Supplier Performance Assessment – How Good Are Your Critical Suppliers?

Supplier performance assessment is an important aspect of determining the efficiency and reliability of an organisation's suppliers. Through performance assessment, you should be able to evaluate critical suppliers and their role in your supply chain. Assessment should provide insight on which suppliers are likely to cause disruptions, too. There are different ways to rate and evaluate your critical suppliers. A proper supplier performance and financial risk assessment program should help you review the suppliers' financial performance, financial health indicators, and the underlying conditions that are affecting their financial health.

Setting performance indicators is a good way to evaluate and rate your critical suppliers. Once you establish a relationship with a supplier, you need to determine the important characteristics that it must have, maintain, or demonstrate to be worthy of doing business with you. Hence, establish specific performance criteria to evaluate and track suppliers monthly, annually, or quarterly. Consider the size of the supplier's company, its complaint history, financial stability, and management systems.

Your own organisation's needs and processes should dictate the types of criteria to apply. If you are looking for a shipping company, for instance, you may want to explore the supplier's track record for timely deliveries, the number of delivery vehicles they own, driver accidents, and certifications. Your evaluation method for rating the performance of a supplier must be unique to the needs of your organisation or business while keeping in mind the status of the supplier with your company.

When determining your criteria for supplier performance assessment, you need to consider the characteristics of each supplier. Indentify your full partners, associate partners, high risk suppliers, and incapable suppliers. Full partners have goals that suit your company's future plans. They are always on time and capable of helping your company in many of its major operations.

An associate partner can satisfy the majority of the full partner criteria as agreed upon by your management, but its employees and management must be committed in the continuous improvement in delivery and quality to meet your company's objectives and goals. High risk suppliers are those whose action plans and goals are incompatible with your company, and those who are unable to provide economically feasible solutions to your business.

Incapable suppliers, meanwhile, are those that are unable to meet delivery and quality goals. They do not show the capability or the desire to improve on subpar delivery and quality. Hence, they must be dropped as soon as you can.

Outsourcing your supplier performance assessment can make it easier to determine the efficiency of your critical suppliers. A reputable company can help you manage your suppliers using a signature propriety risk assessment framework that can monitor supplier risk across hundreds of business, sustainability, and financial risk indicators. This way, you can easily analyse, filter, and capture every important detail related to the performance of all your suppliers.

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