Companies all know that selecting good suppliers is important, so they spend about 60% of their time on strategic sourcing. However, after the supplier is selected, the subsequent management is different, and the results are quite different.

At the end of strategic sourcing, the supplier gives us the best promise, such as the best price, delivery and commitment. However, many companies select and fail to manage their suppliers, so their supplier performance goes from bad to worse. They try their best to raise the reduced prices back up, and their quality and delivery are also getting worse day by day

It’s like after you are admitted to college, you put your swords and guns into storage, burn all those high school books, and then ask you to take the college entrance examination three months later. Can you still pass? What about six months, a year from now? Of course, it will only get worse as the exams pass.

So how can you ensure that you can go to college at any time? It’s very simple, that is, continue to take exams – one small test every two weeks and one big test every month to ensure that you remember all the useful and useless knowledge firmly. When it comes to supplier management, it means looking at the performance of the previous week, last month, and last quarter every week. Once problems such as delivery and quality are discovered, follow up in a timely manner and take corrective measures 

The current situation of many enterprises is that they have supplier selection (sourcing), but there is no supplier performance management. A fundamental problem is that selection and management are used. You know, there’s a problem with this: you buy a kitchen knife (selection), and if you just use it and don’t sharpen it (management), it will naturally become dull and no longer useful. Your solution is not to throw away the old one and buy a new one.

Once performance assessment begins, supplier performance will stabilize and improve slightly. This is because performance appraisals send a very important message: we are paying attention to your performance. This is like two groups of people playing basketball. When the score is not being counted, everyone is lazy and playing casually. As soon as someone says that the score has started, everyone immediately becomes serious.

Supplier integration is also a key initiative in cultivating suppliers. Think about it, how does an excellent supplier become excellent? There are few exceptions, and they are all the result of long-term cooperation with the most demanding customers. For example, early involvement in new product development, I suffered a lot, suffered a lot, but I also developed good skills.

Many companies habitually complain that existing suppliers are not good enough and are always looking for new suppliers. Don’t forget, you can’t get good suppliers just through selection; you also have to develop suppliers through management, especially in-depth collaboration and integration of key suppliers , especially when you become the top company in the industry. .

Supplier performance management is also the most basic and important risk control measure.

A few years ago, three large local companies asked me through different channels about the management and control of supply chain risks. They are all large companies with revenue exceeding USD 895 billion and play a decisive role in their respective industries. The problem is the same: the company and business are big, and suppliers are all over the world. Any supply chain risk will have its negative impact infinitely magnified. How to avoid it?

In addition to uncontrollable factors such as natural and man-made disasters, international disputes, and wars, the biggest supply chain risk is the bankruptcy of suppliers and the loss of supply. But will suppliers suddenly go bankrupt overnight? No. There will always be a process for a supplier’s bankruptcy, and there are various clues. For example, sales managers are replaced every two days, customer service staff are replaced every two days, on-time delivery is unstable, and quality problems have not been resolved for a long time. If we measure supplier performance, we can at least be several weeks, or even months, ahead of our competitors in discovering problems and taking measures.  

For supply chain risk control, supplier performance management is our safety belt .

For many companies, when it comes to sourcing, they choose some high-risk suppliers in a confused way, laying the foundation for subsequent risks; in terms of follow-up management, there is no systematic performance management, insufficient control over supplier performance, and inability to timely Detect, identify and respond to supplier performance risks. The result is like a blind man riding a blind horse. Not to mention natural disasters and man-made disasters, there is not much resistance to general supply chain risks.