30 Jan 19

Businesses rely on supplier relationships – but can you trust your supplier performance data?

Businesses rely on supplier relationships – but can you trust your supplier performance data?

By Alan Day, Chairman and Founder of State of Flux

Age may be nothing but a number, but like many men my age, I have been told by the doctors to eat more sensibly and do more exercise. As a result, I’m obsessed with keeping track of my steps and running kilometres using my trusty Garmin, which records my activity via GPS technology. Well, I say trusty, but that’s the problem: I don’t trust it anymore. Recently, I’ve noticed a glitch in the system. When I crossed the International Date Line (in this case, appearing to go back in time from Sydney to San Francisco), my Garmin lost data. It went back to zero, which meant me doing another 10,000 steps.

When I contacted Garmin, they weren’t too concerned, but for me, if it loses data, any data, then how do I trust it? How do I know the data is right at other times, especially when I travel so much? One event has now caused me to challenge the whole validity of the product.

The same thing can happen when keeping track of suppliers’ performance. You need to measure performance to manage it, but if suppliers or internal stakeholder don’t believe in the data, then you face an uphill struggle. Correct measurement of KPIs and SLAs generate a lot of data. How you review, analyse and act on it will help determine how suppliers perform – and the value the business gets from them. You will also need to analyse the data and create meaningful insights you can act on to engage internal stakeholders.

The adage of ‘garbage in, garbage out’ stands true. If we put the wrong data in or measure the wrong things, then the outputs and reports generated on that data will either be incorrect, or correct, but irrelevant to the problem at hand. Ask yourself, do you or your teams know how to set a supplier KPI that is measurable, timely and accurate? Do you have training in place to help teams set up meaningful KPIs? Have you talked to the supplier and do they understand what, why and how their performance is being measured? If the answer is ‘no’ to all three questions, then it is time to think more seriously about performance data.  

Next, how is data captured? Too often, I see the suppliers setting their own KPI’s either based on their internal historical processes or occasionally, the contract. Then the suppliers capture and tracks the data, and submit a monthly spreadsheet to their procurement contact. This approach presents a few problems. Assuming the suppliers are honest, you can still only take this approach with a small number of suppliers because it is so labour intensive. Secondly, spreadsheets are very prone to human error, and lastly, if each supplier sets up its own spreadsheet, it will become very difficult to consolidate data and compare one supplier with another. If you want to get on top of supplier performance, you need to invest in the technology to support a standardised process for gathering data.

Once you have the supplier performance data, do you or your teams know how to analyse it? Do they know and have they been trained on how to turn that data into insights that can be acted on? Before you share data with internal executives, have you verified it and are you prepared to defend it? Because you will have to.

Organisations should be more concerned about their supplier performance data. Our survey of 303 global companies found 86% of organisations still use Microsoft Excel spreadsheets to manage the performance of their tier-1 suppliers. Excel is a great desktop tool, but it’s not designed to run a whole organisation. Without better control and analysis of supplier data, you will struggle to address supplier performance.

But professional enterprise tools are available to help. At State of Flux, we’ve spent more than 10 years developing Statess, our supplier management platform, to help measure supplier performance accurately, create meaningful reports and suggest actions to improve a supplier’s performance should it fall short. We’ve also developed a way of normalising the KPI data to help procurement compare suppliers’ performance – and the performance of a single supplier across multiple contracts.   

Your organisation’s legal compliance, reputation and performance can depend on suppliers. They can also innovate and create growth for you. But without getting accurate, meaningful measures of suppliers’ performance, you cannot minimise the risks and exploit the opportunities.

Contact us now to discuss how to refresh your supplier performance management approach.