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[krinatisol]

4 Steps to Make Supplier Performance Management Work for you

Why is Supplier Performance Management important?

Supplier performance management is important for a number of reasons:

It helps ensure that goods and services are delivered on time and meet quality standards. This is especially important in industries where timely delivery and high quality are crucial, such as in the manufacturing or healthcare sectors.

It allows organizations to identify and address issues or problems with their suppliers before they have a negative impact on the business. This can help prevent delays, reduce costs, and improve overall efficiency.

It helps organizations make better-informed decisions about their supplier relationships. By tracking and analyzing supplier performance data, organizations can determine which suppliers are the most reliable and cost-effective, and prioritize their relationships accordingly.

It can help organizations build stronger relationships with their suppliers. By working closely with suppliers to understand and address their needs, organizations can foster mutual trust and cooperation, which can lead to long-term partnerships.

Here are 4 steps to make supplier management services performance work better for your business.

1) Determine the right KPIs

While you establish the practice of monitoring supplier performance, the first step is to understand what you will measure. Determine the exact metrics you will use to evaluate and track supplier performance. This will help you make more informed decisions when evaluating and assessing supplier performance.

The metrics you use should be specific, measurable, and realistic. This will ensure that you’re able to accurately measure your suppliers’ performance and make changes when necessary. You should also take into account the impact each measure has on the overall performance of your business.

Typical performance KPIs include:

On-time delivery

Quality of product or service – SLA adherence or rejections on the assembly line

Pricing terms

Sustainability & Environment

Risk & Stability – Reputation, Insurance, Financial Stability

2) Communicate your expectations early and often

Once you’ve determined the performance measures for tracking supplier performance, it’s important to be proactive in communicating with suppliers. Make sure that suppliers are aware of the metrics that will be used to measure their performance and how their performance will be tracked. This includes communicating your expectations about quality, cost, delivery timelines, and other key performance metrics. Ensure that suppliers are given enough information to allow them to make the necessary changes to meet your goals.

This proactive approach to communication with suppliers will create a culture of trust and ensure that everyone involved in the process understands their role in achieving success.

Additionally, you should establish regular intervals for evaluating supplier performance and make sure the data is collected and communicated with all stakeholders at these intervals.

3) Set up a system for tracking and measuring performance

Keeping track of and measuring supplier performance is important. A supplier performance scorecard is a great way to track and measure performance over time and make necessary corrections.

When setting up a supplier performance scorecard, there are several factors you should consider. For each measure, you should assign a numerical value that corresponds to a certain level of performance. Then, at regular intervals, you should gather data about how your suppliers are performing against these measures and determine the overall performance score for each supplier.

Choose a method for storing and organizing data, such as a spreadsheet or specialized software. For smaller organizations, spreadsheets work great. For more complex needs, specialized software esourcing solution is available that can help with tracking and analyzing supplier performance data. These solutions may offer features such as automated data collection, real-time reporting, and the ability to track multiple suppliers and KPIs. By doing this, you can easily track trends in performance and make changes where needed.

4) Maintain corrective action and continuous improvement

Continuous improvement is a key part of supplier performance management. This means continually working with your suppliers to review current performance, discuss areas for improvement, and set new goals and objectives.

By taking necessary corrective action, you can ensure that your suppliers meet the standards you have set for them.

If a supplier is consistently underperforming, it’s important to have a plan in place to address the issue and take steps to improve performance. This could include reducing the order size, providing extra training or resources, or finding an alternative supplier.

For suppliers that consistently perform to set expectations, you need to put strategies in place to maintain their continued involvement with the organization; most often requiring one-on-one meetings with management personnel from both parties involved.

Original Source: 4 Steps to Make Supplier Performance Management Work for you

[krinatisol]

Why Suppliers Should Not Fear Reverse Auctions

Reverse auctions are a great tool for buyers to save money, but many suppliers tend to be apprehensive about participating in them. Suppliers do not like participating in reverse auctions because they are typically viewed as a race to the bottom in terms of pricing.

There are more apprehensions which we will articulate in this article. We will also take a look at the remedial measures a buyer must take to ensure auctions are competitive and the best bid is placed by the most capable supplier.

Understand suppliers’ apprehensions about participating in reverse auctions

When it comes to participating in a reverse auction, suppliers are wary about who else will be in the pool of participating vendors. Suppliers fear that they will be pitted against unqualified or inexperienced vendors who will try to undercut their prices, compromising the quality of the product or service.

Incumbent suppliers may also worry about the fairness of the auction. They may feel that their knowledge of the buyer’s needs and the standing relationship they have with the buyer are not given enough consideration. This can make them feel devalued and uncertain about the outcome of the bidding process.

Large and established suppliers may further worry that a reverse auction only takes into account price, and does not measure their ability to deliver on the project or meet customer needs. They feel the auction does not adequately differentiate between different companies, especially if one has more experience or resources than the other.

Finally, suppliers will be wary of poor buyer behavior while conducting reverse auctions. Buyers tend to place phantom bids, not award business as per prior commitment or tend to negotiate further with the supplier post-auction. Such buyer actions demerit the effort and cause mistrust among the suppliers.

Communicate the benefits of reverse auctions to the suppliers

While supplier apprehensions have merit, the truth is that reverse auctions offer several benefits to the participating suppliers. Buyers need to ensure they inform suppliers of these benefits as well as other insights important to them.

One of the biggest benefits of reverse auctions is the level playing field it creates for all participating suppliers. They can see their competitive positioning vis-a-vis other suppliers and place further bids accordingly. They can trust the system instead of the words of a buyer! In other words, all suppliers have an equal chance of winning the business.

Reverse auctions open up new opportunities for several suppliers. The auction process allows suppliers to reach a much wider audience of buyers than they normally would have access to. This can lead to more business and larger contracts for many suppliers, reducing their sales costs.

Also, while winning the auction is often the primary goal, there are other benefits to participating in reverse auction sourcing. If a supplier does not win, they still gain insights into what their competitors are offering and the market value of their products.

Effectively manage every apprehension of the suppliers

Supplier apprehensions must be proactively addressed. If suppliers feel that reverse auctions are detrimental to trust-based relationships with the buyer, this needs to be managed on priority.

Communicating the award scenario to the suppliers prior to the auction and adhering to it builds trust. How many suppliers will be awarded the business? How much share of the business can the best bidder expect? Would there be any further qualifying steps for a new supplier? Greater the clarity on the outcome, the higher the competition from suppliers.

Explain to suppliers that you are not on a mission to find the ‘cheapest’ supplier. On the contrary, past performance and better capability are valued and factored into the auction. This ensures that the most capable supplier wins, not the cheapest on price alone.

If you have done a pre-qualification of suppliers prior to the auction, go ahead and communicate this to all the participating vendors. This will demonstrate the integrity and seriousness your company has when it comes to reverse auctions.

Summary

In summary, buyers must acknowledge that suppliers are wary of participating in reverse auctions. Their prior experience with other buyers, perhaps from the same industry, also set their perception regarding the process. These apprehensions are critical to be addressed because supplier participation is critical to the success of any online auction.

Krinati offers Program Management Services tailored to assist you in executing a successful eSourcing solution program. To do this, we focus on communicating the right message to suppliers and addressing their apprehensions. We also train users on the dos and don’ts of eSourcing as well as providing event management for sourcing events.

Original Source: Why Suppliers Should Not Fear Reverse Auctions