Supplier Evaluation and Performance Excellence: A Guide to Meaningful Metrics and Successful Results

by Sherry Gordon

Overview

Understanding supplier performance is vital to ensuring a well-functioning supply network. Supplier Evaluation and Performance Excellence will help you develop and implement an evaluation process that can reduce costs, lower risk, and improve both the performance of your company and your suppliers.

Product Details

ISBN-13:	9781604276589
Publisher:	Ross, J. Publishing, Incorporated
Publication date:	04/01/2008
Sold by:	INDEPENDENT PUB GROUP - EPUB - EBKS
Format:	eBook
Pages:	256
File size:	7 MB

About the Author

Sherry Gordon is President of Value Chain Group, a supply management and performance excellence consultancy. She is a pioneer in enterprise measurement and process improvement techniques. After the acquisition of her previous company, Valuedge, she became Vice President, Supplier Performance at Emptoris, a leading provider of enterprise supply management software solutions. Valuedge's supplier assessment software became part of Emptoris' software suite. Before founding Valuedge, she ran the New England Suppliers Institute (NESI), a non-profit organization focused on improving customer-supplier business relationships and on using lean enterprise practices to improve supplier performance. Sherry has worked for manufacturing and distribution companies as well as management consulting firms. She is a frequent speaker on enterprise performance improvement and supply chain topics. Mrs. Gordon has a B.A. from University of Michigan, an M.A. from Columbia University, and an MBA from Simmons Graduate School of Management.

Table of Contents

Foreword     ix
Preface     xi
Acknowledgments     xvii
About the Author     xix
Wave Added Value     xxi
Introduction     1
Supply Management Today     1
Value of Effective SPM     2
What Is Supplier Performance Management?     4
Current State of Supplier Performance Management     7
Cost Drivers in the Supply Base     9
Risk Factors     15
Selling the Business Case for SPM     15
Getting Started     17
Organizational Readiness for Supply Management     17
Supply Management System Components     19
Supply Management Leadership     20
Supply Management Strategy     20
Operational Planning     21
Business Relationship Management     21
Order-to-Delivery Processes     21
Quality and Performance Management     22
Human Resource Management     22
Supply Management Enablers     22
Customer-Supplier Focus     23
Fact-Based Management     24
Alignment     24
Agility     25
Continuous Improvement     25
Participation/Involvement/Teamwork     26
Process/Systems Approach     26
Identifying Strategies and Goals     27
Developing a Procurement Strategy     31
Choosing the Team and Developing the Plan     33
Developing a Supplier Performance Management Project Team     33
Structuring the Evaluation Process     36
Developing a Project Plan     39
Initiate Project Plan and Kickoff     42
Segment the Supply Base     43
Develop Evaluation Strategy     44
Define Performance Expectations     45
Define KPIs and Scorecards     46
Develop Data Collection Instruments     47
Plan Transition from Metrics to Action     48
Develop the SPM Business Process     50
Conduct SPM Pilot     51
Fully Deploy SPM     55
Developing an Evaluation Strategy     57
Segmenting the Supply Base     57
Creating a Supplier Measurement Strategy     69
Supplier Qualification     69
Evaluating Current Suppliers     73
Supplier Performance Management Solutions     75
Supply Base Segments and Types of Information     76
Summary      76
Determining What to Measure     79
Introduction     79
Characteristics of Measurements     80
Types of Measurements     81
Creating Performance Expectations     83
Using Business Models to Develop Performance Expectations     87
Using Value Stream Mapping to Identify Performance Expectations and Metrics     90
Using Business Drivers to Identify Performance Expectations     91
Cost     92
Quality     92
Time     93
Technology     93
Measuring to Uncover Risk     94
Evaluating Sub-Tier Suppliers     97
Measuring Indirect Suppliers     99
Evaluation Approaches     103
Measurement Methodologies     103
Surveys or Questionnaires     103
Deployment Methods     104
Clarity of Purpose     105
Clarity of the Survey Instrument     105
Clarity of the Questions     106
Time to Complete     106
Timing of Deployment     106
Survey Length     106
Confidentiality     106
Team Experience and Capabilities     107
Communication Strategy      107
Budget     108
Language of the Survey or Questionnaire     108
Cultural Background     108
Compliance     109
Site Visits     109
Scorecards     113
Scorecard Case Study     113
Challenges of Scorecards     117
Start Small and Expand     120
Certification to Third-Party Standards     121
Third-Party Information     122
Issues with Third-Party Information     123
Summary of Evaluation Approaches     123
Using Technology for Supplier Evaluation     125
SPM Standalone Solutions     126
Supplier Relationship Management as Part of Supply
Management Solutions     126
Quality Management and Compliance Software     129
ERP-Based Supplier Performance Management     131
Summary     131
Designing the Process     133
Designing the Supplier Performance Management Process     133
Components of SPM Business Process     134
Creating Surveys     137
Considerations for Designing Supplier Surveys     138
Be Clear about How the Results Are Going to Be Used     138
Be Specific about Calculations      138
Write Good Questions-How To     138
Ensuring Survey Compliance     143
Cheating     145
Creating Scorecards     146
Derive Supplier Measures from Your Supply Management or Procurement Strategy     146
Structure the Scorecard     148
Measure the Impact of the Scorecard     148
Conducting Supplier Site Visits     149
How to Conduct a Good Site Visit     150
Select the Right Suppliers     150
Develop and Use a Good Site Visit Instrument     150
Select and Prepare the Site Visit Team     150
Communicate with Suppliers before the Site Visit     152
Conducting the Site Visit     154
Site Visit Follow-Up     157
Cost of a Site Visit and ROI     158
Measuring and Managing Supplier Performance     161
Communicating with Suppliers about Performance     161
Supplier Performance Feedback     162
Formal Performance Feedback     162
Informal Performance Feedback     166
Customer Performance Feedback     167
Supplier Conferences     169
Changing Supplier Behavior and Performance     172
Managing and Measuring for Supplier Risk     174
Supply Risk Planning     175
Identify the Potential Risks     175
Segment the Supply Base According to Risk     176
Analyze the Potential Impacts of Risks     176
Evaluate Your Contribution to Supplier Risk     177
Implement Risk Mitigation Strategies     177
Make Supplier Risk a Part of Your Performance Management System     177
Recognition and Rewards     179
From Metrics to Action     179
Supplier Performance Incentives     180
Supplier Recognition     181
Supplier Recognition Readiness     182
Developing a Supplier Recognition Process     183
Supplier Certification     188
Developing a Supplier Certification Process     190
Obtain Senior Management Support     190
Choose the Project Team     191
Develop Certification Goals     191
Develop Certification Process     191
Develop Performance Measures     192
Continuous Improvement/Corrective Action     194
Rollout     195
Recognize Certified Suppliers     197
Supplier Self-Assessment     197
Disengaging with Poor Performers      199
Summary     201
Supplier Development     203
Why Develop Suppliers     204
Choosing Which Suppliers to Develop     204
Choosing Supplier Development Approaches     205
Training     206
Consulting and Technical Assistance     208
Targeted Assistance to Solve Specific Problems     208
Help Suppliers Build Their Own Capabilities for Improvement     210
Conducting a Successful Supplier Development Project     211
Identify Performance Gaps     213
Assess Supplier Readiness to Undertake the Development Process     213
Gain and Build Supplier Commitment and Support     216
Develop Improvement Plan     216
Execute the Improvement Plan     217
Transition Responsibility to the Supplier     218
Rolling Out Specific Internal Initiatives to Suppliers     219
Summary     222
Index     223