it may seem impertinent, it is always worth going through scheduling tools and techniques with suppliers.
Increasingly a supplier’s attitude to sustainability and their ability to ensure a responsible attitude towards environmental issues is also seen as a key performance measure, simply because the Government is driving forward an agenda of reducing carbon footprints. Companies that are able to demonstrate that they are carbon neutral or have a relatively low carbon footprint will be more sustainable and therefore more desirable than other companies who are less responsible in terms of the environment.