Supplier Performance and Operational Management — The Technology Fundamentals (Part 1)

At ISM, Sherry Gordon and I presented a session in the risk track covering "Core Risk and Performance Technologies You Can't Afford to Be Without." For those who don't know Sherry, besides being an SPM pro -- probably the deepest expert in the world in the area -- she's a serious cyclist, albeit one that was recently swept off her bike by a falling tree branch. Yet Sherry pulled it together for ISM and is recovering extremely well from her nasty crash (as a former rider, stories like hers give me pause every time I think about getting back into riding and racing). She ended up leading a great presentation with me on the topic, putting SPM in the context of today's more risk-aware environment.

In our discussion, Sherry focused part of her talk on supplier performance and operational management tools. Given the recent interest around supply risk management and the key intersection of vendor performance with supply risk, I thought it would be worth sharing some of the technology fundamentals from our presentation. Sherry and I define supplier performance and operational management as the process of measuring, analyzing, monitoring and understanding supplier performance and suppliers' business processes and practices for the purposes of reducing costs, mitigating risk, driving continuous improvement and leveraging supplier value.

Supplier performance and operational management can help companies prevent risk first and foremost by focusing resources on proactive, value-added activities and anticipating risks in advance instead of learning about and reacting to supplier performance-induced problems after the fact (i.e., defects, compliance issues, excess inventory, late deliveries to customers, service issues, work stoppages, reduction of market competitiveness, etc.). In addition, supplier performance is a leading indicator for risk and often the best (and only) indicator with SMB suppliers where financial information on is often less reliable. Fortunately, even with smaller suppliers, operational and performance data from suppliers provides better and faster insights into risks (i.e., late deliveries, lengthening cycle times, reduced responsiveness) than just about any other source. And they also provide an opportunity to develop relationships that provide valuable insights and mutual opportunity to take action.

Stay tuned as we continue to cover how SPM tools can play a central part in overall supply risk management efforts. For further reading on the subject, check out our Compass Research as well (all downloads are free):

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management – Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

Beyond Basic Scorecarding – Supplier Performance and Development Approaches to Drive Competitive Cost and Risk Advantages

Jason Busch