3. Defect rate
Defect rates, like OTIF and lead time deviations, are an obvious spanner in the works.
They can also make a good OTIF rating and no lead time deviation pointless. After all, what good is your order arriving on time, if half of it’s broken or not up to standard?
Your customers won’t accept shoddy products and neither can you.
Even if the order was damaged in transit or the materials aren’t up to spec, a full enquiry into why must be undertaken.
4. Volume deviation
Lead time variation’s one bad example. But getting fewer or too many items can be just as hazardous.
Especially if that deviation impacts sales. Or you’re left holding the baby, at your own personal expense.
Volume has to be bang on. Every time.
If it’s not your order volume, pack quantities and pallet sizes will also be off. And that’ll set off a chain reaction which is expensive to fix.
5. Supplier ROI
What value are you getting from this supplier? How much does it cost to work with them over a competitor? And does that represent value for money, or are you being ripped off.
Every business promises value.
You need to benchmark whether they’re actually delivering it or not.
And if you can’t point out the return on investment you’re getting, likely, you’re not getting one.
And now, for some slightly less tangible metrics…
As we mentioned above, it’s not a great analysis tactic to only focus on the obvious stuff. The clear data’s there for all to see.’
So let’s look at some of the more difficult supplier performance factors you can define KPIs with.
Sustainability should be so much more than a buzzword for marketing to throw out.
And there’s a lot to be said for making sure it’s that in your business. Something Volkswagen will be wishing they’d done, before recalling 800,000 vehicles.
Consumers these days care about sustainability. It’s no longer a buzzword. It matters.
And can you call yourself a sustainable business if your supply chain partners show no regard for the environment?
That’s not rhetorical by the way, the answer’s no. You can’t.
There are some industries, like Food and Paper which have very clear, indelible sustainability metrics. Taking inspiration from these might be a good start, but you may need to adapt individual KPIs to have full control of your supplier sustainability.
I’d imagine you spend a lot of money and a whole lot of research in getting ahead of the curve. And possibly even more money to stay there.
Your suppliers therefore must be held to the same account.
Not only are they a good conduit to innovation, but they can be priceless in your quest.
How are they investing in R&D?
Are they advancing their product offering?
Can they keep up with the demands of your market?
Can they diversify in range?
Are they able to fulfil new markets?
What speed can they service new locations around the world?
All correct and proper questions to be asked if you want to make sure they’re as innovative as they’d like you to believe.
Is a supplier your flexible friend? Or is it rigid beyond belief?
Sometimes, and sometimes far more often than that, the unexpected happens. And you need a flexible friend to help you out.
A good supplier will be just that.
A bad supplier will leave you out to hang in your moment of need.
9. Risk mitigation
They say prevention’s better than a cure.
As stated above, agility’s a great characteristic to have in a supplier. But not in place of one who can proactively mitigate risk in their operation.
Of course, this is the kind of information you can’t just assume. You may need this information directly from the horse’s mouth.
But if Covid has taught us anything, it’s to expect the unexpected.
So ask what your suppliers are doing to make sure they fulfil your orders – even if the world is falling apart outside. Because some will be doing lots. And others will be relying on their agility.
Who you run with after knowing which is which, is your call.
10. Ease of collaboration
Often an overlooked KPI to benchmark with, but commonly one of the most important.
Sure, you want suppliers who deliver on time. And in full. And as expected. But you also want suppliers who you can work with seamlessly.
A supplier who values collaboration, just as much as you do.
One who doesn’t take your business for granted. And treats you the way you deserve to be treated.
Some suppliers are better prepared to support end-to-end collaboration. And some just take your order and leave you for dust should you have a problem.
Perhaps you have good chemistry? Maybe they share key supply chain insights? It might be they’re brave enough to challenge your way of working and help you improve?
Of course, this fits in the ‘hard to measure’ column. But it’s one of the most important elements in business. Collaboration and harmony.
After all, the closer your collaboration, the more likely you are to improve the points above, and the better your supply chain.