Supplier Performance Management (VPM) is the monitoring and analysis of the reliability, quality and performance of the company’s suppliers. It allows your company to increase efficiency and profitability, reduce inventory levels and inventory costs, and improve customer satisfaction.
While vendor performance management may be relatively easy to define, it is difficult to maintain in real life. It requires real-time information about seller performance, formal procedures, and profitable two-way communication between buyers and sellers.
Fortunately, technology has filled all of these gaps. As mentioned above, buyers benefit from this, but sellers also benefit from increased purchases and buyer loyalty.
Supplier performance management is usually measured by a set of agreed and contracted key performance indicators (KPIs). Most VPM systems use dashboards or balanced scorecards to measure vendor performance.
The former provides 2D views, while the Balanced Scorecard provides more 3D views. KPIs used usually include: ▪ Lead time. ▪ Communication time lags. ▪ The quality of the products offered. Forced the prices. ▪ Frequency of price changes. ▪ Terms of payment. ▪ Changes made. ▪ Under-delivery and over-delivery. Forced the damaged. ▪ Competitiveness with other suppliers. ▪ Financial stability of suppliers.
The dashboard approach measures each vendor against a specific number of KPIs and visually shows its capabilities and compliance. In contrast to qualitative observation, this is very quantitative and therefore 2D.
The balanced scorecard approach will look at some weights in four key areas: ▪ relationships – – cost management – – – delivery – – – quality
Each company will have a different idea of how much weight it should have in each element. These metrics can be checked individually or as a group to provide a vendor 3D view.
In both cases, the supply of physical goods and the supply of services can be measured.
Through the implementation of supplier performance management software and the collaboration between suppliers and buyers, the supplier performance management is greatly simplified. Buyers and sellers alike see the benefits of performance management, so much so that it is almost routine practice in large companies. In fact, most of the big companies’ terms and conditions and general purchase agreements now consider this to be necessary to show their level of profitability.
With more and more suppliers, we need an effective management tool to help us manage all the suppliers more efficiently and delicately. 8Manage SRM vendor management software enables enterprises to quickly identify, evaluate and track new suppliers, and aims to build long-term partnerships with suppliers.
1. Open supplier screening
8Manage SRM supports open recruitment and pre-selection to help companies select qualified suppliers. Retrieve and validate supplier information, such as business reports, financial data, and credit risk, using the supplier’s unique number.
2. Qualification review and classification
8Manage SRM supports the management of supplier qualification and rating. Suppliers can only become qualified suppliers if they pass the qualification audit set by users.
After becoming a qualified vendor, users with modification rights can modify their status and levels. At the same time, 8Manage SRM provides blacklist management so that authorized users can blacklist bad vendors.
3. Track key communication and commitment records
The 8Manage SRM system provides the organization with a record mechanism to record its communications and commitments with each supplier, which can be viewed in chronological order. A clear and easy track of what has been discussed and promised reinforces your corporate memory with everyone inside your company and ensures that they walk the walk.
4. 360-degree performance management
The 8Manage SRM interactive dashboard Outlines all supplier activities and risks in a standard format, enabling enterprises to monitor all supplier controls, measures and indicators. With this data, companies have a seat at the table for decision-making and effective action.
5. Corrective actions
When the supplier performance declines, the enterprise can choose to initiate the supplier corrective action plan or have the supplier withdraw from the portal.