For years companies have tried to tackle the area of supplier performance management.
Large organizations spending billions of dollars per year across multiple supply chains with thousands of vendors involved understand that even small improvements in supplier performance can yield millions in cost savings per year, improving profitability and productivity. But transforming an entire approach to procurement programs and supplier management can be a daunting task requiring a lot of investment and time.
Working with multiple tiers of suppliers in disparate locations dealing in multiple currencies and languages requires much time and effort. Yet nonetheless companies strive to gather quality benchmark information.
They know they need to be able to manage their suppliers performance against agreed objectives and to do that consistently they need strategic key performance indicators. In my experience organizations addressing this area fall into one of three groups.
Unstructured/Ad Hoc Approach – Excel Hell
ERP/Financial Systems – Servants to a ERP Master
Seeing the Light!
The final group includes companies who have invested the time and resource in supplier performance management tools and processes such as those provided by Biznet.
These companies understand the benefits of a documented system that gathers key performance indicators through regularly completed scorecards. They understand the performance management loop, the infinite process involved in identifying an organizations supplier performance management information needs.
The Performance Management Loop diagram (below) shows the loop split into three distinct areas. Implementation, execution and delivery.
The first area is essential, determining business drivers and defining key performance indicators.
The execution element requires a dynamic tool to create scorecards and KPIs, capture data online and produce real-time reports.
The delivery part to the loop is the real benefit of the process where operators can see th e benefit of improved performance, productivity and profitability.
How many KPIs should a company use?
Obviously that depends on the nature of the business and the business line in question, but typically best practice shows that 8 – 12 KPIs tend to work best.
Comparing the Technology Options
Biznet’s SPM Tool (BiznetP6) Vs Unstructured/Ad-Hoc Approach
Biznet P6 provides the following features not provided by spreadsheets:
- Real-time data
- Automated analysis and reporting
- Data easily compared across users, systems and sites
- Trusted data – data cannot be manipulated
- Full audit trail
- No version control issues
- Data easily shared across organization and with suppliers
Biznet’s SPM Tool (BiznetP6) Vs ERP/Financial Systems
- Real time reporting
- Short implementation process achieving ROI quickly
- Central location to store and track organizational KPIs
- Specifically designed for the purpose of SPM.