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Why monitor suppliers?

Monitoring the performance of suppliers is a key aspect of purchasing & supply management, but one which can easily be under-resourced and neglected.

'Monitoring the performance of suppliers',
CIPS 2013

Every organization knows it should be assessing supplier performance... But few purchasing and quality professionals are likely to answer “yes” when asked whether they are satisfied with their supplier assessment capabilities and results.

'Measure supplier performance',
Sherry Gordon, 2005.

A recent study of 500 UK supply chain professionals found that 34% saw their primary challenge this year as better monitoring of supplier performance.

Source: Dun & Bradstreet, 2021

There are clear business benefits from reviewing supplier performance

  1. Increase performance visibility.
    When companies do not know the facts about how their suppliers are performing, supplier management tends to be based on guesses. Moreover, the simple act of measuring performance can help improve performance. This improvement can be even more dramatic when companies award additional business on the basis of suppliers meeting performance goals.
  2. Uncover and remove hidden waste and cost drivers in the supply chain.
    The supply chain is full of inefficiencies. Some of these inefficiencies can be improved by better communications between customers and suppliers.
  3. Leverage the supply base.
    By measuring supplier performance, an enterprise can set a threshold for its suppliers that can lead to higher-quality results.
  4. Mitigate risk.
    Insight into supplier performance and business practices helps reduce business risk, particularly given companies increasing dependence on its key suppliers.
  5. Improve supplier performance.
    The goal of supplier evaluation should be supplier performance improvement. While simply measuring performance has a positive effect, supplier evaluation can be most effective when it leads to continuous improvement activities and actual supplier performance improvement

'Supplier Evaluation: Benefits, Barriers and Best Practices',
Sherry R. Gordon, Vice President Supplier Performance Intelligence, Emptoris, Inc.
91st Annual International Supply Management Conference, May 2006