Blog

From insights come answers.

A series of articles on the world of procurement from the Insider Procurement consultancy team.

Construction: Supplier performance management - the 7 questions you should be asking

Posted by Jeremy Bowley
Find me on:

We worked with a national builder and cut £millions off their cost base, moving their business from being uncompetitive to one of the most profitable in the industry.

During our procurement consultancy, we spent time understanding their business and discovered that, like most in the construction industry, reliability of supply was key. Missed deadlines, idle time waiting for supplies to arrive, poor quality supplies.....all of these things add cost and spoil the reputation of any building company.

We worked on that, and having cut costs dramatically (see our eBook for more detail on how we achieved that), we looked at how the business would continue to measure supplier performance going forward.

In the past, project managers would place orders and be responsible for day to day liaison with suppliers. Project managers would be aware of which suppliers performed well, and those that didn't. But the information was held in isolation, and where one project manager might go so far as to refuse to work with a particular supplier, another would be discussing future requirements.

There was a rating system whereby the team could rate suppliers on a range of criteria using a 10 point scale, but the questions were complex and being short on time, most project managers gave suppliers straight 7's. This result was a pretty meaningless supplier performance measurement.

We simplified the process to just 7 questions*, each with a "yes" or "no" answer. We asked those dealing with suppliers to answer this for each supplier on a monthly basis.

All data is held centrally now, so that project managers and buyers can review supplier performance metrics before inviting suppliers to quote.

The big result, however, was not a simplified process per se, but the impact this had on supplier performance. Knowing that they would be rated each and every month helped to increase on time delivery which in turn impacted the performance of the construction company against their contracts.

Added to that, all involved determined that there was a lower risk rating on each contract as the chosen suppliers could be trusted to deliver.

Simply changing the WAY you go about supplier performance management can actually lead to an improvement.

*Curious about the 7 supplier performance management questions we asked? Click here to find out!

 

Topics: Best Practice, Supply Chain Management, Case Studies