How We Conduct Supplier Performance Reviews

If you rely on external suppliers for the success of your business, there’s a high likelihood that significant value can be found through implementing Supplier Performance Review meetings. A Supplier Performance Review is an opportunity for you to meet with your suppliers one-on-one to discuss their performance against the Key Performance Indicators (KPIs), Service Level Agreements (SLAs), and other standards.

Over the years of helping companies set up their Supplier Relationship Management (SRM) programs to include reviews, we’ve found some guiding principles that have a pattern of producing positive, forward results.

To start, here are some common agenda topics for a well-structured Supplier Performance Review:

• Review contract term compliance & renewal plans
• Evaluate supplier service & delivery performance
• Review and mitigate identified performance issues
• Create shared issue resolution plans
• Set KPI/SLA goals for the next review

When developing an implementation plan for your own Supplier Performance Reviews, we’ve found it helpful to ask yourself the following questions:

Who should be included in Supplier Performance Reviews?

Internal Participants — Your Team

In order to capture the full picture of performance, it’s important to include a variety of internal stakeholders in your Supplier Performance Review. These meetings are a great forum to have an honest dialogue between your suppliers and the people that interact with them regularly. Often, these people work in departments like sourcing, supply chain, logistics, purchasing, or buying.

A Supplier Performance Review is also a chance for people that interact indirectly or irregularly with your suppliers (accounting, IT, legal, and sales) to provide their input on supplier performance. While these people do not necessarily need to participate in the review meeting, it is essential to use tools like surveys to gather qualitative feedback prior to help guide the topics and tone of the meeting.

External Participants — Suppliers

Supplier Performance Reviews are a great forum to solicit honest feedback from your suppliers, so the supplier employees who handle the direct interactions between your company and the supplier should be included in the review. Supplier departments that most often interact with your team may include sales or customer success, but depending on the nature of your relationship with your supplier, it may be useful to include other departments such as finance, accounting, product, or engineering.

How do I prepare for Supplier Performance Reviews?

The foundation of a productive Supplier Performance Review starts with establishing a clear understanding of how your supplier has performed against the contract terms, KPIs, and metrics relevant to them.

It is becoming the new industry standard to create a Supplier Scorecard for each supplier that blends quantitative data like KPIs with qualitative data like survey results & incident reports. The scorecard blends these data points into a score from 1–100, providing a clear measure of performance and removing any ambiguity or feelings from the evaluation. Learn how Leverage enables automated Supplier Scorecards.

How do I collect feedback & data before my Supplier Performance Review?

By collecting relevant data and aggregating it into a scorecard before your Supplier Performance Review, you will establish an understanding of your supplier’s performance that is informed by clear input from all relevant stakeholders. Common ways of gathering data include:

• Surveys
• KPI/Metric Reports
• Incident Reports & Chat Logs
• Action Plans
• Previous Performance Reports
• Performance Reports from Similar Suppliers

What do I do during my Supplier Performance Review?

A Supplier Performance Review is a time to have an honest, data-focused discussion about a supplier’s performance with all the relevant stakeholders in one room or on one call. Topics discussed during the meeting often include:

• Delivery or Service Incident Reports
• Billing Terms
• Product/Service Quality
• Contract Status
• Issue Resolution Plans
• Prepared Data Reports (see above section)

As mentioned, it’s helpful to create an agenda of the items & topics you’d like to discuss during your Supplier Performance Review. This will help you keep the meeting on track, and it also provides helpful documentation of the meeting.

How to Get Started

To ensure that your first Supplier Performance Reviews are productive and manageable, it’s helpful to choose 2–3 of the documents and data sources mentioned above to create your supplier scorecard. You can add more documents as you get more comfortable in your review process and learn what is (not) helpful for you to incorporate into your review.

As you work through your first reviews, it can be helpful to solicit feedback from suppliers about how they felt the review went. One goal of reviews is to strengthen your relationships with suppliers, and this is helpful to ensure they feel reviews are a positive experience for them.

The First Supplier Performance Review

Whether you’re just starting Supplier Performance Reviews for your organization or you’re doing the first Performance Review for a specific supplier, it’s important to wait at least 90 days from the implementation of a supplier before you review their performance. This provides an early touchpoint for you & your supplier to review their initial performance and make any necessary adjustments or action plans. This first review is also a great time to establish a regular review cadence going forward.

Automating Supplier Performance Reviews

Similar to employee performance reviews, creating a regular Supplier Performance Review cadence helps maintain & improve long-term supplier performance and compliance. Depending on how significant your spend is with a supplier or their record of performance, you can choose to meet as often as once per quarter or as little as once per year. We’ve found setting automated triggers based on KPI performance or supplier tiers can be helpful for those with a large supply base.

If you’re looking to get started with Supplier Performance Reviews or upgrading the workflow out of Excel and manual surveys, our team at Leverage has built an advanced technology platform to help with this and many other workflows related to purchase order or SKU management, powered by a group of industry experts. If you or your team are interested in learning more, feel free to reach out anytime to learn how we’ve helped countless companies drive supply chain management through expertise, technology, and artificial intelligence.