The document provides guidelines for establishing a supplier performance measurement program that rates suppliers quarterly in categories like quality, delivery, and administrative support. It recommends focusing measurement on critical suppliers and outlines a process for collecting performance data, calculating ratings, notifying suppliers of scores, and taking corrective action for underperforming suppliers. Metrics should drive improved supplier performance while keeping measurement costs reasonable through focus on key suppliers.

1. Key Supplier Performance
Metrics
Bill Kohnen

2. General Guidelines
• Measurement of Suppliers should be meaningful and drive
improved performance
• Measurement requires time and $$$ so should focus on
critical suppliers and those we can impact
– Estimated total cost to formally measure a suppliers
performance is $8,000 to $12,000 per year. (See attachment)
• Highest rating should exceed expectations and be hard to
reach
• Low ratings should result in action.
• Time frame is quarterly with publishing of data in timely
manner
• Provide relevance with prior quarters data as well as
average for all suppliers.

3. Specific Guidelines for this Model
• Rating is between 0 and 100
• There will be a central point of contact to manage the process
of preparing and sending the ratings.
• The central contact will document the process and actions taken and
have this available for audit as needed.
• Send out summary scores to Suppliers quarterly and
share details as needed in Supplier Review Meetings
• Categories for rating are:
– Quality
– Delivery/Service
– Administrative

4. Quarterly Supplier Rating
Single Supplier Example
95
90
85
80 Supplier Rating
Average
75
70
65
Q1 Q2 Q3 Q4

5. Categories and Guidance For Rating
Rating Guidelines
Category Score
100% 75% 50% 25%
Quality 40 No Issues Issues Reported But No Production Issues Reported requiring fix Issues
Impact by Buyer or Supplier reported
and
Production
Impact
Service 40 SLA or PO performance better than Issues arise but within SLA/PO Potential Downtime averted Downtime
Delivery commitment agreement because of Buyer fix (Usage of
Safety Stock or Substitution)
Administrative 20 Proactively Meeting Needs Normal Performance for response. Buyer must request response Lack of
Support Immediate response to requests. No Price competiveness. and follow up. response or
Billing Issues. Best Value Price in Market. Product and Service meets Buyer Unclear Value and cost no contact.
Bringing innovation to Buyer. Proactive Needs. Quickly provides requested competitiveness. Requires High Cost.
and transparent in providing data for information needed for Buyer follow up on Buyer audit No
Buyer Audit Requirements. audit. information. innovation.
No response
to Buyer
audit
information
request.
100

6. Results and Action's
Rating Designation Result
90 to 100 Outstanding Preference for New
Business
80 to 90 Good Performance Maintain. Include in
consideration for new
opportunity.
60 to 80 Acceptable Performance Mutual Work between
Rearden and Supplier to
Improve. Equal evaluation
with other “new” suppliers
for new business.
Below 60 Immediate Corrective Senior Level Meeting held
Action and Action plan to
Improve. Regular progress
reporting to E Staff
Sponsor. No new projects

7. Roles and Process
Quality Data
Collected
Quarter E-Mail to Discuss
End Prepare Supplier Score Y at Next
Consolidate Charts for Above e
Process cc. Key review
Input Suppliers 60 s
Starts Contact
Service and
Admin NO
Ratings from
Buyer Key
Contacts
Set Up
Meeting
with
Supplier
and Report
to E Staff
Owner

8. Critical Supplier PerformancePrgram Summary
Sample
2.5
2
1.5 Action
Acceptable
1 Good
Outstanding
0.5
0
Q1 Q2 Q3 Q4

9. Detail Critical Supplier Ratings
(For Bigger Organization make as a commodity or division chart)
100
Outstanding
90
Good
80
Supplier A
Acceptable
70 Supplier B
Supplier C
60 Supplier D
Supplier E
50
Action Needed
Average
40
30
Description
Q1 Q2 Q3 Q4

10. Comment about Compliance with
Audits
• Reviews of Supplier Performance Process are
often part of audits (ISO, TS, Customer, even
internal)
• Generally they will never question the details of
any given supplier rating
• What auditors look for:
– Is there a process?
– Is it followed?
– Is it documented?
– Is action taken in a timely basis?

11. Summary
• Focus on Most Important Suppliers
• Time is of the essence for supplier performance
measures to be meaningful (preparation, review, sharing and
action)
• Share information with a very high level at
Suppliers.
• Include overall supplier performance trends as a
metric for your Supplier Management process.
• On a yearly basis recognize the best performing
suppliers.

12. Attachment
Program Total Cost Per Supplier
Quartely Cost
Normal Costs Hours Hourly Cost
Quarterly Prep 4$ 125.00 $ 500.00
Assumptions you
Time Reviewing 2$ 125.00 $ 250.00 may need to modify:
Maintenance of Process 1$ 125.00 $ 125.00
Documentation 0.5 $ 125.00 $ 62.50
Hourly Cost – although unless
Audit Costs Formal Audit Cost
this is done outside the US
Formal Audit Assuming once every 2 years $ 10,000 8$ 1,250
these total costs are close
Quarterly Cost Single Supplier $ 2,187.50
Annual Cost Single Supplier $ 8,750.00 Formal Audit Costs and
Frequency –
Other Costs
Key supplier suggests a formal
Cost If Action Required (one Supplier) Hours
onsite audit will be done
Meeting and Review 16 $ 125.00 $ 2,000.00
occasional
Travel $ 2,000.00
Documentation 4 125 $ 500.00 Total # Suppliers you will
measure
Quarterly Cost Single Supplier $ 4,500.00
Annual Cost Single Supplier Issue per Quarter $ 18,000.00
What type of recognition you
Cost For recognition Of Suppliers $ 20,000.00 will do - $20K represents
modest trophies, press release,
Total Other Costs
Number of Suppliers Measured
$ 38,000.00
10
and dinner
Progarm Overhead per Supplier $ 3,800.00
Total Annual Cost Per Supplier $ 12,550.00