Purchasing Magazine had a good feature this month on supplier performance management. The thesis of the article is that "the best suppliers are the ones with business and technology goals that match yours". In other words, sophisticated Spend Management practices on the supplier side are a signal that the organization is a good fit -- and will live up to quality and performance expectations. In the article, I like how Purchasing went into detail on how Rockwell Collins has implemented both processes and technology to monitor supplier performance: "Rockwell Collins monitors suppliers to see how well they are integrated with business processes deemed most important to its success. The material and supply operation implemented a tool that uses traffic light colors—red, green and yellow—to indicate whether suppliers are on target. The tool monitors specific criteria in each of these categories: minimize, maximize and maintain (supplier growth strategy); percentage of part numbers on long-term agreement; payment terms; use of the supplier portal; automation (percentage of orders going through SAP as schedule agreements); percentage of inventory on consignment and payment method (check vs. electronic funds transfer)."
One of the keys of successful supplier performance management is a two-way dialogue and conversation with the supply base. Rockwell Collins' supplier performance management process lets the procurement organization "know where suppliers are headed from a technology standpoint and how [Rockwell] might be able to capitalize on that". It's through efforts like this that leading procurement organizations can work with their supplier community to further reduce costs while improving quality and performance over the long term. We can all learn from Rockwell Collins' supplier performance leadership in this regard.