Katie Virtue, Manager of Category Development, Corporate United
Supplier reports can be a window into the performance of a category and the opportunities that lie ahead. Because of a bigger push in developing long relationships, many suppliers are now providing some type of reporting. They realize that reporting is a key part of account management and that it helps solidify this relationship. Suppliers are even more aware of how simple efforts such as customization or in person presentations of the reporting can make a big difference for their clients. However, suppliers still need guidance on what is important to each individual company and how to best present it. It’s important to set objectives around what an organization would like to gain from reports and voice these to suppliers so they can provide appropriate data. This is just the start to getting the most out of supplier reports.
Beyond the Facts
Reports should include both quantitative and qualitative information. The obvious quantitative information is the spend amount, trends in spending, rebate achievement (if applicable), and many others. Data is usually easy to present, but it is important to expect more from a supplier than just the facts. Request a copy of the report or presentation beforehand and come prepared with questions on what the data means. Also, conduct an audit beforehand to verify the reported information is correct.
Data will differ depending on the category. In some commodity categories, the amount of spend is on the core list – a predetermined basket of best value items - versus off the core list. These results could provide insight into where savings might have been realized had the core items been purchased. Other categories will provide the average response time or hit rates. The possibilities are endless and in some cases there can be too much reporting. One must establish with the supplier exactly what data is relevant to the individual organization and the specific category. It is necessary to think about all goals and objectives and determine how the reporting matches up with them.
The second part of reporting is the qualitative information. This can encompass a wide range of measurements from customer service and quality reviews to compliance levels and untapped savings from unused services. This information is great and can provide increased insight, but an organization must make sure that any service level agreements within the contract are being measured or reported. Oftentimes suppliers will self-monitor and report their performance without being asked.
How do you compare?
Reports can provide information about individual performance as well as group performance. An organization should look for comparative metrics and measurements regarding how it is doing and what can be done to improve. Additionally, it is always helpful to see how an organization is doing relative to the other supplier’s customers.
A New Movement in Supplier Performance
Some suppliers are taking initiative and leading the way in reporting. One such initiative is scorecards. Scorecards are used in a variety of ways, and now we are seeing them used for reporting on client performance, as well as supplier performance. Scorecards require more initial input from both parties to determine the metrics, scale and weights to use. Suppliers then have to pull together data and sometimes send out surveys to be able to measure all the items in the scorecard.
Together, an organization and its supplier may determine that not reaching the target rate is unacceptable and there will be consequences if it is too low. A scorecard provides a comprehensive overview of performance and allows a company to pinpoint which areas are not up to par. A scorecard can also help to identify specific locations that are not compliant and then develop strategies for addressing the issue. Some of the changes above may require executive support and, if so, those executives should be included in the creation of the scorecard.
While reporting is usually provided by the supplier, auditing allows an organization to take initiative in evaluating its own program, spend and supplier performance. If reporting is limited and focuses solely on spend, auditing can provide deeper insight into achievement of service level agreements and other performance factors. Also, reporting might only be provided a few times a year, whereas auditing can occur more frequently. However, there are pros and cons to auditing:
- Provides more control in the relationship
- Shows insight into supplier performance
- Can be time-consuming
- Results may not be useful if no issues are found
Reporting Through Regular Meetings
Business reviews are conducted several times a year for those who request them from their suppliers. If your company participates in a supplier business review, this may be the only time that you receive reporting. The goal of the meeting is to see how your organization has been spending and determine what can be done differently to save more money.
It is important to be specific when requesting the data and type of report needed for a supplier meeting. If an organization does not define the data/report they want, then it is up to the supplier to create a report based on what they feel is important. Plan ahead and create a list of what information will be most beneficial, including: spend by location, average order size, etc.
Also, before requesting this data and information from a supplier, it’s important to know what will be done with it once it is provided. Most importantly, use a forward looking focus when analyzing all the results. Ask for recommendations from the supplier. After looking at each table and chart ask what this means for the next quarter or year. Also, ask the supplier what efforts they will make to help achieve the goals that have been set. This should not be a one-sided review of the organization’s spending; it should be a tandem review of the relationship.
A Go Forward Strategy
If the above suggestions have been taken into account, then a reporting review may have caused an organization to recognize necessary changes. The discussion with the supplier should always end with identifying action items for achieving the objectives that materialized from reviewing the report.
Beyond inventorying the action items, priority and responsibility should be designated for each item on the list. Some suppliers will accept consequences if they do not complete specific action items. For example, a supplier might have monetary consequences for not increasing on-time deliveries. Also, more complex items might need various steps for completion and all items should have an associated deadline.
Reporting, and the tools and software used to compile the reports, will continue to evolve and play an important part in interaction and business with suppliers. Effective reporting presents a great opportunity for collaborative efforts to strengthen both the organization’s program and the supplier’s program. Some suppliers may see conflict in providing cost savings strategies, but the ones that realize the long term benefits of the relationship are usually the ones who will succeed. Do not let your suppliers dictate what information they think is important. Take the time to discover what reporting will help your company achieve and improve.