Benefits of managing supplier performance

1. Avoid supply chain risk and disruptions – If you are not deeply familiar with the third party vendors making up your supply chain, it will be difficult to put measures in place to prevent interruptions and reduce the incidence of risk exposure. Supplier performance
management provides in-depth visibility into the risk a supplier may pose so you can put measures in place to reduce or eliminate that risk as it relates to your supply chain.

2. Protect and improve brand/reputation – A number of corporate brands have been tarnished by the actions of their suppliers – think automobile recalls as a common example. SPM can help you track supplier performance against these KPIs which will enable you to enact corrective actions early and keep your brand and reputation strong in the eyes of your customers and partners.

3. Avoid costs and achieve savings – There are a variety of cost factors tracked using supplier performance management which affect both hard and soft dollar costs. Lack of timely and accurate vendor information can have huge impact on costs and can prevent
you from capturing savings. Not only can you track supplier performance on cost and savings-related KPIs, the information provided by an SPM system can contribute to cost avoidance and savings achievements because it centralizes supplier data into a single
source of truth for everyone interacting with vendors.

4. Segment and rank vendors – As noted in the point above, supplier performance management is useful beyond the supplier managers in your organization. For example, SPM gives procurement groups visibility into specific groups of suppliers and their
overall ability to meet your organizations expectations and requirements. With performance data in hand, procurement can make data-based decisions regarding where to direct spend.

5. Collaborate with suppliers – When you collaborate closely with suppliers you create new value for your business. The data collected through a supplier performance management solution can help to start these conversations because it provides the supplier with a view of what is important to your organization. The results are numerous: continuous improvement of the supply base, creation of realistic contracts based on past performance, more communication with suppliers, formation of common goals, and the establishment of trust. Ultimately, SPM drives the creation of meaningful and mutually beneficial relationships with suppliers.

6. Improve internal processes – Creating a SPM process is a great step towards optimizing your supplier management program. By utilizing a technology-based solution for SPM, organizations can achieve a standardized and automated approach for creating scorecards, issuing and tracking scorecards for completion, and in-depth reporting and analysis. If you tack this onto an existing supplier information management (registration, onboarding, qualification) process, SPM data will contribute to a complete supplier management lifecycle.

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