Drive Improvement with these Top 10 Procurement Metrics - ProcureWare
Manage supplier risk and compliance by strengthening global transparency and visibility on key relationships through policies and processes, metrics and tools. Over the past few years, Supplier Relationship Management (SRM) has gained significant momentum and leverage as a required tool and. In the fourth quarter of , 50 organizations responded to a survey on their use of supplier relationship management. Survey responses.
Each type of relationship requires different management and leadership and yields different benefits. As one moves from the arm's length price relationship toward joint venture, the linkages become closer, more defined, and the benefits are broader and deeper beyond just price.
Supplier Relationship Management SRM Scorecards
Internal relationships are just as important as external ones. With SRM these links are common with operations, logistics, accounting and engineering. Internal ones can work against a concerted effort with a supplier or it can create a strong consistency of purpose. There are two types of measurements: Targets are those end goals being sought price, cost, quality, specific logistics details, order cycle times, time to market, etc. Means types of measures are those manageable sub-component activities that add up to accomplishing targets.
For example, an order cycle time target has within it a transportation transit time as a means measure. A common fault here is to over-require means measurements of suppliers.
A simpler approach is to expect the supplier to perform to certain end goal targets. Whether target or means measures are used, stakeholders have specific ones that impact their performance and that of their groups. What type of relationship will work toward that? What do you need to measure to assure that it will happen? These define the roles. Some key issues here are: To the left are activities common in basic sourcing. As the needs from suppliers increase, so do the needs to measure, control and develop the supplier in overall supply assurance.
The increased, more hands-on SRM needs are shown as the relationship moves to the right, with medium and more advanced levels of interaction. Where to Go With It? SRM is often a part of the rollout of strategic sourcing. Here, it can be the management and leadership end of working with strategic suppliers or ones that are preferred or simply transactional see footnote.
If not, what would it take to enable them? Does it make sense to subsidize the cost and assist your smaller suppliers in the implementation of strategic tools?
Supplier Relationship Management (SRM) Scorecards
If so, how many suppliers are sending you electronic ASNs? If you have a large number of suppliers that do not have the capability to send you an ASN, how much is it costing you to work with them and are there any alternative solutions? Another area to examine could be receiving.
- Measuring Indirect Supplier Performance Using Supplier Relationship Management SRM Scorecards
- Measuring Direct Supplier Performance
Do you require delivery appointment scheduling? If so, how many suppliers or transportation companies are complying with your requirements? What do you do if they do not comply, and what is the overall cost to your operation? You might have bar coding requirements. If so, is there a particular placement on the carton that is required? Do you require pallet identification? Use your completed detailed process flow and questions as a baseline for developing a specific list of performance metrics that you can deploy both internally and externally and then follow the guidelines below to validate the feasibility and necessity of each item.
Measurable Performance metrics are typically recorded and shared with your suppliers in a quarterly report card. In order to provide a supplier with a performance report, each performance metric must be measured towards compliance.
A scorecard is a great way to keep up with the performance metrics and measurement criteria. The scorecard should list each specific task and a grade range that typically runs from one to five, with one being the highest best and five being the lowest worst.
After each supplier receipt, the receiving department should use the scorecard to complete a quick scoring exercise. Using bar codes as an example, if all of the inbound cartons are labeled correctly, then the obvious score for that supplier on that task is a one. Bear in mind, that without this measurement process on the floor, this issue may have never been reported and could be costing you thousands of dollars in time and materials to reprint and reapply labels.
As a result of measurement, you now have a mechanism that will provide management with a real time tool that enables them to validate the savings of this compliance program and will provide them with the data they need to work with your suppliers to improve this process.
Attainable Much like goals, you should not create unreasonable expectations or performance metrics. Be realistic in your objectives and build a program that will provide real value to your organization. For example, if you have thousands of suppliers, then it may not make sense to have a reporting process for each one.