Managing supplier performance and relationships can be an overwhelming task. Most organisations maintain quite a large and complex supplier footprint, delivering a range of unrelatable services, to different parts of the business and to different degrees of importance. There’s strong evidence linking strong supplier relationship and performance management to increased value (both financially, and company outcomes), and a more engaging relationship with the supplier.
So how can we properly capture supplier performance data and insights, especially when we’re poorly resourced to manage it. The good news is that starting simple can quickly lead to quite advanced and high value outcomes, and adopting a relatively basic data and analytics practice takes very little time.
To shed some light on what needs to be considered, we’ll fall back on the classic five W’s. Who, what, where, when and why.
We’d argue the most important question, and the first one to address is why are we tracking and reporting on the data? How are we going to make use of it and why is it valuable?
Data for the sake of data is a terrible outcome, and not being able to attach clear purpose to each point of data makes it a poor use of both yours and the suppliers time. When formulating an analytics strategy around performance data, be clear on what are you going to do with it. Why is the data important? Why are we looking to capture it (e.g. legislative requirement, contractual requirement), why is this data valuable to you business for making decisions?
Who do you need to manage performance information for? Most organisations will have hundreds, if not thousands of suppliers, so determining who needs to be managed and to what degree is an exercise in itself. There’s a commonly applied process around supplier strategic segmentation, where through a detailed risk assessment an organisation can profile their suppliers into a number of strategic tiers, with management requirements aligned to the strategic importance. This is an excellent approach to take, but can be pretty advanced in its application. A simpler starting point is undergoing a basis analysis on supplier contract exposure, or if you haven’t established a contract register, spend or purchase order information. Using this method you will be able to identify say your top ten spend suppliers, who we can prioritise to become our initial targets for performance management.
Consider also who within the organisation contributes data. It’s not just the supplier or contract managers who provide intel on how a supplier is performing. Every user of the contract across your business can provide you with critical information if you enable them to.
There are a broad range of determinants around whether a supplier is doing a good job or not, including service levels, KPIs and more. Depending on how the contract is structure, management of detailed KPIs can be quite a tricky. Contract management can often fall victim to KPIs being overly detailed and complex to manage, so ultimately they’re either not tracked, or can’t be reported on in a meaningful fashion. In determining how you will track performance, have a genuine think about what is the outcome you are after.
Simplifying what information you capture and track can deliver a better outcome achieving the same desired outcome
All KPIS or just meaningful. E.g. do we need to know that the KPIs this month were 96.7, 85.5 and 73%, or do we just need to know if the supplier consistently meets or doesn’t meet them?
Do I need a detailed performance assessment each quarter, or would a simple satisfaction survey from my contract users give me a good indication on performance (this could be as simple as an emoji survey!)
Your supplier is also going to love you for having a straight forward approach.
Where is the data being captured, where is it stored and where is it accessed all contribute to how useful performance information is.
Do you capture performance information through your contract management system, through your purchasing platforms, or both? A good performance strategy would capture metrics from the contract manager all the way down to the user at the cold face.
Where is the information made available. Making performance information open to the broader community allows all parties to make better use of it, and increases the value and investment made. There’s minimal value to someone looking to leverage a supplier off a panel if they’re unable to access previous analytics on the suppliers performance.
Be smart about where the data is captured too. It’s absolutely possible to capture performance information as detailed KPI spreadsheets, but consider baking it into processes and capturing it by stealth. Asking a key buyer to fill in a monthly survey on delivery will provide good insight on the contract performance, but having them provide a quick 1 – 5 survey every time they use the supplier could provide much better insight, including trends. Simple data capture often yields the best outcome.
How often do you need to track performance data to enable good analytics. While there’s an argument to be made that more is better, consistency is what is really key. Having a monthly framework only provides meaningful data if it’s captured on a monthly basis. As soon as gaps in data start to surface due to inconsistency, the quality of the information and your ability to create value out of it diminishes.
Two big considerations around timing. The more frequent the data capture, the higher the accuracy and the more likely you are to detect trends, upcoming issues and remediation approaches.
Ultimately, pick a cadence that isn’t a burden on you, your users or your suppliers, and that still enables the strategic outcomes of the agreement. If the contract is critical to business operations, you need to be able to make it work with monthly or quarterly cycles (the data doesn’t need to be complex though remember!). If it’s not critical, we’d recommend bi-annual, or annually to begin with.
You can also take a multi-stream approach too. Consider adding additional information through other capabilities such as satisfaction surveys.
Frequency and consistency is important for building good data sets, and the simpler it is the more likely you are to bring it all together.
Article written by: Chris Holmes, Co-CEO of Portt