How do you measure vendor performance?

By: Tom Brenner, Director of Business Development

There’s a bar and grill in my hometown that has been a local favorite of many for a long time. I make it over regularly for lunch and occasionally an evening to watch a ball game. It’s my favorite place to grab a burger and a plate of waffle fries. Come to think of it - I don’t think I have ever had a bad burger, been treated poorly, or spent too long waiting before the waitress drops the plate in front of me and with a friendly smile asks, “Can I get you anything else.” It probably makes a difference when you know most of the staff and grew up with a few of them. I look forward to the burger and the experience each and every time.

Most of us select a favorite restaurant based on the same criteria; is the food consistently good, is the staff friendly, and do I get my food in a reasonable amount of time. Of course, there may be other important criteria in selecting a favorite, but to each their own.

In the manufacturing, distribution, and retail world we experience these principles in a similar way. Best practices and key performance indicators help each organization develop criteria that mold the relationship between vendor and customer. Vendor scorecards are growing in popularity and have allowed vendors and customers to collaborate on the expectations of each other to ensure a quality interaction to move the business forward.

In 2016, I had the opportunity to hear Nancy Jorgensen, Director of Supplier Performance Management at W.W. Grainger, present the criteria that she has developed to maximize her vendor relationships. She strongly suggested that the two parties should commit to developing the evaluation criteria together to develop reasonable expectations, understand capabilities to fulfill those expectations, and then decide together how each metric should be tracked. It’s kind of like the question, “How do want your burger cooked?”.

Proactive transportation management partners have a front row seat to experience the relationships between their clients’ vendors. That way, they can help their clients’ build criteria for their vendors to ensure a smooth and transparent logistics experience to keep shipments arriving on time and in full.

Here are a few best practices to consider:

Select the metrics that have the greatest impact on your business and monitor them closely. Developing a weighted approach will clearly emphasize the importance of each metric. Is on-time delivery most important? Be sure to clearly communicate your expectations early and often.
View your vendors as a business partner, not a disposable supplier. This will enhance transparency and trust between you and your vendor to increase the ability to problem solve together when challenges inevitably arise.
When expectations change, proactively communicate these changes and adjust the scorecard accordingly. Just like your business, your vendor relationships require continuous improvements.
Keep your vendors accountable by providing objective evidence if they are failing to meet expectations. Open lines of communication are vital to a successful relationship. If your vendors are struggling with any metrics, be sure to collaborate with them to understand the reasons why they are struggling before just replacing them with another vendor.
You’ve got to inspect what you expect. If they know they’re being watched, it’s tough to get away with shortcuts!

Our best relationships tend to have one thing in common; you know what you’re going to get and it’s good. Keeping score of your vendors will help you understand if what you’re getting is good or if there is room for improvement. If you find it challenging to have credible metrics that provide end to end visibility with your inbound supply chain, please reach out to a proactive transportation management provider who can help take your business to the next level.

So, the next time you grab a burger or favorite meal, think about your dining experience and consider the interaction with your waiter or waitress, how did the experience meet your expectations, and why do you keep coming back?

Enjoy your meal.