Supplier Performance: Lessons from Canada Post (Part 1)

I must admit, it's not too often that we see a government organization beat-out the private sector in process or technology adoption in the Spend Management world. But Canada Post, the country's national postal service, has deployed some fairly sophisticated supplier performance management processes with its top suppliers. Perhaps most interesting is Royal Mail's approach to gathering information -- they depend entirely on suppliers to self-score their performance. A private sector observer might look at this and logically say to herself: "come on, you've got to look at both supplier and company ratings to arrive at a useful scorecard". But Canada Post does not even do this. Rather, they only have their procurement team "validate" the supplier's scorecard response.

A lazy approach to SPM you're thinking? That's what I thought until the end of the presentation. As it turns out there's a good reason for it -- a legal one. In fact, it's not a lazy approach to supplier performance -- it's an ingenious one because Canada Post cannot easily take punitive action against a supplier (e.g., contract termination) based upon analysis performed internally thanks to public sector regulations. But a supplier-driven scorecard does provide a legal basis to take action in cases where suppliers are not living up to contract expectations. Though even this has its limits in the convoluted North of the border public sector world. To wit, past performance -- even supplier-driven past performance records -- is not admissible in bid selection for future tenders issued via Canada Post.

Fascinating you say, but how does Canada post measure supplier performance in these supplier-driven scorecard responses? They focus on four general areas. First, defect free products or services. Measurement approaches for this category include product defects, missed assignments, labeling/shipping errors, invoice accuracy, downtime on critical systems, and user complaints. This category typically receives a 35% weight on the overall scorecard.

The next area Canada Post measure is value for money. Factors making up this category include cost improvement, added value, shared cost, innovative approaches, and providing assistance above and beyond a contract (e.g., regulatory, labor relations, environmental, customer relations). This category typically receives a weight of 15%.

Next on the list is on-time delivery including fill-rate, responsiveness to corrective action requests, etc. This category typically receives a weight of 35%.

The final category Canada Post measures suppliers on is continuous process improvement. This includes JPI (joint process improvement), documented quality management, joint development plans, new technology introduction, and systems that provide and early warning of problems. This category typically receives a weight of 15%.

Stay tuned for Part 2 of this post later this week.

- Jason Busch

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