How to measure supplier performance kpi

Supplier performance KPIs help establish accountability, ensure continuous improvement, and make the supply chain more resilient. Measuring supplier performance KPIs is an integral part of supplier relationship management, as it helps ensure the value suppliers contribute to the source-to-pay process.

To get started with supplier performance KPI tracking, stakeholders need to identify the aspects of supplier performance that are important to the organization and determine the specific spend category or categories. Then, it is time to translate these goals and objectives into measurable supplier key performance indicators (KPIs).

Supplier performance KPIs include on-time delivery, quality defect rates, lead time compliance, responsiveness, and cost competitiveness. Based on organizational policies, procurement leaders can also include compliance rates and other relevant metrics in their reports.

The next step is figuring out how to collect the data. Either through manual reports or automatically by implementing a supplier management solution. After determining the data collection methods, stakeholders need to set benchmarks, targets, and stretch goals for each KPI to establish expected performance levels. In addition to measuring performance, offering each supplier consistent performance feedback will help identify corrective actions and appropriate rewards to keep suppliers motivated.