Each of the three key elements of sustainability (economic, environmental and social) has quite distinct problems and opportunities associated with them. Economic assessment is well established. It has the great advantage that it is trying to measure wealth and that wealth is represented by a universally accepted standard measure, the $. It has until now operated within a broad consensus from the academic and professional world. In this sense the challenge is largely limited to a discussion of the effectiveness of measurement
techniques and perhaps more important the availability of this data to procurers and monitoring organisations.
In stark contrast the social world has exactly the opposite difficulty. Here there is agreement that many of the softer‘ impacts on communities and individuals are critical to success. Sadly it has proven to be extraordinarily difficult to provide measurements that span the gap between being objective in the sense of being usable within a public procurement system, and yet sensitive enough to capture the subtlety of the benefits that both beneficiaries and organisations claim are needed for a more sensible implementation of public policy.
These difficulties pale into insignificance when environmental methodologies are considered. This is a booming, buzzing world where all proponents are simultaneously trying to develop models that assess accurately the impact, measures that can inform these assessments, and standardised calculation techniques. Even when these are attempted there is still relatively little data to use. Finally unlike economic and for the most part social elements, all of these are measures are interdependent.
Performance measurement is the process of developing specific measurable indicators against which performance can be systematically tracked in order to assess progress towards achievement of goals and objectives.
Supplier performance measurement generally implies the comparison of a supplier‘s current performance against:
- Defined performance criteria e.g. Key Performance Indicators – to establish whether the aimed for or agreed level of performance has been achieved.
- Previous performance – to deterioration/improvement trends.
- Performance of other organisations or standard benchmarks to identify areas where performance falls short of best practices or the practice of competitors.
- Performance measurement is important to supply chain management because it supports the planning and control of operations and relationships. It‘s often said, what gets measured gets managed.
Performance measurement leads to performance improvement and supplier development. It‘s also an important tool for communicating with stakeholders about their part in supply chain performance and sustainability and how they are doing.
Performance measurement such as Key Performance Indicators can be used to manage, motivate and reward individuals, teams and suppliers. One of the key principles of sustainability is the need to satisfy the needs and interests of an extended group of organisational stakeholders thus the need to control performance. Setting clear goals and targets for sustainable procurement and then monitoring, measuring, evaluating and reviewing progress and performance ensures that:
- Deviations or shortfalls can be corrected, identified and solved.
- Potential for improvement can be identified and lessons learned for future rounds of planning.
- Individuals and teams can be motivated by clear objectives & targets and the rewards of having demonstrably and measurably achieve them.
- Executive‘s responsibility to stakeholders can give accurate account of progress and performance and the discharge of responsibility.
- The expense of resources can be justified by the results and a sustainable business case for procurement confirmed.