Daily Archives: December 11, 2012

To Get The Most Out Of Supplier Reports, Read Between the Lines

SIG recently ran a good article on Getting the Most out of Supplier Reports (that now appears to be hidden behind a registration/membership wall in their newly redesigned site) that made some good points. Many suppliers are just beginning their reporting journey, and don’t always know what is important or what the customer really wants. Plus, and this is even more important, if a supplier is really doing poor in one area, it may not want you to know, especially if renewal time is coming up.

So how do you get the most out of the reports?

First, go beyond the facts. As the article notes, the reports should include quantitative and qualitative information. Have the supplier go beyond just spend, on time delivery, and other hard metrics and include customer service ratings, quality reviews, and overall compliance levels. The supplier might be hitting the cost targets, delivery times, or resolution times, but your internal stakeholders, the customers, might be extremely unhappy with the supplier.

Then, and this is SI’s advice, pick a couple of metrics that are poor and a couple of metrics that are good and dig, dig, dig. For example, let’s say on time delivery is poor. Find out why. When the supplier says that the production rate is 80% of predicted throughput, don’t just say to speed up, dig. Is it labor issues? Is the supplier short-handed? Is it mechanical issues? Does key equipment keep breaking down? Is it supply? Is a second tier supplier repeatedly late? Don’t stop until you find the root cause and make sure it gets appropriately addressed. Then choose a good metric. For example, let’s say the supplier hit the savings target. Why? Every cost has components, and where a supplier is concerned, there will be supply costs, labour costs, and overhead costs. Make sure you understand which costs were reduced and to what degree. There might still be gold in the veins. For example, let’s say that supply costs dropped 10%. If market costs dropped 12%, then the supplier might not have done anything! If the supplier was supposed to reduce supply costs and overhead costs, and leaves one cost untouched, the supplier can still do better.

But don’t stop there. As the article indicates, make sure you have the supplier compare its performance serving you to its average performance serving other customers. This will help you identify metrics that you need to monitor for improvement.

And audit. (But not too often.) This will allow you to maintain control and give you more insight into the supplier’s performance. (However, if done too often, will be too time-consuming, instill angst in the supplier, and not produce any results if no issues are found.)

Doing this will allow you to read between the lines and extract true value from your supplier reports.