This is a review of a white paper entitled “Effective Supplier Performance Management: Maximize your Profitability and Minimize Risks” from Ariba.

The white paper starts by discussing some of the key aspects of supplier performance management (SPM), with a lot of similarity to the concepts taught in our free online mini-course “Managing Supplier Performance” and our article “Managing Supplier Relationships.” The portion of the white paper that I found most unique and interesting was Ariba’s “7 Foundational Principles of Supplier Performance Management.” Here is a summary of those:

1. Know your end game, then set metrics for only those elements that drive you
   toward the end game.
2. Decide with metrics…the facts rule. What I think this white paper is getting at here is saying to internal customers (who are often defenders of the incumbent – and, usually, expensive – suppliers): “I understand that you feel that this supplier is good. Let’s work together to find out exactly how good this supplier is from an objective perspective.”
3. Hold them to the numbers, clarify consequences, and follow through. Basically, this piece says that consequences for bad performance are necessary, but there will be less friction and, ideally, better performance if everyone knows what to expect upfront.
4. Work with (not on) suppliers. Suggesting that procurement professionals ask suppliers to rate themselves (as a complement to being rated by you), this white paper stresses that supplier relationships are a collaboration of peers at times, not just a review between a superior and a subordinate.
5. Assign SPM owners. Effective supplier performance management requires personal dedication to the process as well as personal accountability.
6. Leverage continuous improvement methodologies, modify metrics over time. Nothing stays the same forever. Neither should your supplier performance management program.
7. Automate processes, including data collection, reporting, and analysis. This is pretty self-explanatory.

Obviously, the white paper has much more detail than I can review here, it’s very well written and relevant, and it’s only five pages, so I recommend that you download your own copy from Ariba’s Web site (registration is required). Be sure to save a copy – I think this is one of those rare white papers that you may find yourself referencing now and then over the years if you’re committed to an effective supplier performance management program.

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Recommended Reading

• Managing Supplier Performance
• 14 Procurement Best Practices
• 15 Rules for Ethical Supplier Interaction

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