Supplier Performance Management (SPM) Systems – Implementing Best Practices and Processes to avoid Brick Walls (Part 2 of 3)
In Part 1 we looked at a range of Best Practices, Lessons Learned, we explored some potential Rabbit Holes and Brick Walls. If you have not yet seen Part 1 it is available via a link at the bottom of this article.
In this article (Part 2) we will continue this theme by discussing many more of the important lessons you can learn in implementing a Supplier Performance Management System and associated business processes. Getting it right is key to your success.
9) Data Visibility – Collaborating with your Supplier
Quite often the SPM data gathering process has being designed with the flaw that its only the Operator (customer) that is interested in the data. Often the supplier who has spent the time completing scorecards is left in the dark. In Order for your SPM initiative to be successful you need to let the supplier see there own data as well. It has to be a two way street and rightly so given the time commitment that they put into the scorecard completion.
Done right you should be providing the supplier the same degree of visibility via reports, dashboards, alerts as you would your own category managers. After all the supplier has a vested interest in improving the relationship. Providing your Account Manager with such visibility means they can run the reports and visualize the same data in order to make improvements between the Performance reviews.
One way systems where the supplier has no visibility stem from those who like the Shitty Stick Management (SSM ) methodology and this only end up in a frustrated relationship. On the other hand if the supplier is provided visibility and sees a problem via your system in real time then they can action it rather than waiting to hear it from you at the QPR, often 3 mths too late to action.
Excel scorecards linked to internal databases, cubes and desktop based Analytics is the weapon of choice for the Shitty Stick Manager. Just like in my previous part 1 post dont fall into the trap of SS MGT of suppliers. Surprises at QPR’S are not the way forward.
So open up your SPM reporting * to your suppliers and reap the rewards that two way system visibility brings both in terms of reduced time to action, and also in improving the overall openness of the relationship.
*Caveat : This must me limited to only viewing their own data. You need to ensure the supplier cant build reports and dashboards on data from a competing supplier, or any other supplier for that matter.
10) Dashboard and Report Sharing
As well as giving the supplier access to their own dashboards you should also encourage the sharing of data, whether its between you and the supplier, internally within your organization, or within the suppliers organization. This sharing encourages a collaborative approach to managing performance and driving discussions around opportunities for improvement.
Example, you develop a report on certain KPI’s against a range of criteria, you spot some interesting observations, and then share it with only your own organization. Keeping this report to yourself will not drive supplier change, you should share it immediately with your supplier to open up discussion. With technology today the sharing of reports and dashboards is quite easy.
11) Reporting Criteria – Asset Meta Data
When running reports its important to understand that the assets you are reporting the suppliers performance against often differ in their properties. When talking about assets I am referring to Assets within Asset groups such as Onshore Rigs, Offshore Rigs, DeepWater Rigs, Pumping Stations, Aircraft, Helicopters, Refineries, Subsea Equipment, Supply Vessels, Support Vessels, Tankers, Trucks, Wells, etc. Each of the assets can have different properties (meta data) thereby affecting the comparability of results for the KPIs used to monitor supplier performance.
Examples of Meta data for each asset grouping include:
Rated Depth (e.g 20,000ft , Horse Power (e.g 1500hp) Type (Single, Pad Double, Pad Triple ), Mast Rating, Day Rate, etc
Engine Type, Manufacturer, Passenger Capacity, Years in Service, Last Serviced Date, etc
Other Meta data that you can attach to the asset include Latitude, Longitude,
This Meta data is not just for reporting criteria purposes but also serves in helping to determine comparable like for like performance levels by criteria. Example only show me Drilling efficiency KPI performance of competing Rig suppliers where Rig (the asset) Horsepower is BETWEEN ‘3500 AND 4000Hp”, AND Type is “Pad Triple”.
Or, only show me KPIs for competing Aviation suppliers for KPIs on performance for Helicopters that have Passenger Capacity > 10.
In order do treat like with like you need to associate Meta data with each asset so when you run reports you are comparing like with like. If your system does not allow the association of Meta data then you will not be comparing like with like and thereby run the risk of doing unfair comparisons and subsequently your judgment on which supplier is performing the best could be affected. You need the Meta data to compare like with like.
12) Saved Reports / Cloning Reports
Building reports in any system takes time, your system should include the ability to not alone save reports in a report library but also clone those reports for easy editing.
Example: you have spent the last 10 minutes determining all the criteria you need for a particular supplier KPI report, and now your boss really loves that KPI report and wants it for all 30 of your strategic supplier in that region, with the same KPI’S and criteria.
So having an easy way of saving a report template and cloning it for multiple suppliers offers a huge time saving and also makes managing the supplier reporting easier.
Same goes for dashboards. People don’t have time these days to do repetitive tasks.
13) Automation / Scheduled Reporting
As well as being able to run Supplier KPI reports you should also have the capability of scheduling these to run on an automated basis and delivered into your inbox, whether that is once a week, once a month on quarterly. You should also be able to choose the format for ease of edit, example Word, Excel and PowerPoint give you the ability to edit where as PDF is locked down, and not easy to add additional comments to in a presentable manner.
Many people think that output to excel is the most popular but from my experience with SPM systems the most beneficial is PowerPoint as that’s the weapon of choice that people like to use at Presentation forums such as Performance reviews. So imagine the PowerPoint deck you need with 16 slides for a performance review is auto generated and sent to you on an automated basis. Knowing that when it arrives it has the latest KPI dataset for that Supplier or Group of Suppliers.
14) The Importance of Setting and Monitoring, and Managing Current versus Historic Targets and Bands
As pointed out in Part 1, many SPM Systems suffer from either the inability to cater for different KPI targets ranges for the same KPI across different Categories or Business Units, Regions, and Districts. You need to have flexibility in your ability to change these targets to fit the average performance for Suppliers in these regions.
Likewise and equally important is how we manage the targets and bands over time. If suppliers are constantly in the green zone and meeting targets then we may look at raising the bar a little. However in doing so for say 2016 data we need to be sure that the Historic data remains within the bands set for 2015.
A good example of where I have seen failures in this is where an Operator resets or increases targets and bands for a KPI in current year only to find that when we look at historic data the performance now looks skewed. To elaborate on this a supplier that was in the green zone for 2014 data now looks at their 2014 data after the reset and it shows they are in the amber zone. The supplier scratches their head wondering how this can be.
So you need to ensure that historic targets and bands are maintained at the levels they were set at in order to give a true picture of performance in relation to the bands and also variance from target for past years after you change the current targets.
15) Setting Targets and Bands at Regional Level & Benchmark Data
Now that we know the best process for Target management, how do we set targets and bands for these KPIs at regional levels.
That process often involved looking at past data and reassessing whether the Business Unit Target and associated Green / Amber / Red Bands are appropriate at the Local level.
By looking at past data we can get a picture of what the average performance is for that supplier or group of suppliers and set the target accordingly. You do need a good data sample as we know performance can fluctuate.
In determining the appropriate target you can also use Industry Benchmark targets for regions. I have seen these for general logistical targets such as On Time Delivery but they exist for a wide range of KPIs. For example there are providers that can even give you benchmark data for drilling efficiency KPIs (Happy to provide contacts on request). More often than not you will consult with internally, with subject matter experts, externally with Industry Partners, Competitors, or engage with external Domain and Subject Matter Experts (SMEs) for such benchmark KPI targets.
Its also important you consider the units of measure at the BU, Region, or Local Level. I am referring here to are Currency, Length, Weight, Depth. You need a way to convert these back on the fly to compare rolled up performance for a report at Global level. A good example here is that in most cases the terminology or definition of Drilling efficiency KPIs such as Days per 10.000 ft can differ regionally, like in Canada they use Days per 3048m, as their unit of measure is in that BU is Meters.
Likewise different countries may capture costs in different currencies, so be aware of the impact of Units of measure in rolling up data from different countries when comparing like with like. You need to integrate various converters into your system.
So when determining your targets and bands make sure you do your research and analysis so you are setting them at the appropriate levels for the BU, Region, or District in question. Targets that are easy to hit don’t drive performance improvement. Targets that are unattainable mean that quite often the supplier will give up on trying to achieve them as they are deemed unachievable. Do review targets on a regular (say yearly) basis but keep in mind that you need the functionality to retain historic targets.
16) KPIs not always best managed in isolation of each other.
Its of significant importance that can easily see the influence of one KPI on another. Two examples here include tracking safety improvement and drilling efficiency.
a) Improvement in one KPI normally drives Improvement in another KPI:
An ongoing comparison of the monthly Number of Hazard IDs reported by a Rig provider keen to identify, fix and reduce safety risks can drive a reduction in the Number of Incidents
b) Performance Improvement in one KPI can also drive Negative Performance in other KPIs:
The example i use here is where we have a strive for Drilling efficiency (Days per 10k) at the risk of Recordable Incidents.
Or, the strive for the Number of On Time Deliveries at the cost of the KPI for On time Deliveries in Full and Too Specification
Whatever the case you need to ensure you can track two different KPIs on the same graph to correlate whether they are is a root cause in one driving the other in either a positive or negative manner. Having loads of graphs that are viewed in isolation wont give you the insight into root cause. You need them on the same performance graph where appropriate to do so.
I hope that the above list (although not exhaustive) will help you in having success with your SPM initiative. I would also welcome any feedback and constructive discussion you have on this article / post.
- Variance Alerts & Real Time Data Management
- Performance Comparison – Supplier A V B – Masking Suppliers
- Applying Scorecard Section Weightings
- Overall Supplier Scores & Grades
- Geographical Performance Management Made Easy
- Workflow / Scorecard Approvals
- Managing Scorecard Compliance
- Turning Data into Actions
- Action Tracking / Management
- Performance Review Automation
- Performance Review Preparation
- Actions Post Performance Review
Part 3 is now available:
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About : Daryl Fullerton
Daryl is a Supplier Performance and Relationship Management Specialist at Outperform SRM. He provides guidance and consultancy on the design, development and Implementation of various Supplier Performance & Relationship Management Systems for Global Oil & Gas Operators and Service Companies across Upstream, Midstream and Downstream Sectors.
Specialism’s include Supplier Performance & Relationship Management, Supplier Risk Management, Supplier Enablement, Operational Risk Management, Contract Compliance Management, Scorecards, KPI’s, P2P Process Automation, PIDX Standards, and Management Information & Reporting Systems.
A keen promoter and believer of the importance and focus on his ‘partnering to solve approach‘ in improving Operator / Supplier Relations in 2015 Daryl was awarded the honor of “Supply Chain Pros to Know” in recognition of the leading supply chain professionals and experts worldwide.
About : OutPerform SRM
OutPerform SRM is a management consulting firm that helps leading Oil & Gas businesses establish value added solutions for effective Supplier Relationship Management (SRM). We help our clients reduce inefficiencies, reduce costs, and make lasting improvements within their Supplier Relationship Management (SRM), Supplier Performance Management (SPM), and many more important business critical Supply Chain Initiatives . Through our hands on experience with Major Oil and Gas Operators over the last 17 years we’ve now built a firm uniquely equipped to this task across all Major Category Lines.
Our Experts have Experience of working with a wide range of internal and external stakeholders with the ability to build relationship and influence outcomes. Our Experience of supplier performance management includes detailed knowledge of processes and frameworks including commercial performance management of contracts and knowledge of supplier risk management techniques.
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