When Evaluating Indirect Suppliers, Perception is Reality

Supplier evaluation in a non-manufacturing or service environment presents some unique challenges. There is less objective data available than in manufacturing for creating KPIs (Key Performance Indicators). For example, service quality and supplier responsiveness information, key components of customer satisfaction, is not typically captured in a system. Capturing performance information about indirect suppliers can be just as important as for direct suppliers. For example, trucks from a fleet supplier that break down or business software that malfunctions can bring your business to a halt.

Without quantitative data readily available in a system, many firms create qualitative data on customer satisfaction through internal stakeholder surveys.

Apart from measuring performance to service level agreements, internal customer satisfaction surveys are an important method of supplier evaluation in non-manufacturing environments. But deploying such surveys can be fraught with difficulties. Some of the issues include:

- Extremes of service, particularly bad, are more readily recalled and can skew the data if they are disproportionately reported

- Respondents tend to take the most recent experience into account, not overall performance

- Response rates to surveys can be low

- Doubters of the process may criticize the data for being qualitative (i.e., based upon opinion)

How do you overcome these challenges? First, communicate the purpose and importance of stakeholder participation in these surveys and remind people to complete them, repeating reminders not just once, but on a regular basis. Next, make sure that the survey participants have a real interest in the suppliers and understand the importance of participating. Make it simple to participate by making surveys easy to access and easy to complete. Then, use the information for making decisions about suppliers and give feedback to the internal stakeholders/customers as well as to the suppliers. You can use survey information in conjunction with other KPI data, if available, as a means of validating it.

There are always those who oppose qualitative data and who think that data not being generated directly by a computer is not objective and not valid. However, when it comes to customer satisfaction, one can argue that perception is reality. Internal customer satisfaction surveys can be a primary means of gathering information on indirect or service supplier performance. When done well, they provide invaluable, actionable information.

- Sherry Gordon

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