SIG University Certified Supplier Management Professional (CSMP) program graduate Elyse Benoit captures the 4 key benefits from SPM - cost, quality, reliability/risk, and relationship management and how these 4 areas all drive value to the business.
I am a Third-Party Manager. Often when asked what I do for work, my response is juvenile: “…basically I manage suppliers to their contracts and make sure they are doing what they are supposed to be doing.” At this point in my career, I should know better than to downplay the importance of supplier performance management. In today’s competitive business environment, companies need a solid and effective supply chain to succeed. And a vital component of any successful supply chain is effective supplier performance management.
The Chartered Institute of Procurement & Supply defines supplier performance management as “a business practice which extends supplier evaluation and is used to measure, analyze, and manage a supplier’s performance to cut costs, alleviate risks, and drive continuous improvement.” This essay will outline the four key benefits of effective supplier performance management: improved supplier relationships, cost savings, improved quality, and risk mitigation.
One of the key benefits of effective supplier performance management is improved supplier relationships. By monitoring and evaluating performance, you can identify areas where your suppliers excel and where they may need to catch up. You can use the information you curate to have open and honest conversations with your suppliers about improving their performance. These conversations can lead to more substantial and more productive relationships. I’ve learned from past supplier relationships that when a supplier feels that you are invested in their success, they are more likely to go above and beyond to meet your needs. Adversely if you are not managing your supplier’s performance, suppliers may feel they can fly under the radar and cut corners without consequences.
Effective supplier performance can also lead to cost savings. There are often financial repercussions written in the contract for suppliers’ failure to meet service level agreements and key performance indicators. Successfully monitoring performance ensures you have compensated accordingly when suppliers fail to meet their obligations. Information collected throughout the performance management process can also be used to negotiate better pricing during contract renewals.
Another benefit of supplier performance management is improved quality. An article on asq.org (The American Society of Quality Management) titled The Fundamentals of Supplier Quality Management illustrates how supplier quality directly impacts customer loyalty, brand reputation, sales, and market value. By monitoring supplier performance, you can identify quality issues before they become significant problems. Working with suppliers to improve their quality can ensure that the products or services you receive meet your standards and are of the highest possible quality.
Finally, effective supplier performance management can help you to mitigate risks. By monitoring supplier performance, you can identify potential risks and take steps to minimize them. For example, if a supplier consistently fails to meet delivery deadlines, you can work with them to develop a plan to ensure they can meet their obligations. This can help you to avoid supply chain disruptions and other issues that can negatively impact your business.
The importance of effective supplier performance management must be balanced. Monitoring supplier performance can improve supplier relationships, reduce costs, improve quality, and mitigate risks. In today’s competitive business environment, those benefits can make all the difference in achieving success. As I continue to learn and grow as a Third- Party Manager, I will focus on my performance management efforts. Perhaps as we advance, when asked what I do for work, I should fine-tune my answer and say, “I foster relationships, save money, drive quality, and mitigate risks for the company I work for….”
The Certified Supplier Management Professional program is a five-week course delivered through SIG University’s unique education platform. Visit our website to learn more about the discipline of governance and enroll for the upcoming semester.
My name is Elyse Benoit, and I graduated from the University of Scranton in 2011 with a Bachelor of Science in Health & Business Administration. I started my career at Cigna shortly after graduation in 2011. Throughout my career, I have held customer service, claims, resource planning management & enablement positions. Currently, I am a Third-Party Management Senior Advisor in our Global Procurement Sector.