By tracking KPIs, companies can ensure that suppliers are meeting cost, quality, delivery, and sustainability targets, which are pivotal for maintaining an efficient and resilient supply chain. They also enable businesses to objectively assess the value delivered by each supplier, facilitating informed decision-making regarding supplier selection, retention, or replacement. Furthermore, KPIs underpin strategic supplier partnerships by aligning supplier performance with the overall business strategy, ensuring both parties work towards common goals for mutual benefit.
KPI |
Definition
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Business Insights [?]
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Measurement Approach
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Standard Formula
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Annual Supplier Evaluation Completion Rate More Details |
The percentage of suppliers who undergo the full evaluation process within a given year.
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Reveals the effectiveness and timeliness of the supplier evaluation process.
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Tracks the percentage of evaluations completed against the total number of scheduled evaluations within a year.
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(Total Number of Completed Evaluations / Total Number of Scheduled Evaluations) * 100
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- An increasing completion rate may indicate a more thorough supplier evaluation process or a larger number of new suppliers being onboarded.
- A decreasing rate could signal inefficiencies in the evaluation process, supplier dissatisfaction, or a reduction in the number of active suppliers.
- Are there specific criteria or steps in the evaluation process that suppliers find burdensome or time-consuming?
- How does the completion rate vary across different supplier categories or geographic regions?
- Streamline the evaluation process by leveraging technology for data collection and analysis.
- Provide training and support to suppliers to ensure they understand the evaluation requirements and process.
- Regularly review and update the evaluation criteria to ensure they remain relevant and valuable.
Visualization Suggestions [?]
- Line chart showing the completion rate over time to identify any consistent patterns or fluctuations.
- Pie chart illustrating the distribution of completion rates across different supplier categories or regions.
- A low completion rate may lead to inadequate supplier performance monitoring and increased supply chain risks.
- High completion rates without corresponding improvements in supplier performance may indicate a lack of meaningful evaluation criteria.
- Supplier relationship management (SRM) software to automate and standardize the evaluation process.
- Data analytics tools to identify correlations between evaluation criteria and supplier performance.
- Integrate the completion rate data with supplier scorecards and performance management systems for a comprehensive view of supplier relationships.
- Link completion rate tracking with procurement systems to ensure that only fully evaluated suppliers are considered for new contracts or orders.
- Improving the completion rate can lead to better supplier selection, improved performance, and reduced supply chain disruptions.
- Conversely, a declining completion rate may result in increased supplier-related risks, potential quality issues, and delivery delays.
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Buyer-Supplier Strategic Alignment More Details |
The degree to which the strategic objectives of the buyer are aligned with the operations and capabilities of the supplier.
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Helps to ensure that both parties are working towards common goals, which can improve collaboration and performance.
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Assesses the degree to which strategic objectives and business practices align between the buyer and supplier.
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Assessment score based on alignment criteria (no standard formula)
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- Increasing alignment may indicate improved collaboration and communication between buyer and supplier.
- Decreasing alignment could signal a shift in strategic priorities or a breakdown in the relationship.
- Are the strategic objectives of the buyer clearly communicated to the supplier?
- How often are the strategic objectives reviewed and updated to ensure ongoing alignment?
- Regularly communicate strategic objectives and changes to the supplier.
- Establish key performance indicators (KPIs) for the supplier to ensure alignment with buyer's goals.
- Conduct regular performance reviews and strategic alignment assessments with the supplier.
Visualization Suggestions [?]
- Line charts showing the trend of strategic alignment over time.
- Spider charts comparing strategic objectives of the buyer with the capabilities of the supplier.
- Misalignment in strategic objectives can lead to inefficiencies and missed opportunities.
- Lack of strategic alignment may result in the supplier not meeting the buyer's needs and expectations.
- Supplier relationship management (SRM) software to track and manage strategic alignment.
- Collaboration platforms for effective communication and sharing of strategic objectives.
- Integrate strategic alignment KPI with performance management systems to align incentives and rewards with strategic goals.
- Link strategic alignment with procurement processes to ensure that supplier selection is based on alignment with buyer's objectives.
- Improved strategic alignment can lead to better product quality and innovation.
- Poor strategic alignment may result in increased costs and missed business opportunities.
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Conflict Resolution Efficiency More Details |
The efficiency and effectiveness with which conflicts with suppliers are resolved.
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Provides insight into the effectiveness of conflict management processes and the health of supplier relationships.
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Measures the time taken to resolve disputes or conflicts with suppliers.
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Average Time Taken to Resolve Conflicts (no standard formula)
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- An increasing conflict resolution efficiency may indicate better communication and collaboration with suppliers.
- A decreasing efficiency could signal breakdowns in supplier relationships or unresolved issues leading to prolonged conflicts.
- Are there recurring patterns or common triggers for conflicts with suppliers?
- How do our conflict resolution processes compare with industry best practices or benchmarks?
- Establish clear communication channels and expectations with suppliers to prevent misunderstandings.
- Regularly review and update contracts and agreements to address potential sources of conflict proactively.
- Invest in supplier relationship management (SRM) software to streamline communication and issue resolution.
Visualization Suggestions [?]
- Line charts tracking the resolution time for conflicts over time.
- Pie charts showing the distribution of conflict types and resolutions.
- Protracted conflicts can lead to disruptions in the supply chain and impact production schedules.
- Repeated conflicts with suppliers may result in reputational damage and loss of future business opportunities.
- Supplier management platforms like SAP Ariba or Oracle SRM for tracking and managing supplier interactions.
- Collaboration tools such as Slack or Microsoft Teams for real-time communication and issue resolution.
- Integrate conflict resolution data with supplier performance evaluations to identify patterns and address recurring issues.
- Link conflict resolution metrics with procurement systems to inform future supplier selection and contract negotiations.
- Improving conflict resolution efficiency can lead to stronger supplier relationships and better overall supply chain performance.
- However, a focus solely on efficiency may overlook the importance of addressing underlying issues that lead to conflicts in the first place.
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CORE BENEFITS
- 61 KPIs under Supplier Relationship Management
- 15,468 total KPIs (and growing)
- 328 total KPI groups
- 75 industry-specific KPI groups
- 12 attributes per KPI
- Full access (no viewing limits or restrictions)
FlevyPro and Stream subscribers also receive access to the KPI Library. You can login to Flevy here.
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Contract Compliance Rate More Details |
The percentage of contracts that are adhered to by both parties, helping to mitigate risks and ensure compliance with legal and ethical standards.
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Indicates how well suppliers meet contractual obligations, which can affect reliability and risk.
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Tracks the percentage of times suppliers adhere to contract terms.
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(Total Number of Compliant Instances / Total Number of Contractual Obligations) * 100
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- An increasing contract compliance rate may indicate better communication and alignment between the parties involved.
- A decreasing rate could signal potential issues in contract management or changes in supplier performance.
- Are there specific types of contracts or suppliers that consistently show lower compliance rates?
- How do our contract compliance rates compare with industry standards or benchmarks?
- Implement regular contract performance reviews and audits to ensure adherence to terms and conditions.
- Enhance communication and collaboration with suppliers to address any potential compliance issues proactively.
- Utilize contract management software to automate tracking and monitoring of compliance metrics.
Visualization Suggestions [?]
- Line charts showing the trend of compliance rates over time.
- Pie charts to compare compliance rates across different contract types or supplier categories.
- Low contract compliance rates can lead to legal disputes, financial penalties, and reputational damage.
- Inconsistent compliance may indicate weaknesses in supplier relationships and performance that could impact overall supply chain stability.
- Contract management software such as Coupa or Icertis to streamline contract monitoring and compliance tracking.
- Supplier relationship management (SRM) platforms to facilitate better communication and collaboration with suppliers.
- Integrate contract compliance data with risk management systems to identify potential areas of vulnerability and prioritize mitigation efforts.
- Link compliance metrics with procurement processes to ensure that supplier performance is a key consideration in supplier selection and contract negotiations.
- Improving contract compliance can lead to stronger supplier relationships and more reliable supply chain performance.
- However, increased focus on compliance may require additional resources and time for monitoring and enforcement.
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Cost of Goods Sold (COGS) More Details |
The cost of raw materials and other inputs required for production, helping to identify cost-saving opportunities and optimize the supply chain.
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Assists in understanding the cost structure of products and impacts on profitability.
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Calculates direct costs attributable to the production of goods sold by a company.
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Sum of Direct Costs Related to Production of Goods Sold
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- Increasing COGS may indicate rising raw material costs or inefficiencies in the supply chain.
- Decreasing COGS can signal successful cost-saving initiatives or improved supplier negotiations.
- Are there specific raw materials or suppliers driving the majority of the COGS?
- How does our COGS compare with industry benchmarks or fluctuations in commodity prices?
- Regularly review and renegotiate contracts with key suppliers to secure better pricing.
- Invest in technology for supply chain visibility and analytics to identify cost-saving opportunities.
- Explore alternative sourcing options or materials to reduce COGS without sacrificing quality.
Visualization Suggestions [?]
- Line charts showing COGS trends over time.
- Pareto charts to identify the most significant contributors to COGS.
- High COGS can erode profit margins and competitiveness in the market.
- Significant fluctuations in COGS may indicate vulnerability to supply chain disruptions or market volatility.
- Enterprise resource planning (ERP) systems with robust cost tracking and analysis capabilities.
- Supply chain optimization software to identify cost-saving opportunities and streamline procurement processes.
- Integrate COGS data with financial systems for comprehensive cost analysis and reporting.
- Link COGS tracking with inventory management systems to optimize stock levels and reduce carrying costs.
- Reducing COGS can enhance profitability but may require strategic changes in sourcing and production processes.
- Significant increases in COGS can impact pricing strategies and customer perception of value.
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Cost Savings through Negotiations More Details |
The cost savings achieved through negotiations with suppliers on price, delivery, and payment terms.
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Reflects procurement's ability to reduce costs and contribute to the company's bottom line.
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Measures the reduction in costs achieved due to successful negotiation strategies with suppliers.
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Total Cost Before Negotiations - Total Cost After Negotiations
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- Increasing cost savings through negotiations may indicate improved supplier relationships and stronger bargaining power.
- Decreasing cost savings could signal rising supplier costs or inefficiencies in the negotiation process.
- Are there specific suppliers or categories where negotiation efforts have been particularly successful or unsuccessful?
- How do our cost savings compare with industry benchmarks or with the performance of similar organizations?
- Invest in supplier relationship management (SRM) tools to better track and analyze negotiation outcomes.
- Train procurement and supply chain teams in effective negotiation techniques and strategies.
- Regularly review and update negotiation tactics to adapt to changing market conditions and supplier dynamics.
Visualization Suggestions [?]
- Line charts showing the trend of cost savings over time to identify patterns and seasonal variations.
- Pie charts to visualize the distribution of cost savings by supplier or category.
- Overemphasis on cost savings may strain supplier relationships and lead to reduced product quality or service levels.
- Failure to achieve cost savings targets may impact overall supply chain costs and competitiveness.
- Supplier management software such as SAP Ariba or Oracle Procurement Cloud for comprehensive negotiation tracking and analysis.
- Market intelligence tools to stay informed about supplier pricing and market trends for more effective negotiations.
- Integrate cost savings data with financial systems to assess the impact on overall profitability and cost management.
- Link negotiation outcomes with supplier performance management systems to align incentives and drive continuous improvement.
- Increasing cost savings through negotiations may positively impact overall profitability and financial performance.
- However, aggressive cost-cutting measures could potentially affect product quality, supplier relationships, and long-term sustainability.
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In selecting the most appropriate Supplier Relationship Management KPIs from our KPI Library for your organizational situation, keep in mind the following guiding principles:
It is also important to remember that the only constant is change—strategies evolve, markets experience disruptions, and organizational environments also change over time. Thus, in an ever-evolving business landscape, what was relevant yesterday may not be today, and this principle applies directly to KPIs. We should follow these guiding principles to ensure our KPIs are maintained properly:
By systematically reviewing and adjusting our Supplier Relationship Management KPIs, we can ensure that your organization's decision-making is always supported by the most relevant and actionable data, keeping the organization agile and aligned with its evolving strategic objectives.