Rating Your Suppliers – Part Three of Four: Key Performance Indicators Assessment

January 06, 2015

Part Three of this four-part series focuses on assessing the Key Performance Indicators (KPIs).

KPIs measure achievement (past performance) of operational standards and progress toward strategic objectives and continuous improvement.  Formal evaluation of a supplier’s performance includes objective and subjective ratings.  There are numerous evaluation templates to measure KPIs.  They typically include:

  • Strategic Focus Areas to group similar KPIs (e.g. Quality, Delivery, Cost, Partnership/Service, Innovation)
  • Associated Key Performance Indicators – A set of quantifiable, well-defined and significant-to-the-business measures used to gauge a supplier’s performance in each Focus Area
  • Weighting scheme applied to the Focus Areas, with the most important Focus Area having the most points/weight
  • Rating method applied to each Focus Area and KPI (e.g. Likert-type scale)
  • Comments to support the ratings (constructive feedback and improvement made)
  • Scorecard to report the results to the supplier and key stakeholders and compare historic trends

Tips for assessing KPIs:

  • Invite all key business process owners who receive and/or provide support and/or are impacted by the suppliers to evaluate. 
  • Weight the responses commensurate with the criticality and frequency of the respondent’s interaction with the supplier.
  • Apply only metrics that are critical to the business strategy.
  • Keep the evaluation time under an hour to ensure focus.
  • Provide clear instructions.

It’s most important to ensure that the evaluation goes beyond measurement to actual performance improvement.

The Team at HR&Relo Advisors

 

 

 

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