As the saying goes, “you cannot manage what you don’t
measure”. If the criteria for measuring the performance are not defined, then
it would be difficult to understand whether it is being improved or not. By
monitoring and measuring the supplier’s performance on a regular basis, company
can realize significant benefits like cost controlling, nipping the problem in
the initial stages and creating a corrective action before the problem expands.
The effective supplier’s performance management improves the
collaboration between the suppliers that leads to a better coordination and
enables the company to meet the company’s objectives. A wide range of areas of
supplier performance can be measured. The focus can be on financial condition
of the company, performance and overall cost.
Once the criteria is defined, how to evaluate the
performance should be established. This performance evaluation should result in
producing the required data for decision making.
Suppliers’ performance management reflects the company’s
strategy and is a comprehensive approach to managing a company’s supply base. This
data is sought to identify and mitigate risks in an attempt to boost company’s overall
profitability.
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