Monitoring supplier performance is an important aspect of running a successful business. After all, working with suppliers is a partnership. You need to know how they’re doing and how you can help them improve.
That’s exactly what supplier monitoring is all about. It’s a tool for checking up on your suppliers, spotting risks and solving problems before they escalate – and that makes it an important asset for your business.
In this article, we’ll cover what supplier monitoring is and why it’s important, as well as 5 best practices for effectively monitoring your suppliers.
What is supplier monitoring?
Supplier monitoring is a central aspect of supply chain management that involves continually assessing and managing suppliers to ensure they live up to your expectations.
No matter how established your business is, it’s important to ensure your suppliers meet the standards you’ve agreed on for your partnership.
You want suppliers who never fail to deliver quality products and services – and suppliers you can trust to meet your compliance requirements. The purpose of supplier monitoring is to ensure exactly that.
Key aspects of supplier monitoring include:
- Performance evaluation: Supplier monitoring involves regular checks that the quality and timeliness of your suppliers’ deliveries are up to par. It’s also about making sure they’re giving you good value for money and sticking to the budget. Read more about supplier evaluation here.
- Compliance and risk management: You want to know that your suppliers are following the rules. A key element of supplier monitoring is making sure your suppliers comply with laws and industry rules, as well as keeping an eye out for any potential risks surrounding your suppliers. Read more about supplier risk management here.
- Relationship management: Part of supplier monitoring is making sure there’s always clear and open communication with your suppliers. It’s about ensuring everyone is on the same page, sharing feedback and building strong partnerships. Read more about supplier relationship management here.
- Continuous improvement: An essential element of supplier monitoring is doing regular audits and assessments of suppliers to make sure they’re always improving. This also comes with offering training and resources to suppliers so they’re all set to meet your standards and improve their processes.
In short, supplier monitoring plays a key role in mitigating risks, ensuring product quality and keeping your supply chain running smoothly. Overall, it’s essential for your business operations.
The benefits: Why supplier monitoring is so important
Monitoring the performance of your suppliers can help you catch issues early on and take action if you need to. This helps you get the most value out of your suppliers – and that comes with numerous benefits.
Here are some of the most significant benefits of supplier monitoring:
- Better products and services: Keeping an eye on how your suppliers are doing helps you spot when their products and services aren’t up to scratch. This allows you to step in and make sure they improve.
- Cost savings: Most issues require more time and resources to fix the longer they’ve been going on. Catching problems early can save you a lot of money down the road.
- Increased transparency: Monitoring your suppliers helps create a more transparent relationship between all parties involved. This means better communication and teamwork – and that helps you resolve issues faster when they do occur.
- Happier customers: When your customers get the quality and timeliness they expect from you, they’re more likely to be happy with your overall service. This way, supplier monitoring helps you boost customer satisfaction.
All in all, there’s a lot to gain from supplier monitoring. Of course, you’ll only see these benefits if you do it right – and we’re here to help you ensure that you do.
5 best practices for effectively monitoring your suppliers
Now that we’ve covered what supplier monitoring is and why it’s so important, it’s time to cover how to do it right.
For that purpose, we’ve compiled a list of five best practices for effective supplier monitoring. Let’s get into it.
1. Set up KPIs
Key performance indicators (KPIs) are an important tool for keeping tabs on how your suppliers are doing.
Set up KPIs for your suppliers that line up with your business goals – they should cover things like quality, delivery, cost and compliance.
2. Gather and analyse performance data
Data collection and analysis are a must for supplier monitoring. You can pull data from a variety of sources, including scorecards, audits, surveys and feedback from your team.
Once you’ve gathered your data, analysing it will help you spot trends, patterns and areas that need work.
3. Compare performance to benchmarks
Another essential tool for supplier monitoring is benchmarks. Comparing how your suppliers are doing against benchmarks helps you see where they fall in relation to industry standards and best practices.
You can set your benchmarks based on a variety of factors that make sense for you – e.g. internal goals, industry averages or top suppliers in the game.
4. Use a scorecard system
We mentioned scorecards earlier – and with good reason. The primary purpose of a supplier scorecard system is to keep track of how your suppliers are performing, making it an essential tool for supplier monitoring. Your scorecard should include your KPIs, their importance, targets and ratings.
Want to learn more about supplier scorecards? Read our article: ‘Step by step: How to make a supplier scorecard’
5. Give feedback to your suppliers
Monitoring your suppliers isn’t just about keeping an eye on them – it’s also about creating a solid foundation for improving your partnership.
Giving suppliers feedback based on your findings is crucial for helping them improve. Make sure your feedback is specific, timely and actionable. Teaming up with your suppliers for constructive feedback sessions can help you figure out the root cause of any issues and work together to fix them.
Conclusion
Supplier monitoring is an important tool to ensure the success of your business. It allows you to stay on top of how your suppliers are doing, help them improve and spot risks before they escalate.
By following the best practices above, you’re all set to get the most value out of your suppliers and build professional relationships that’ll last.
