A Post Pandemic Imperative

According to the Sourcing Industry Group Resource Center, supplier performance management (SPM) is "a comprehensive system for monitoring, managing, controlling, and influencing a supplier's provision of a product or service to meet a company's business needs and goals. SPM can also include considerations to orchestrate the buying side of the relationship by providing a mechanism to receive supplier feedback.

 

SPM serves as a continual communication protocol to provide insight into a company's buying behavior, transactional processes, and overall relationship management techniques." Organizations can leverage this process by identifying potential suppliers to work with while considering how goals can be met. With the current state of supply chains, SPM is of the utmost importance.

 

Bottlenecks, stockouts, shipping delays, and inflated costs have become common obstacles for sourcing practitioners. With the circumstances surrounding all organizations, it is crucial to find suppliers you want to do business with but also suppliers that want to do business with you. The General Motors "Lopez Effect" clearly showed that you could get small wins but having mutual value and respect leads to perpetual success for a sourcing team. When things are tough, the better your relationship with your supplier, the more likely you will get what you need when you need it.

 

In the past, organizations have been able to get away with keeping suppliers with less spending in a fundamental transaction relationship. This was perfect when purchases could be simple. However, as bottlenecks continue, many investments are no longer "standardized" and "non-critical ."A simple purchase for MRO could now lead to weeks of downtime. Therefore, the question is, how can you compare a large base of vetted suppliers efficiently (Supplier Performance Management in Bulk)?

 

Practitioners have created many tools and technologies to address the issues in identifying the correct supplier. A device commonly used in the supplier management process is the supplier scorecard, designed to measure a supplier and its performance so that an organization can compare suppliers and incumbents on a level playing field.

 

Imagine your middle school report card. As a best practice, scorecards should be flexible, and measured variables should be adjusted as time changes. An example of a category that can be scored is "how well did a supplier demonstrate compliance with quality and specifications."

 

This metric is a great way to understand if a supplier delivers precisely what you are asking for. Further, as suppliers continue to be constrained by international issues and the ongoing pandemic, organizations can shift what they measure to address any concerns. Additionally, metrics on supplier response time, on-time delivery, and availability of substitute products can be calculated and prioritized, ensuring no downtime. Organizational success will depend upon making sure necessary materials and resources are available; therefore, scorecards are pivotal to ensure a company has a satisfactory partner(s) (supplier) to ensure that this happens.

 

This matters because it is getting to the point where every supplier is critical. Hence, having suppliers who want to work with you in times of uncertainty ultimately drives success and creates a competitive advantage for an organization. Making this happen is no easy task. It will use tools like scorecards to evaluate whom you can and should rely on in your supply base.

 

Then, it is of equal importance for an organization to find creative ways to drive mutual values in their supplier relationships. Being proactive in managing these relationships will help avoid downtime. Having more robust and more engaged relationships with your suppliers is the new normal.