Businesses that view suppliers and vendors as partners in mutual growth tend to thrive during challenging economic environments. According to many analysts, this phenomenon stems from the fact that prices procurement teams negotiate today directly impact future service quality and savings; not to mention larger suppliers may provide some level of strategic support, often attending internal team meetings while offering direction or co-innovation services.
Not every supplier can add equal value for your company; therefore, it is your company's duty to set up a system of assessing, selecting and reevaluating vendors and suppliers you use now or are considering in the future.
What Is The Supplier Report?
Before diving in deeper, businesses need to agree upon a definition for supplier reports. supplier report refers to the process of reviewing and approving potential suppliers using both qualitative and quantitative measurements; popular tools for doing this evaluation may include scorecards, questionnaires or third-party certification.
Keep in mind that supplier reporting is an ongoing process; typically taking place every three months at best-in-class organizations or once or twice annually in other cases. Therefore, businesses are strongly advised to establish an evaluation procedure today in order to complete evaluations quickly and reliably in future evaluations.
Benefits Of Conducting A Supplier Report
- Increase performance visibility: As businesses lack information regarding the performance of their suppliers, supplier management often relies on speculation to assess them. If businesses increase business for suppliers that meet performance goals, measuring performance becomes even more consequential than it appears at first glance.
- Uncover and remove hidden waste and cost drivers in sustainable procurement: Sustainable procurement entails many risks, particularly from suppliers' CSR practices. One way of mitigating risks related to sustainable procurement is improving communication between suppliers and customers; customers can help their suppliers reduce waste and inefficiency by learning about performance measures as well as procedures used for business procedures; this allows costs for customers to decrease while simultaneously improving supplier performance.
- Leverage the supply base: An organization can set benchmarks for their suppliers that result in higher-quality output by measuring supplier reporting performance. By understanding more fully their capabilities and levels of performance of suppliers, businesses can develop new goods and services more quickly.
- Align customer and supplier business practices: Idealistically, suppliers would operate harmoniously with their clients by adhering to similar moral principles, striving for comparable levels of excellence and making commitments toward sustainability and continued development.
- Mitigate risk: Understanding supplier performance and business procedures helps mitigate business risk, particularly given their increasing dependence on key vendors. Geographic proximity increases risks that could either be operational or financial in nature.
- Improve supplier performance: Assessing supplier performance and progress should be at the core of the supplier report. While performance measurement alone has its benefits, for optimum effectiveness supplier assessments must prompt actions which lead to continuous improvement that lead to tangible performance gains. Quantifiable and positive outcomes can best be realized through follow-up initiatives including supplier development/training programs or corrective actions taken against assessments findings.
How Does The Supplier Performance Report Help Businesses?
One or more SKUs from your supplier could be experiencing quality issues or being sold below standards, leading to unhappy customers writing negative reviews and reduced sales if their inventory ages more slowly or has less of an uptake rate than your other SKUs or has low sales velocity. To make sure customers receive what they ordered from this supplier, samples may need to be ordered or the manufacturer can be inspected; as an alternative you could decide not to place orders with this particular source in future.
Read More: Maximizing Efficiency and Quality: The Importance of Vendor Management in Business Operations
Checking Supplier Performance Reporting
Establishing Performance Indicators
Attaining an actionable supplier report is the starting point in setting both broad and specific parameters of decision making for both broad and specific suppliers. Without one, subsequent actions might become pointless or worse still could reveal incorrect data that compromises your company. Below is the KPI checklist you should include as criteria:
- Price: Negotiation is at the core of every successful supplier relationship; therefore it's essential that businesses pay close attention when entering into negotiations with suppliers. Your organization could strike an advantageous agreement with those willing to reduce prices through economies of scale; you could then leverage ongoing transactions between you two. Pay particular attention to whether companies adhere to their estimates; if extra fees or unexpected taxes pop up frequently then be wary.
- Cost: Consider both the financial and non-financial ramifications associated with interactions with suppliers for your company, including costs related to transportation, packaging disposal and delivery expenses. While purchasing goods or services is the primary contributor, other expenses also exist such as transporting them on your company's behalf and disposing of waste from production processes.
- Quantity: Compare Ordered Quantity With Receipted Amount When reviewing quantities ordered and received from suppliers. Sometimes suppliers will confirm and explain delivery anomalies with an ASN (Advance Shipment Notice).
- Quality: Inspection checks provide an invaluable service, helping identify any flaws or defects within a product as well as rejections, returns or any other concerns with its production process.
- Service: Maintaining client engagement and quickly addressing issue resolution are hallmarks of exceptional service delivery.
- Delivery: Order processing and pre-delivery waiting times have an enormous effect on how satisfied you feel with a supplier.
- Payment terms: Agile payment terms and methods give sourcing organizations payment flexibility; this is more desirable than following rigid payment procedures.
- Certifications: Certifications tailored specifically to an industry or domain do more than check off boxes; they ensure trust between suppliers and their target markets, guaranteeing minimum standards of quality from them.
- Value additions: Value addition may not seem like something providers often think to offer; however, for certain people value addition is part of who they are; such as managing disputes and problems quickly or responding promptly when orders change, etc.
- Innovation: Innovation on multiple fronts will always prevail over providers that don't think long-term.
Classifying Suppliers
Sorting suppliers by grouping similar categories is an effective supplier performance reporting strategy when comparing them. There are two methods available; product type or geography will typically suffice.
Centralizing And Integrating Data
At least 20% of business needs can typically be satisfied by 20% of suppliers, yet your organization could utilize thousands or even hundreds of suppliers for various needs - for this reason iPerform is highly effective as an evaluation tool for all these suppliers at once.
Developing A Solid Evaluation Approach
Choose an evaluation method carefully by allocating ample time. Here are a few examples:
- Supplier scorecards
- Contract management
- Six sigma
Collaborating With Suppliers For Review Feedback
Not every evaluation needs to be quantitative: rather, ongoing supplier-buyer cooperation often more easily exposes any bottlenecks. Regular meetings with both teams is vitally important - however feedback conversations often help address many impediments to success and get rid of many obstacles faster.
Creating An Actionable Plan
At last, it's time to create and implement an actionable and implementable plan that addresses each supplier relationship individually. When supplier performance is executed properly using the optimal mix of personnel, procedures, and technology - amazing things occur; in addition to helping identify performance gaps and form plans to address them.
As such, for an in-depth explanation and additional evaluation of cutting-edge technologies for supplier assessment purposes.
Supplier Report Tips
Following are a few guidelines to assist in conducting an effective supplier report analysis:
- Set Clear Goals: Before embarking upon any evaluation endeavor, it's vitally important that clear objectives be established. What goals have been set?
- Identify your criteria: Once your goals have been established, it is necessary to set standards by which suppliers will be judged - this could include customer service standards, delivery timelines and quality measurements.
- Collect data: To evaluate your suppliers properly, it will require gathering data from various sources - financial statements, customer surveys and employee interviews are just a few examples of such.
- Analyze data: Once you've amassed all the needed data, the next step should be analyzing it to pinpoint any weaknesses within a supplier.
- Take action: With your findings in hand, it may be necessary to take measures that enhance supplier performance based on what has been discovered. This might involve writing new policies, switching vendors or revising contracts - these steps will ensure your supplier report process goes as quickly and successfully as possible. Pay special attention to these pointers.
Conclusion
Sustaining high supplier performance is integral to your company's success. Unreliable vendors can damage finances or put it in jeopardy if not reviewed regularly; for this reason it's critical that suppliers are regularly assessed against our short Supplier Performance Reporting Checklist.
