The value in measuring the performance of external suppliers is obvious. Full visibility of current supplier performance and the progression (or regression) of their performance over time will allow you to intelligently identify the suppliers you should increase or decrease your trade with. Key performance indicators (KPI`s) can be used to analyse data based on supplier performance objectives and are often agreed at the beginning of a contract. Though there are many KPI`s which can be established for supplier assessment two which are very frequently used across industry sectors are:
Quality - Measuring the amount of product faults. This will work differently across industry sectors but one example would be a KPI based on the number of Quality Notifications raised against a material.
Delivery Schedule - This KPI evaluates the quoted delivery time compared to actual delivery time, how often the product/service is delivered earlier or later than promised and by what length of time it is early/late. How the actual delivery time impacts your own product schedule can also be taken into account.
It is important to agree measures which can be assessed very easily and that the data itself is objective and beyond dispute by the supplier and yourself.
Tracking KPI`s is obviously an initiative which any proactive company should be doing. To view this data internally is one thing but what are the benefits of exposing this information to your suppliers. The answer is self-policing. If the supplier has visibility of their performance, why would they not strive to constantly improve the service which they provide to you? If they value their short, medium or long term relationship with you, then they know they will need to positively react to visibility of a downward trend in performance.
So how do you ensure supplier visibility of these KPI`s. Traditionally, this has been done by a quarterly, bi-annual or even an annual review where data is extracted from an ERP system into a spreadsheet for joint assessment by you and your supplier. Though these reviews may be beneficial to a degree, imagine the ability to expose this data to your suppliers in real-time, every minute of every day. Why wait 3, 6 or 12 months to make a supplier aware of poor performance when they could be doing something to positively affect it now.
Utilising a Supplier Portal brings multiple benefits to businesses all over the world but if we focus on the topic at hand, it is the perfect platform from which to expose KPI data to your suppliers. Positioning KPI data front and centre on a Supplier Portal dashboard ensures the supplier is always aware of their current performance as well as positive/negative trends against indicators. It is an obvious alarm every time they log-in, which will instigate positive action as soon as the supplier sees something of concern. Back this up with a dedicated section for KPI`s in the portal and all of a sudden the supplier has a more rounded view of performance against any agreed KPI`s. Format this information to be easily accessible in tables, graphs, charts and allow suppliers to drill into the detail so they can identify which deliveries were responsible for a poor score in terms of an OTIF related KPI or which orders contained the inadequate materials leading to a poor quality score. The final piece in this jigsaw is to provide this information in real-time. If the data provided to the supplier can be served up directly to the Supplier Portal from your ERP system in real-time, then you really can start to see the benefits of having a self-policing supplier base who are reacting instantly to the very latest information. This is achievable, but only a solution which is natively delivered within the ERP landscape can truly achieve this.
To find out more about SAP native Supplier Portals - please click here