Key Supplier Performance Metrics Process - Bill Kohnen


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Purchasing Expert Bill Kohnen Presents - Supplier Performance ratings process with sample reports, templates for creating specific ratings and guidelines overall program. Includes comments about supplier ratings and ISO, TS and Customer audits as well cost benchmarks and calculator for programs

Key Supplier Performance Metrics Process - Bill Kohnen

  1. 1. Key Supplier Performance Metrics and Process Bill Kohnen
  2. 2. General Guidelines• Measurement of Suppliers should be meaningful and drive improved performance• Measurement requires time and $$$ so should focus on critical suppliers and those we can impact – Estimated total cost to formally measure a suppliers performance is $8,000 to $12,000 per year. (See attachment)• Highest rating should exceed expectations and be hard to reach• Low ratings should result in action.• Time frame is quarterly with publishing of data in timely manner• Provide relevance with prior quarters data as well as average for all suppliers.
  3. 3. Specific Guidelines for this Model• Rating is between 0 and 100• There will be a central point of contact to manage the process of preparing and sending the ratings. • The central contact will document the process and actions taken and have this available for audit as needed.• Send out summary scores to Suppliers quarterly and share details as needed in Supplier Review Meetings• Categories for rating are: – Quality – Delivery/Service – Administrative
  4. 4. Quarterly Supplier Rating Single Supplier Example95908580 Supplier Rating Average757065 Q1 Q2 Q3 Q4
  5. 5. Categories and Guidance For Rating Rating GuidelinesCategory Score 100% 75% 50% 25%Quality 40 No Issues Issues Reported But No Production Issues Reported requiring fix Issues Impact by Buyer or Supplier reported and Production ImpactService 40 SLA or PO performance better than Issues arise but within SLA/PO Potential Downtime averted DowntimeDelivery commitment agreement because of Buyer fix (Usage of Safety Stock or Substitution)Administrative 20 Proactively Meeting Needs Normal Performance for response. Buyer must request response Lack ofSupport Immediate response to requests. No Price competiveness. and follow up. response or Billing Issues. Best Value Price in Market. Product and Service meets Buyer Unclear Value and cost no contact. Bringing innovation to Buyer. Proactive Needs. Quickly provides requested competitiveness. Requires High Cost. and transparent in providing data for information needed for Buyer follow up on Buyer audit No Buyer Audit Requirements. audit. information. innovation. No response to Buyer audit information request. 100
  6. 6. Results and ActionsRating Designation Result90 to 100 Outstanding Preference for New Business80 to 90 Good Performance Maintain. Include in consideration for new opportunity.60 to 80 Acceptable Performance Mutual Work between Rearden and Supplier to Improve. Equal evaluation with other “new” suppliers for new business.Below 60 Immediate Corrective Senior Level Meeting held Action and Action plan to Improve. Regular progress reporting to E Staff Sponsor. No new projects
  7. 7. Roles and Process Quality Data CollectedQuarter E-Mail to Discuss End Prepare Supplier Score Y at Next Consolidate Charts for Above eProcess cc. Key review Input Suppliers 60 s Starts Contact Service and Admin NO Ratings from Buyer Key Contacts Set Up Meeting with Supplier and Report to E Staff Owner
  8. 8. Critical Supplier PerformancePrgram Summary Sample2.5 21.5 Action Acceptable 1 Good Outstanding0.5 0 Q1 Q2 Q3 Q4
  9. 9. Detail Critical Supplier Ratings (For Bigger Organization make as a commodity or division chart) 100 Outstanding 90 Good 80 Supplier A Acceptable 70 Supplier B Supplier C 60 Supplier D Supplier E 50 Action Needed Average 40 30Description Q1 Q2 Q3 Q4
  10. 10. Comment about Compliance with Audits• Reviews of Supplier Performance Process are often part of audits (ISO, TS, Customer, even internal)• Generally they will never question the details of any given supplier rating• What auditors look for: – Is there a process? – Is it followed? – Is it documented? – Is action taken in a timely basis?
  11. 11. Summary• Focus on Most Important Suppliers• Time is of the essence for supplier performance measures to be meaningful (preparation, review, sharing and action)• Share information with a very high level at Suppliers.• Include overall supplier performance trends as a metric for your Supplier Management process.• On a yearly basis recognize the best performing suppliers.
  12. 12. Attachment Program Total Cost Per Supplier Quartely CostNormal Costs Hours Hourly CostQuarterly Prep 4$ 125.00 $ 500.00 Assumptions youTime Reviewing 2$ 125.00 $ 250.00 may need to modify:Maintenance of Process 1$ 125.00 $ 125.00Documentation 0.5 $ 125.00 $ 62.50 Hourly Cost – although unlessAudit Costs Formal Audit Cost this is done outside the USFormal Audit Assuming once every 2 years $ 10,000 8$ 1,250 these total costs are closeQuarterly Cost Single Supplier $ 2,187.50Annual Cost Single Supplier $ 8,750.00 Formal Audit Costs and Frequency –Other Costs Key supplier suggests a formalCost If Action Required (one Supplier) Hours onsite audit will be doneMeeting and Review 16 $ 125.00 $ 2,000.00 occasionalTravel $ 2,000.00Documentation 4 125 $ 500.00 Total # Suppliers you will measureQuarterly Cost Single Supplier $ 4,500.00Annual Cost Single Supplier Issue per Quarter $ 18,000.00 What type of recognition youCost For recognition Of Suppliers $ 20,000.00 will do - $20K represents modest trophies, press release,Total Other CostsNumber of Suppliers Measured $ 38,000.00 10 and dinnerProgarm Overhead per Supplier $ 3,800.00Total Annual Cost Per Supplier $ 12,550.00