Assessing Supplier Performance

The first stage of supply chain development is the establishment of a set of metrics by which the existing supplier performance can be assessed.

Some companies use a vendor rating system, which is used to calculate a rating for each supplier, often on a monthly basis. The key performance indicators are often weighted according to importance and multiplied together to achieve an overall score. The ratings are usually arranged in bands, with say "A" being suppliers who score >95%, etc. The vendor ratings reports are sent to the suppliers on a regular basis to enable them to see how their performance is perceived by the customer.

Typical supplier performance measurements could include:

• On time delivery
• Quality rejects
• Annual cost reduction
• Supplier lead time