If you are looking for a good lead indicator that can predict the success or failure of your business, then take a good look at how well your supply chain performs. If the relationships with your suppliers are good, then the buying, movement, storing and selling of your products or services will also be good. This will result in customers receiving products/services on time, no excessive storage charges or maintenance of stock to meet demand or large amounts of redundant or obsolete stock that will never be moved.
A close, open relationship is required to ensure accurate forecasting and drive a just-in-time replenishment programme. Building a close, open relationship takes time and effort and the one part of the process that is often missed is supplier evaluation and benchmarking. Suppliers want to know where they stand with you. If there is a clear process in place to define what good performance is and what is not, then a supplier can respond (or suffer the consequences of not responding).
Building a set of assessment criteria need not be an onerous task and should be undertaken in collaboration with your suppliers. Once created, a quarterly assessment process will quickly provide benchmark data on your suppliers and the ability to feedback (potentially the most important aspect of the process) to your suppliers about their performance.
The key is to ensure that it is a collaborative process that involves the supplier in determining what the objectives are and therefore what metrics to apply. The assessment process should not be a means to lower supply prices; this is not a good place to start!
As a by-product, you will have created an excellent lead indicator for your overall business performance. Look at our Lead and Lag Indicator page for more infromation
