Is there really a way to manage supplier performance, or is this something that you can simply monitor and hope for the best? Since there is no way you can directly control their performance, you might not be able to manage this effectively as well.
Maybe it’s just a matter of semantics. This explains the growing tendency to talk of supplier relationship instead of the supplier performance management. In this article, let’s talk about the latter.
Check out these four tips that can help your company to get the best performance from your suppliers, service providers, and vendors today.
Base Your Agreements on More Than Handshakes
An effective management of supplier performance starts even before placing your first order with a new supplier. If you want to make sure a supplier meets your expectations, you need to make those expectations the foundation for a formal agreement. Putting agreements in writing shows that you have set the terms with your supplier, they understand what you need and you have documents on which to measure their performance.
Follow a Partnership Approach
There is no magical stick in the hands of enterprises that excel in managing their supplier’s performance. Rather, they follow a partnership approach with their suppliers, recognizing that management is all about nurturing relationships.
These three principles are going to help your company towards being better in managing supplier performance when followed correctly:
- As you choose suppliers, ask them what they can do for you and also how realistic it would be to work with them for mutual gain.
- Once relationships have been made, look for ways that you both can mutually benefit to maximize profitability or reduce total supply chain cost.
- Go ahead and agree on penalties to discourage poor supplier performance, but also reserve such application when collaborative efforts fail. Even then, be sure that your own company is not at fault, before looking at your suppliers on penalties.
Be an Excellent Customer for Supplier Performance
Leave the mentality “the customer is always right” to your consumers. If you want to enjoy having a great performance from your suppliers, your organization needs to take accountability for its role in the relationship. You can’t expect to get the most out of your supplier if your company:
- Constantly places orders that require emergency handling
- Fails to meet supplier’s payment terms consistently
- Delays the handling of inbound deliveries
- Makes changes unilaterally to payment terms
- Changes orders after placing them initially on a frequent basis
- Makes demands regularly for price discounts and reductions
Even if you are a large enterprise that casts a large shadow, that doesn’t excuse rude behaviors that can limit the willingness of your suppliers to maximize their performance. Rather, prepare to take accountability and get rid of obstacles that arise from your company’s role in the buyer-supplier relationship.
You don’t need to have full and direct control over something just to manage it – especially when this something is a team of individuals. Managing people well is all about leadership, teamwork, influence, and persuasion. All these qualities can be applied to grasp and become better in supplier performance management.