The Vendor Performance Myth
PurchTips edition #149
Can You Predict Vendor Performance?
"The key to superior vendor performance is measuring vendor performance." Let me unequivocally say that this statement is a myth.
Yes, it's true that measuring vendor performance is very critical for improving vendor performance. However, the most important element in achieving superior vendor performance is sourcing and selecting the right vendor.
There is no foolproof way of selecting a vendor whose performance will never disappoint you. However, there are three questions you can ask about a vendor that will help you better predict that vendor's future performance:
- Is this category the vendor's core competency? Some vendors do only one thing and do it well. Others do a multitude of things but specialize in one. That area of specialization is called a core competency. An office supply vendor may also provide printing services. A computer manufacturer may also make printers. You need to identify what the vendor's core competency is. If you purchase products or services outside of a vendor's core competency, the risk of poor performance is greater.
- Does the vendor have experience with requirements like mine? Find out if the vendor has provided products or services of similar specifications, with similar lead times, to similarly-sized customers in similar industries. The more similar the vendor's successful experience is to your requirements, the more likely that the vendor will perform well for you.
- How will my contract impact the vendor's capacity? Some purchasing professionals will research the answers to questions 1 and 2. Those are important questions, but there is still a significant probability that the vendor will fail unless you confirm the vendor's capacity. Capacity represents the available people, equipment, and/or facility space required to fulfill your orders. Just because a vendor is successful with a customer similar to your organization doesn't mean that they have the resources to duplicate that success simultaneously. For critical contracts, you need the vendor to thoroughly explain how they are going to allocate people, equipment, and/or facility space to your orders. Are those resources in use today? Will they be freed up by a project coming to completion? Will the vendor have to add resources? If not, how challenging will it be for the vendor to squeeze your requirements into the current resources' capacity?
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