Smart-Purchasing.com: Best Practices: Checklist

Best Practices: Supplier Development
Use Metrics That Predict Supplier Instability

Traditional	Best Practice
Utilization of lagging metrics: On-time %, specification conformance, invoice accuracy	Utilization of leading metrics: Supplier conformance to production plan, number of supplier stock-outs, frequency that supplier has to expedite its supplies, accuracy of marketing forecast

Rationale
Traditionally, the metrics focus on the symptoms and not the problems. Leading metrics focus the buyer and, more importantly, the supplier on what makes the supplier’s business unstable.
Details
As larger suppliers acquire strategic importance to the buyer, buyer becomes exposed to a much greater risk in a case that supplier becomes unable to perform services or deliver goods that the buyer needs. It, therefore, becomes necessary to review supplier’s market, competitive position, and future growth, in addition to supplier’s financial statements, to determine whether supplier will continue to be financially sound, as well as reliable.

Best Practice | Case Study | Commentary