Supplier Performance Management - The Interview

I am joined by Duncan, a U.K expert in procurement and supply. We are talking about managing the performance of your suppliers, and how you can use this to help your organisation improve and deliver a better quality of service.

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If you would prefer to review the transcript of the podcast, see below:

Mo: Hello, and welcome to Health Procurement Africa. If you are involved in buying and selling products or services for your organisation, Health Procurement Africa is here to help and support you. A community and learning hub for people in procurement, who work to improve access to healthcare across Africa. Here you can learn, share and address the challenges you face as a procurement specialist. 

Today I am joined by Duncan, a U.K expert in procurement and supply. We are talking about managing the performance of your suppliers, and how you can use this to help your organisation improve and deliver a better quality of service.

Mo: Welcome Duncan, and thank you for sharing your knowledge with us about Supplier Performance Management today. Can you begin by explaining what this means and why it is important?

Duncan: Of course. Organisations rely on the delivery of products and services, with the right quality and price and at the right time to be able to meet their commitments to customers and end-users. The performance of their suppliers has a direct effect on their ability to fulfil their contract with customers but also on long-term relationships. So, it is always important to know how they are doing and what action you should take when things are not working as well as they should.  

Mo: How difficult is this, when you are busy trying to keep up with everything that you have to do on a day-to-day basis?

Duncan: Indeed, it can be a challenge for an organisation. This is why I believe they should take steps to make performance management an integral part of what they do every day. At the same time they must ensure thay have the skills and resources to implement supplier performance management activities.

Mo: Is this expensive? It must involve additional cost to the organisation.

Duncan: We should think of it as investment, rather than a cost. Over time, it can save money for your organisation as well as improving your relationship with customers because they get a better service. And there are a number of tried and tested methods and tools to help you on this journey, which will keep down the cost. For example, many organisations use key performance indicators, or KPIs as we know them, in supply contracts.

Mo: But isn’t it obvious whether a supplier is doing well or doing badly? And when a supplier is not doing what they are paid for, you threaten to end the contract and find a new supplier.

Duncan: Good supplier performance management is about being able to respond before the relationship between you and your supplier reaches such a difficult point. And sometimes even when things seem to be going well there are relatively small changes you can make that will benefit both you and your supplier.

Mo: Where do you begin to implement supplier performance management?

Duncan: You begin by collecting information, because management is only as good as the information you have at your disposal. For example, lead times from when orders are  placed, quality standards being met, pricing compliance and late deliveries.

Mo: What about other people’s experiences of the suppliers?  

Duncan: Yes, it is important to ask customers for their experience in terms of service, attitude and response rates. You also should talk to your suppliers about their experience of working with your organisation. Don’t be afraid to learn about the bad experiences as well as the good ones! This is how you improve, by accepting any criticism and taking steps to put things right. Generally by treating each other with respect, communicating openly and  honestly as well as sharing information you will develop trust.

Mo: How do I understand the information that I have collected?

Duncan: The information can be interpreted in different ways. You may be able to measure it against agreed KPIs. For example, if the number of returns is higher than you are able to tolerate, you and the supplier must take steps to put this right. In general organisations want to achieve right first time delivery and quality because any other outome results in delays and higher costs.

But you can also measure it against what your competitors are achieving or against industry standards. Obviously, you want to be as close as possible to them or even ahead. But the most important thing in this journey is to be improving, not falling behind. This is what is known as benchmarking.

Mo: What advice would you give an organisation which is thinking of investing in supplier performance management?

Duncan: Keep it as simple as possible. Elaborate and complex solutions can be difficult to put in place and expensive. You will do better with an approach using tools that are simple to use, do not require much training and can be adapted for use across the organisation.

You also want to make sure that any performance management tools you use produces information that is compatible with other systems you use. Otherwise, you may be spending time and money trying to put all the information and data together to get an accurate picture. Remember measures need to be SMART!

Mo: What problems should organisations be aware of with regard to supply performance management?

Duncan: You need to be flexible, for example by listening to what your team or suppliers are telling you even when it appears to contradict the data. Sometimes data can be incomplete or a few weeks behind what is actually happening in the workplace. Hence data needs to be accurate otherwise you might accuse your supplier of not delivering on time when in fact it is your own poor metrics that are the problem.

Mo: Duncan, we hear the term ‘expediting’ a lot in connection with supply performance management. What does it mean?

Duncan: Expediting is closely related to supplier performance management  and is about understanding your suppliers’ operations so you are aware of their production processes and you can follow them through the sequence. The Supplier Expeditor is responsible for the smooth flow of materials to and from various suppliers and organisation sites. They work with suppliers to co-ordinate the timely delivery of all material requirements. They may be able to identify ways to save money on the sourcing and procurement of goods and services. So you see how important expediting can be in terms of managing the performance of your suppliers.

Mo: Duncan, thank you for explaining the importance of supplier performance management. How does Health Procurement Africa help companies to manage risk to make sure that patients are able to receive the treatment and care that they need, as soon as possible?

Duncan: You are welcome. I am delighted to be supporting Health Procurement Africa as a community that works to ensure that patients get the healthcare they need while delivering value for money for the public sector.

Mo: HPA brings together knowledge and experience of procurement and supply into a community of people working together to ensure that patients are able to access the healthcare they need and that the public sector secures value for money.

If you work in healthcare in Africa and are buying products or services on behalf of your organisation, this is the perfect community for you, where you can start learning, sharing and solving your procurement and supply problems.