What Gets Measured, Gets Improved

 

You’ve reviewed your business values, you’ve defined what success looks like for your business and your suppliers, and now, you’re ready to assess how your suppliers are performing

This assessment will help you: (1) set expectations to improve supplier results; or (2) make the decision to part ways.

Remember: What gets measured, gets improved.

But First, Consider These Factors 

You probably work with different types of suppliers in your business: goods vs. service providers, high trend vs. basics, hard goods vs. soft goods, customer facing vs. operations support. Therefore, the 5 to 7 measures of success you defined for your matrix may not apply to all of the suppliers that you want to evaluate.

That’s perfectly fine.

Furthermore, you may not want to hold all your suppliers to the same standards of performance.

That’s A-OK, too.

And finally, you may have 60 partners you work with, and you simply won’t have time to assess them all.

Yes, you guessed it, that’ll work as well.

The point is, when it comes to assessing your suppliers, there is no “one size fits all” approach. You need to evaluate your suppliers in a way that makes sense for your business.

The Key Question

So now, ask yourself this critical question: Where you do want to drive the most value? Do you want your good suppliers to become great? Your great suppliers to become outstanding? Or do your problem performers need to become acceptable?

Prioritize the suppliers you want to target, as well as the metrics you want them to achieve.

A first pass of assessments for two suppliers might look like something this:

Key Differentiator Measurement Supplier A Supplier B
#1 Best New Products Innovation (Scale: H/M/L) H L
#2 Responsible Production GOTS Certified (Binary: Y/N) Y N
#3 Responsible Global Citizen Approved list of COPs (Binary: Y/N) Y – Portugal Y- Indonesia
#4 There where you need us (i.e. – growing into new markets) Supplier capacity (Binary: 3M units or Quantitative: % available to secure) 1.2 M Units, 11% 5 M Units, 21%
#5 Always instock, All the time On Time Shipment Rates, Fill Rates (Quantitative: percentages) OTS: 78%

FR: 85%

OTS: 99%

FR: 95%

 

Back in my corporate days, we focused on the suppliers that drove the top 80% of business volume, which covered our most strategic partners. But sometimes, we’d also add smaller volume suppliers, whose so-so performance we wanted to raise.

Now, Do Your Supplier Assessment

1:   Start by assessing a few suppliers. Rate them on the metrics you’ve included in your supplier matrix.

  • You don’t need to evaluate every supplier on every metric. Choose the metrics that are appropriate for the supplier.

2:   Take a look at what you’ve learned about the suppliers you’ve assessed:

  • What is your response to the results?
  • Are you surprised?
  • Do the results paint a full picture of the supplier’s performance?
  • Are there metrics missing? Ones that aren’t useful?

3:   Pause and see if you need to edit your metrics. (This is why you only assess a few suppliers first.)

  • Use the Goldilocks Approach. You don’t want too many measures, and you don’t want too few, but you do want a combination that’s “just right”—in other words, the measures that’ll help drive your business forward and help you deliver on your key differentiators.
  • Do understand that it’s tricky to get this mix right on the first try, so it may take a few iterations. If you need some guidance, check out the Radical Focus.

4:   Once you’ve refined your metrics, go ahead and rate the rest of your suppliers.

  • If you have a large or diverse matrix, it might make sense to assess supplier performance in subsets: for example, trend suppliers, service suppliers, perhaps even suppliers by geographical area.

5:   And finally, review the results of your entire supplier matrix. How do you respond to the results now?

  • Are there any surprises?
  • Any gaps?
  • What range of performance do you see?

 

The Final Pass

So now, let me suggest one more review, which is really another exercise in self-reflection. Ask yourself: What do these assessment results say about your organization?  What does the state of your matrix say about your organization?

For example:

  • How stable is your matrix?
  • How often are you changing suppliers?
  • How often are they leaving you?
  • How do you onboard new suppliers?
  • How do you support the performance of existing ones?
  • What results are you curious about?
  • What questions might you want to ask your suppliers?

 

Whew!

Right now, a couple of ideas might be going through your head: (1) this seems like a lot of work, or (2) I feel like I knew this already.

Both are fair points. So let me say this.

First, there are great systems and tools that can automate this work for you. But if you’re doing this assessment for the first time, simple Excel worksheets will do the trick.

I also believe this: Once you get into the assessment, you’ll see the payoff, which is that you’re becoming a more informed customer, if you want to go bigger and select a more complex system.

And yes, this knowledge about your suppliers may already be “in your head,” but what are you doing about it? How are you translating this intelligence into action? Or using it to fuel your business?

That’s what we’ll go through next, as we move into discussion.