In this post, I will discuss how to apply supplier performance metrics. Performance is usually measured as part of a service level agreement and KPI’s, even between procurement colleagues there may be some different views on how performance is measured.
Measuring Supplier Performance Metrics using KPIs
Let’s address KPI’s first ( below are some examples)
- KPI’s normally measure success using a tolerance level i.e. within 97% of X
- You might measure time take to complete, on time or overdue
- Number of resources/headcount allocated
- Average time on a task
- Sum of deviation in agreed number of days
- % of help desks calls resolved within X
- Budget within X %
- % of downtime
- No. of outstanding queries each month – % acceptable
- Number of calls answered/ closed each month
- Average response time
- Number of complaints
Typically performance is measured using a RAG status (Red, Amber and Green) if you would like to purchase the Supplier Scorecard click here
As mentioned before KPIs and Service Level Agreement (SLA) is used interchangeably.
What is an SLA?
An SLA is an agreement normally between two parties the client and the supplier. I recommend this is included as an appendix as part of the main set of terms and conditions. Note SLA’s can also exist between internal departments, though internal SLAs don’t usually have any financial penalties.
A good SLA will set out the service provided and dependencies. The SLA should state the desired performance level and the measurement at which this performance is achieved.
Typically you would expect to find the following in an SLA:
- Named parties for escalation
- Timescales for problems to be resolved
- Monitoring of performance and submission of reports to the client
- How service credits will be applied for repeat failure or not meeting the SLA
The SLA and KPI should be thought through at the start of the tender process and not added as an afterthought during the contract management process.