Procurement- Contract Management
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The power point presentation describes about the Procurement- Contract Management in detail. Some important points are c...
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Procurement- Contract Management DELIVERED BY: BSS Management Consultancy Visit www.businessservicessupport.com Tel: 0845 226 4315
WHY CONTRACT MANAGEMENT? ELEMENT TWO: RATERS
The next key element to decide upon is the raters – who are the individuals who will participate in the evaluation of your suppliers?
Obviously, your organisation’s purchasing and supply management staff should participate because that staff is ultimately responsible for the performance of your suppliers
But do not stop there! It is extremely important to get the input of other stakeholders in the organisation
If you work in a production environment, be sure to involve your engineers and quality staff
These folks have a vested interest in the performance of your company’s product or service and usually are more than happy to give their opinions on how well suppliers support their goals
Suppliers
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Raters
Performance
Supplier Rating Program
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WHY CONTRACT MANAGEMENT? ELEMENT TWO: RATERS
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Working in a non-production environment, end users of the products or services of the selected suppliers, would need to be included
Let’s consider copy paper as a commodity purchased from one of your selected suppliers
You, in purchasing, may not use copy paper as much as some of your company’s end users and, therefore, may not be able to comprehensively evaluate your paper supplier’s performance
Meanwhile, your company’s biggest end user of paper may find her copier jamming constantly because of poor quality paper
You need that person’s opinion when rating your paper supplier. Never ignore stakeholders or end users Supplierin the Suppliers Raters Performance Rating supplier evaluation process Program copyright© to Business Services Support Limited 2011
WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES
The third key element of a supplier rating program is the group of performance measures that you select
Performance measures are those important, specific facets of suppliers’ performance that you will rate
Performance measures will differ from organisation to organisation based on the needs of each particular organisation
However, performance measures usually fall into one of four categories:
Cost
Delivery
Service
Quality Suppliers
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Raters
Performance
Supplier Rating Program
copyright© to Business Services Support Limited 2011
WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES
Cost performance measures relate to the direct financial impact of a supplier’s performance and can include:
Price, payment terms, shipping charges, savings from process improvements, and so forth
Delivery performance measures relate to a supplier’s ability to support your scheduling requirements and can include:
On-time delivery of goods, on-time completion of services, stock availability, or anything related to the cycle time between order and receipt
Suppliers
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Raters
Performance
Supplier Rating Program
copyright© to Business Services Support Limited 2011
WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES
Service performance measures relate to the personal and electronic interaction between the buyer and seller and can include:
Responsiveness, resolution of problems, technology used to provide customer service, and so forth
Quality performance measures relate to the conformance of a product or service to requirements and can include:
Rejection rates, warranty claims, technology used to improve products and services, and other metrics related to the durability, reliability, and consistency of a product or service
Each performance measure that you ultimately select should be specific and measurable
For example, on-time delivery is specific (a delivery is either made by a certain date or it is not) and it is measurable (a delivery was 3 days late)
Suppliers
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Raters
Performance
Supplier Rating Program
copyright© to Business Services Support Limited 2011
FRAMEWORK FOR MANAGING CONTRACTS (S.L.A’s)
Methods of Rating Once you have made your decisions relative to the three key elements of a supplier ratings program – suppliers, raters, and performance measures – you must decide how to acquire information about your performance measures
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Be advised that the performance measures you choose and your method of acquiring information have a dependency on one another
The performance measures you choose may drive how you go about acquiring the information
Also, limitations with regard to acquiring information may require that you "tweak" the performance measures that you have selected
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FRAMEWORK FOR MANAGING CONTRACTS (S.L.A’s)
Methods of Rating (Cont)
While there are many ways of acquiring information and The ideal situation The ideal situation then converting is one in which you is one in which you that information have the means of have the means of into supplier acquiring the acquiring the Having such ratings, we will information you information you means may or may focus on three of need to support need to support not be realistic in the most common: your selection of your selection of your particular situation the best the best Supplier performance performance scorecards measures for your measures for your System metrics company measures company Supply chain event management (SCEM) software
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FRAMEWORK FOR MANAGING CONTRACTS (K.P.I’s) SUPPLIER SCORECARD:
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Supplier scorecards are a common starting point for organisations who wish to have some method of rating their suppliers
The supplier scorecard approach gained popularity in the 1980’s
Each rater will receive one scorecard for each supplier being evaluated
Each scorecard represents a survey of the rater’s opinion of that supplier’s proficiency for the selected performance measures
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FRAMEWORK FOR MANAGING CONTRACTS (K.P.I’s) SUPPLIER SCORECARD (CONTINUED):
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The scores for each performance measure are usually based on a scale where low scores indicate poor performance and high scores indicate good performance
For example, a performance measure may be "Adheres to delivery schedules" and the rater may assign a score of 1 to 10 where 1 indicates that the supplier never adheres to the delivery schedule and 10 indicates that the supplier always adheres to the delivery schedule
Scores for each performance measure are then added to produce a total. Suppliers can be ranked from best to worst by creating a list of your suppliers and their total scores, then sorting it from highest score to lowest score
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Case study?
IT’S TIME FOR A CASE STUDY
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