Supplier Performance Management Using DMAIC Principle Part II
In my previous blog, I covered the changing business scenarios which make it a necessity for organizations to not only vet suppliers during the on-boarding process but continue to evaluate and actively participate in their growth on a continuous basis. To enable that I mentioned using the DMAIC principle, which is applied in six sigma projects.
In this blog, I’ll discuss the “DMA” part of the DMAIC principle and how it can be applied to supplier management.
Define:
The first step is to develop the parameters on which suppliers can be evaluated and tracked. These criteria are also called KPIs (Key Performance Indicators). KPIs can be set at different weights and different scorecards. KPIs and Scorecards will differ from organization to organization, from industry to industry. KPIs are created by taking different factors, like industry of the organization, category, and key result areas into consideration. KPIs are designed in such a way that a supply manager is able to capture all the imperative information about a particular supplier like performance data or supplier risk data.
Measure:
Once the parameters have been defined, the next important step is to measure and track the suppliers against the set parameter. For measuring the performance of a supplier, the points below are very important.
- Frequency of Measurement –For example, if the supplier is very critical for the operation, the frequency of measurement should be weekly or monthly. Recurring events normally give a supply chain manager a trend like supplier performance over a period of time.
- Scorers/ Raters – Scorers or Raters are those people who evaluate the selected suppliers for the defined criteria. Category managers, stakeholders and end users are generally invited to participate in the scoring process. It always makes sense to invite suppliers for self-evaluation.
Analyze:
Once the measurement is finished, the next step is to analyze the results. Analyzing a supplier’s performance against each defined parameter is very important. Analyzing the trend is also necessary. If a supplier is supplying multiple categories and is part of multiple evaluations (different scorecards), it is imperative to analyze the overall performance of the supplier and the performance against each score card separately.
Stay tuned as in the next blog I talk about the remaining two-parts of the principle.
For further reading, you can access our whitepaper “Supplier Performance Management Using DMAIC Principle” by clicking on the download button below.
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