Leveraging insights from great supplier performance

An organisation can have tens to tens of thousands of suppliers providing what it needs to do business and stay in business. They need to perform well to give the organisation a fighting chance of performing well itself.

The level of performance an organisation desires from its suppliers is mostly expressed contractually, sometimes by mutual agreement, other times on a take-it-or-leave-it basis.

The level of performance it gets can be a different matter.

This article looks at how great supplier performance can be leveraged to increase the prospect of making it more widespread, bearing in mind the proverb about leading a horse to water, and covers:

• Supply is an intention, not a guarantee
• Defining supplier performance
• The value of great supplier performance
• Uncovering insights from great supplier performance
• Addressing the organisation’s contributions to its suppliers’ performance
• Setting up a supplier performance-improvement program.

Supply is an intention, not a guarantee

Despite best intentions, no supplier can guarantee that they will be able to provide, all of the time or even most of the time:

• the right number
• of the right things
• of the right quality
• at the right price
• to the right place
• in the right manner
• at the right time.

A certain element of luck, good and bad, will inevitably figure in this. Risk happens. Murphy’s Law and the Law of Unintended Consequences are always lying in wait.

Many stresses, internal and external, expected and unexpected, can play havoc with intentions and outcomes.

Some suppliers can get through all such situations without a scratch, maybe because the gods were just looking the other way.

Most of it though is down to well-resourced planning, preparation and agility by those rare ‘lucky’ suppliers. It will also be aided and abetted by realistic expectations in terms of achievable performance targets. It’s often a case of the harder they work, the luckier they get.

Defining supplier performance

The applicable performance levels driving any supplier’s actions define the minimum desired standards. Doing better is always a good thing for the organisation.

Failure to meet those standards represents unacceptability. Rarely meeting them is deemed average.Their comfortable achievement should be considered as good performance.

Anything a supplier achieves beyond that commitment that is consistently better by a decent margin should be described as great performance.

Note though that consistently delivered and trouble-free good performance that’s as reliable as dial-tone could also quite reasonably be ranked as great."

Getting great performance from a supplier reveals what is possible but is no indicator of what is probable.

Understanding what makes great supplier performance possible can influence what is probable.

The value of great supplier performance

Great supplier performance will mean different things to different organisations, and can deliver value to them in different ways:

• The more suppliers that consistently deliver great performance, the greater the positive effect on the organisation’s own performance
• Understanding how its best-performing suppliers do so well provides the organisation with a basis for:
  - addressing performance more broadly across its existing supplier community, and it
  - more finely establishing the suitability of potential new suppliers
• It provides validation of the effectiveness of the performance measurement approaches and rating criteria the organisation uses
• It provides undeniable evidence that value for money is being received
• The rewarding of great performance, say through increased business with the relevant suppliers, reinforces the right behaviour. It increases trust and commitment. It promotes self-improvement and innovation by the applicable suppliers and the organisation
• The effort saved from lowered levels of supplier performance remediation can be redirected to other matters requiring the organisation’s attention
• Growth in the occurrence and consistency of great performance provides a basis for increasing minimum performance benchmark settings, which can reveal suppliers who are candidates for replacement.

The opportunity for an organisation to receive some or all of this value and more should be grabbed with both hands. This is a prize there for the taking, but there are no free rides so it will take some effort.

Uncovering insights from great supplier performance

People have always looked at the best, in whatever field or endeavour, for insights into what it takes to get there and stay there.

It’s said that imitation is the sincerest form of flattery, but that trivialises its power.

Done well, it’s a shortcut to achieving excellence. That can lead to a position near or at the head of the pack, where execution matters, not originality.

Suppliers delivering great performance represent excellence in action, living proof of what can be done and what works.

Understanding what they do to get there and how they do it provides a range of roadmaps for achieving excellence, because there’s no single best way."

Insights delivered by that understanding could form the basis of an approach to improve performance. Good or average suppliers might be persuaded to adopt new approaches for their own and the organisation’s ongoing benefit.

Getting at least some of the good performers up to the next level can pay enormous dividends. Some might be on the threshold of getting there and only need a nudge or two. Others will require a lot more work. Many might never quite make it. That’s just the way it is.

A useful approach has the following steps:

1. Describe common influences on supplier performance

It would be unusual, possibly short-sighted, to base supplier performance solely on delivery. Other elements that shouldn’t be ignored contribute positively and negatively to the perception and the actuality of performance.

Such a rolled-up view of performance provides a more holistic and accurate view, and is fairly independent of whatever is being supplied.

Some common performance-influencing elements include:

• Order handling
• Shipping efficiency
• Invoice accuracy
• Performance reporting credibility
• Obligations compliance levels
• Risk preparedness
• Response to performance and other issues
• Relationship quality.

These elements and more are often covered in the organisation’s user satisfaction surveys of its suppliers’ performance.

2. Prepare a playbook outlining the factors known to deliver great supplier performance

Select a small group of suppliers known to consistently provide great performance. These suppliers should be identified as exemplars whose approaches are obviously working very well and worthy of study. While their importance to the organisation is not a factor in their selection, having a solid working relationship with the organisation is.

Collect high-level details from each selected supplier about the practices and technologies they use in the performance-influencing elements listed above and any others deemed relevant. Also ask for their ideas for any improvements that could be applied.

Note that no product names are required, just details like ‘workflow is used to …’ or ‘measurements are performed using …’.

Compare the supplier practices and technologies used for each element reviewed. Highlight any commonalities and differences in their approaches, factoring in any relevant improvement ideas."

Tease out any notable insights that seem to have broad applicability for achieving great performance, bearing in mind that there’s often many viable ways to go about it.

Check and record the details if any supplier has its performance affected in a good or bad way by anything that the organisation does or doesn’t do.

Summarise all the information collected into a performance playbook showing the various practices and technologies reported as instrumental in providing great supplier performance when used in the performance-influencing elements.

The ultimate purpose of the playbook is to provide guidance to the organisation’s suppliers, even those currently doing very well, about how they might be able to improve their performance.

3. Discover some of the factors inhibiting great supplier performance

Identify a small group of important suppliers considered to be good but not great performers, who all have a cordial relationship with the organisation.

These suppliers can be designated as important through any set of attributes that make sense to the organisation, meaning their performance warrants ongoing attention.

They need to be important because the potential performance payback from addressing their performance shortfalls is much more likely to be better for the organisation than that accruing to its unimportant suppliers.

Collect, compare and analyse the same information as that for the suppliers delivering great performance."

Identify each selected supplier’s most problematic performance-influencing elements, their views of the reasons for the problems, including any contributions made by the organisation, and any ideas about improvements that might be made.

Collate the collected information and update the performance playbook with details of known performance problem areas and options for dealing with them.

4. Bench test the performance playbook’s recommendations

Suppliers will expect to and will rightfully demand to run their own race with respect to their performance. However, they will also have to respect their customers’ expectations, and demand, that they do everything they reasonably can to deliver the best performance they can.

Some of the performance playbook’s recommendations can be based on proven approaches while others might be realistic and practical but untested ideas suggested by various suppliers or the organisation."

Prudence dictates that all the untested recommendations must be theoretically validated before being used in the field. This is to check that they make sense and can reasonably be expected to live up to their promise with respect to their effect on supplier performance.

All or some of the suppliers selected for analysis of their performance would be ideal for conducting this validation since they well understand what they do and don’t do so well, and why.

The bench test process involves consideration of the suitability of using both tested and untested recommendations from the playbook in terms of efficiency, effectiveness and practicality, if there would be no resourcing constraints limiting its implementation.

Removing resourcing as a limiting agent on usage allows focus on just the workability of each recommendation. Resourcing should only matter when the time comes to make choices about which recommendations a supplier might choose to adopt.

Note that some recommendations might not be able to work together but in an either/or fashion, where others could be both/and with possibly a better outcome.

All findings from the bench test must be consolidated and assessed to winnow out the impractical recommendations and provide detailed guidance to suppliers about usage of the remainder."

Some suppliers involved in the bench testing might consider various recommendations worthy of immediate implementation, proceed to do so and still contribute to the testing using live findings.

Addressing the organisation’s contributions to its suppliers’ performance

The way that an organisation interacts with its suppliers, deliberately or ignorantly, may play a part in how they deliver their products and services.

Discussions with both groups of selected suppliers will almost certainly reveal if any of the organisation’s actions and inactions have had a positive or negative impact in some fashion on the performance of those suppliers. If so, it’s likely many other suppliers have felt the same impacts somewhere along the line.

Those impacts should be addressed by following great advice from a 1940’s hit song to ‘accentuate the positive and eliminate the negative’.

Investigation of options to do so, to the extent practical and reasonable, should be planned and kicked off fairly promptly. Ideally this would be done in parallel with bench testing of the performance playbook.

Setting up a supplier performance-improvement program

Armed with the performance playbook, the organisation should set up a supplier performance-improvement program with two aspects.

External use of the playbook

A rolling program is needed to regularly:

• Identify a small group of important suppliers with great to good performance who may or may not have been involved with development of the performance playbook
• Isolate areas where each supplier’s performance is most concerning
• Meet with each supplier to discuss their performance weak spots and root causes, introduce the performance playbook, and gauge their interest in addressing their issues based on the playbook and/or their own ideas
• Agree an improvement plan with each interested supplier, track and encourage its progress and consider some type of reward system for improved performance as an incentive to participate
• Update the playbook with new ideas that have proven to work.

Internal use of the playbook

Supplier qualification and selection can be a fraught process. It can be too easy to not ask the right questions, too hard to get clear answers under time pressure.

The performance playbook can be particularly helpful in the process. It highlights the sort of questions that should be put to a supplier to get a sense of its understanding of what’s involved in performing well. The playbook then helps provide clarity about whether or not the answers provided show that the supplier is actually doing it.

Wrap-up

Bob Dylan revealed an essential truth when he wrote ‘Involvement! That’s the issue.’ in the somewhat cosmic liner notes of his ground-breaking 1965 album ‘Highway 61 Revisited’.

Involvement is very much the issue when it comes to leveraging great supplier performance."

People from the organisation’s selected suppliers will effectively be donating their time, information and expertise for a common cause. It’s a good cause: to help more suppliers do a better job, and that includes themselves.

People from the organisation itself will be closely involved with those suppliers, arranging for the collection and assembly of details of the approaches and technologies used, then setting up and managing a program to get improved supplier performance across tranches of the organisation’s supplier fleet.

When people have a say and are heard, when they’re involved in something, that’s when better outcomes than expected are often produced.

Efforts to improve supplier performance can be hard work, especially when the organisation has a large number of suppliers. Call it a day when diminishing returns become apparent, but never stop understanding what delivers great performance."

It’s a different story with efforts to improve supplier qualification and selection. Knowing what to look for to get suppliers with the best potential for achieving great performance right from the outset is always going to pay dividends. 

This is much more likely to happen when insights providing guidance for their identification are kept current.

Always bear in mind though that those insights won’t guarantee widespread better outcomes. The changes required might not be achievable by some suppliers, either in the short or the longer term. What works for one may not for another, for many reasons.

Giving it a shot is better than hoping for the best.

If you would like more information about how to develop your supplier performance playbook, or how Gatekeeper can assist with that activity, then contact us today.