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Supplier performance management is crucial for a company’s success, with managers setting goals and evaluating services provided by suppliers. Communication and focus on important suppliers are key, with the use of vendor performance management software aiding in the process.
In the manufacturing industry, companies depend on suppliers that provide raw materials, equipment and utilities. Many business analysts believe that a company’s success often depends on the performance of its suppliers. Smaller companies that operate on a regional or domestic scale may only deal with a few local vendors, while larger organizations may outsource vendor needs to companies around the world. To optimize a supplier’s performance and improve productivity and efficiency, many managers perform supplier performance management. This is the practice of evaluating and improving the services provided by suppliers.
The first step in effectively managing supplier performance typically requires a manager to set goals for their organization that can be impacted by a supplier’s performance. This can include factors such as budget, production speed and the quality of materials and services received. By creating a list of objectives, a manager can create a scorecard against which he or she can evaluate supplier performance.
It is common for a manager to use a vendor performance management scorecard to find out where services need improvement. Many analysts believe that to use this tool effectively, a manager should periodically evaluate a vendor over the course of a year. Annual reports on supplier performance often allow a manager to observe inefficiencies after they occur, while more frequent reviews can allow a manager a greater degree of control.
Communication with suppliers is a key factor in supplier performance management. Traditionally, managers viewed supplier behaviors as elements they could choose to deal with, otherwise they might find other suppliers. Many experts believe that a more effective way for managers to view suppliers is an integral part of the supply chain. In other words, managers can benefit from clearly communicating needs with vendor representatives and forming plans or strategies that can satisfy an organization’s needs.
Some suppliers are more important to a company than others. For example, a supplier that delivers raw materials to a manufacturing company may be critical to that company’s success. On the other hand, a vendor responsible for upgrading a manufacturing company’s phone system may be less important. A common supplier performance management strategy requires a manager to determine how much to focus on a specific supplier, as not all suppliers have the same value.
Managers often use vendor performance management software. This type of program allows users to generate charts that compare vendors and visualize relationships between vendor performance and company productivity. Users can apply the data accessed by this software to vendor reviews.
Asset Smart.
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