Measures and Metrics for Supplier Performance Evaluation

Common measures of supplier performance and metrics

Define and describe common measures of supplier performance ( ie: quality, price, delivery, service levels) and metrics (ie: defect rates, functional performance, timeliness, responsiveness, availability of technical support) Design and conduct supplier audits, evaluate corrective and preventive action plans, provide feedback, and monitor for process improvement These are the main categories.

In addition to formal audits, there may be many meetings with suppliers where they are subjectively assessed Elements that would factor into that may be: how apparent is management commitment? Are they responsive? Do they clearly have the right technical expertise?

We’ll discuss a couple of these items in more detail – audits, product data The others are really self-explanatory delivery performance: supplier performance against delivery requirements (ie: total number of days late) CA deals with number, timeliness and effectiveness of CA Price and total cost: ability of a supplier to reduce cost or at least minimize increases.  

A survey would often be conducted during the supplier selection process. As you will recall we defined a survey as being conducted before the product is built, the audit after production commences and thus is used to make sure that what you thought was happening is indeed happening…The system audit would tend to look for on-going compliance.

The whole subject of quality auditing is dealt with as part of another course (QUAL1210) but should address 6 major categories: drawings and specs; purchased material; measurement and test equipment; process control and product acceptance; storage packing, shipping and record retention; quality program management Product audits may include compliance testing, tear-down audits – Is the product that we are getting what we thought we were getting (ie is it the same as the first article). Has the supplier changed materials, components, any other elements of the design standard. Need to be sure what the contractual position is.

Similarly for process audits. Is the process capable and in-control? Will it stay this way…Is it the same process as the first article or initial production was made with? What changes have been made? What happens if it goes out of control System and Process audits are based on the the supplier’s documentation of the system or process used to manufacture the part Product audits are based on the product specification Audits should be conducted in a professional manner.

Nonconformance should be handled immediately and constructively Auditors should have a thorough knowledge of quality and auditing principles Auditor should maintain control and not be led by the supplier Auditors should verify all verbal information

An appropriate checklist should be prepared prior to the audit Customer and supplier should have agreement on criteria
The auditor should verify facts before the closing conference Informally discuss the results with the supplier representative
When the results require their attention top management (supplier and customer) must be involved in the closing conference
Corrective action must be followed up Auditors need to be realistic, firm and fair All audit reports should be kept on file

Enables a supplier to link its own internal performance measures with the strategic objectives of its customers Enables suppliers to identify opportunities to improve their performance so that they are better able to meet customer requirements Documents the criteria used to define what levels of performance are considered unacceptable, acceptable, and superior by the customer organization.

Quality improvement and defect-free performance imply relationship between quality and deficiencies.  Absence of reported deficiencies equates with desirable quality performance.  Common measurements relate to rejections to receipts.  Quality Performance can be expressed in percent defective, PPM, DPM Delivery becoming more critical as a lot of companies move to decrease inventory and focus more on JIT.  Common measures are percent of on-time delivery, percent of early deliveries, percent of late deliveries, percent of overshipments and percent of under shipments.Major criteria of supplier evaluation is cost of doing business.  Cost such as scrap, inspection, rework and return can be incorporated into rating system.