Trent Morris is back, this time to talk about Performance Management.
Is managing supplier performance solely about KPIs?
Let’s dive in and see!
Rethinking Performance Management: It’s More Than Just KPIs
Rob: Performance management! We talk a lot about KPIs on this channel, but is performance management all about KPIs? Let’s explore that idea today.
This week, Trent Morris is back with us. Welcome, Trent! We’re going to dive into performance management, and you’ve told me it’s not just about KPIs. So, share your perspective with us.
Trent: Thanks, Rob! Yeah, I believe performance management is about more than just KPIs. In fact, most people misunderstand KPIs. When I develop a supplier relationship management framework, which sits above performance management, I’m focused on the bigger picture.
We’re paying for 100%, not just 98% or 99%. Think about the perfect order. Do we want that to happen 100% of the time? Of course! We want our customers to be happy every time they place an order. So, when we’re talking about performance management, we’re really paying for 100% quality service. But we know that things happen, and that’s where the KPI of 98% comes from.
The problem with setting KPIs at 98% is that we end up focusing too much on that number. But if we aim for 100%, we’re likely to perform better. If we just aim for 98%, we’re setting our expectations lower than they should be.
Aim for 100%, Not Just 98%
Rob: That’s a great point, Trent. I know you’re coming from a procurement perspective, but this would also apply to our internal operations, right? For example, in warehousing or transportation. I love that idea—you set the KPI at 98%, but with a failure point of 95%, it almost makes 95% the real target. We should be aiming for 100%, even internally.
Trent: Exactly! If you aim for 98%, that’s what you’ll get. But if you aim for 100%, there’s a better chance you’ll get closer to that target. Even a small gap—like the 2% difference between 100% and 98%—means accepting a failure once every 50 orders, which isn’t ideal if your operations require precision.
The goal should be to constantly improve, and this requires collaboration between service providers and clients. If we aim for 100%, we’re pushing everyone to do their best and continuously improve performance.
Improving Performance Management: Start with Clear KPIs
Rob: Great advice. So, for those watching, what’s one thing they could check in their business to see if they have a performance management issue?
Trent: First, make sure you have clear KPIs in place. If they’re not well-defined or regularly reviewed, you’ll miss performance targets. Start by identifying key metrics and measure them. Regularly check your data and make improvements.
Rob: Excellent tips! For everyone watching, what KPIs have worked best for you in your business? Share your thoughts in the comments.
Related articles on this topic have appeared throughout our website, check them out:
- 4 Tips for Effective Supplier Performance Management
- Total Supplier Performance Evaluation: More than a Suite of KPIs
- How to Address Chronic Poor Supplier Performance
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated April 05, 2023, under the title “Supplier Performance Management with Trent?“.
