Correcting poor supplier performance is the other side of rewarding good supplier performance. When it is evident through your rating methodology that a supplier’s performance is inadequate, you need to meet with that supplier to improve performance.

Some things to keep in mind when taking corrective action include:

  1. Schedule your meeting as close as possible to the time that the inferior performance has started. Taking immediate corrective steps. This will minimize the damage from your supplier’s poor performance.
  2. Do not create an atmosphere of hostility during your meeting with the supplier. Kick off the meeting by telling the supplier you are there to collaborate and arrive at mutually-beneficial gains.
  3. Indicate to the supplier that you will be asking why the poor performance has occurredIt is impossible to correct a problem unless the root cause is known. If the supplier does not begin thinking about finding the root cause until after your meeting, corrective action also is delayed. Setting this expectation increases the chance of getting a probe started as soon as possible.
  4. Do not allow the meeting to end without agreeing with the supplier on an action plan to resolve the performance problemSet a timeline for resolving the issue and ensure that you and the supplier agree on how to measure how effective the resolution is.

Resolution Setting

An example of the formalization of these three points in the resolution of a quality problem may include:

  • The supplier will have its production machinery re-calibrated by Monday of next week.
  • The supplier will test the first ten components produced for you before shipping to ensure that they function according to contractual tolerances.
  • If your efforts to correct performance problems through collaboration fail, you should seek to replace your poorly performing supplier with one who can meet your expectations. However, it is never safe to assume that switching suppliers eliminate problems.

You may end up with the same or worse problems when switching suppliers. Always perform due diligence and ask prospective replacement suppliers for evidence that they are better than your incumbent. Evidence can include customer testimonials, on-site demonstrations, product samples, etc.

Summary

You ensure that your suppliers adequately contribute to your company’s success by implementing a supplier rating program:

    • First, determine the suppliers you will rate, the individuals who will rate those suppliers, and the performance measures that you will use to determine the degree to which your suppliers are performing.
    • Next, determine how you will obtain information about your suppliers’ performance. Three common ways of collecting data on supplier performance are supplier scorecards, system metrics, and SCEM software.

Finally, you should recognize and reward good supplier performance and immediately collaborate with poor-performing suppliers to correct performance deficiencies.

When done right, a supplier rating program will improve supplier performance. And better supplier performance will help your organization be more efficient, produce higher quality products or services, reduce costs, and increase profits.

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