10 Supplier Quality Metrics For Procurement

As procurement manager, you play an instrumental role in making sure your products are purchased at the best rate. But price negotiation isn’t just what makes you great at your job. You need to benchmark all your suppliers against each other to maintain efficient and reliable supply chain.

Problem. The benchmark can only be done if you aggregate all your supplier’s historical and current data – which, most of the times is a daunting task and not possible with existing tools.

Solution. In this article, we will cover 10 supplier quality metrics, explore how to interpret them, and give you concrete example of actions you could derive from them.

Bonus: we also give you the tool to track them!

What Are The Best Supplier Quality Metrics For Procurement?

1. On-time Delivery Performance

On-time delivery performance measures the percentage of orders delivered by suppliers on or before the agreed-upon delivery date. For instance, if a supplier commits to delivering materials every Monday and fails to do so 10% of the time, their on-time delivery performance would be 90%.

How to read the metric: Consistently low on-time delivery rates may indicate issues with supplier reliability or capacity constraints.

Actionable Steps: Engage in open communication with the supplier to understand challenges and explore solutions such as adjusting order quantities or production schedules.

2. Defect Rate

The defect rate represents the percentage of defective units or products received from a supplier against the total units received. For example, if 1,000 units are received from a supplier and 20 are found to be defective, the defect rate would be 2%.

How to read the metric: High defect rates can lead to increased costs due to rework or scrapped materials, as well as potential quality issues downstream.

Actionable Steps: Collaborate with the supplier to implement quality control measures such as improved inspection processes or training for their workforce.

3. Lead Time Variability

Lead time variability measures the consistency of lead times provided by suppliers. It calculates the standard deviation of lead times over a specified period. A high lead time variability indicates inconsistency in delivery schedules.

How to read the metric: High lead time variability can disrupt production schedules, leading to delays and inefficiencies in the supply chain.

Actionable Steps: Work with suppliers to streamline processes and reduce variability through measures such as implementing lean principles or utilizing forecasting tools.

4. Cost of Quality

The cost of quality includes expenses related to ensuring product conformance to requirements and addressing quality issues such as inspection costs, rework expenses, and warranty claims.

How to read the metric: High costs of quality suggest inefficiencies or deficiencies in supplier processes that need to be addressed.

Actionable Steps: Conduct a thorough analysis of quality-related expenses and collaborate with suppliers to implement preventive measures to reduce defects and associated costs.

5. Supplier Corrective Action Request (SCAR) Rate

The SCAR rate measures the frequency of corrective action requests issued to suppliers due to quality issues. It indicates how often suppliers fail to meet quality requirements and the effectiveness of their corrective actions.

How to read the metric: A high SCAR rate signifies persistent quality issues that require immediate attention and resolution.

Actionable Steps: Work closely with suppliers to establish clear expectations and support them in implementing robust corrective and preventive actions to address underlying root causes. You could also set up a threshold for which the SCAR is too high and would result in a change of suppliers.

6. On-time and In-full (OTIF) Performance

OTIF performance evaluates the percentage of orders delivered on time and in full. It considers both delivery timeliness and order completeness.

How to read the metric: Poor OTIF performance can lead to stockouts, production delays, and customer dissatisfaction.

Actionable Steps: Collaborate with suppliers to improve supply chain visibility and forecasting accuracy to enhance OTIF performance.

7. Return Material Authorization (RMA) Rate

The RMA rate measures the percentage of products returned to suppliers due to defects or quality issues. It reflects customer dissatisfaction and the need for corrective actions.

How to read the metric: A high RMA rate indicates product quality issues that impact customer satisfaction and company reputation.

Actionable Steps: Investigate the root causes of returns and collaborate with suppliers to implement corrective measures such as improving product design or enhancing manufacturing processes.

8. Supplier Relationship Index (SRI)

The SRI evaluates the overall performance and relationship between a company and its suppliers based on factors such as communication, responsiveness, and collaboration.

How to read the metric: A low SRI score may indicate strained relationships, communication breakdowns, or dissatisfaction with supplier performance.

Actionable Steps: Foster open communication, mutual trust, and collaboration with suppliers to address concerns and strengthen relationships for mutual benefit.

How to Monitor These Supplier Quality metrics? 3 Simples steps

1. Aggregate supplier availability data

Gathering supplier availability data is the first crucial step in monitoring supplier quality metrics. This data includes information on the availability of raw materials, production capacity, lead times, and any potential disruptions in the supply chain. To aggregate this data effectively:

• Utilize a data management and analytics software to centralize supplier information from your procurement and ERP systems.
• Implement regular communication channels with suppliers to obtain up-to-date availability data.
• Collaborate with cross-functional teams to assess and validate the accuracy of supplier data.

By aggregating supplier availability data, you gain insights into potential risks and opportunities, enabling proactive decision-making to maintain product quality standards.

2. Get real-time update on your metrics

Timely access to supplier quality metrics is essential for identifying deviations and taking corrective actions promptly. To get real-time updates on your metrics:

• Implement automated monitoring systems that track key performance indicators (KPIs) such as defect rates, delivery times, and compliance with quality standards.
• Set up alerts and notifications within your analytics software to flag any deviations from predefined thresholds.
• Establish regular performance reviews with suppliers to discuss metrics, address issues, and identify areas for improvement.

By leveraging real-time updates on supplier quality metrics, you can promptly address any quality issues and maintain a high level of product quality.

3. Visualize your supplier quality metrics in one dashboard

Visualizing supplier quality metrics in a single dashboard provides a comprehensive overview that facilitates informed decision-making and strategic planning. To create a centralized dashboard:

• Select a data visualization tool that allows you to integrate and display various supplier quality metrics.
• Customize the dashboard to include key KPIs, trend analysis, and performance benchmarks for each supplier.
• Share the dashboard with relevant stakeholders, including senior management, purchasing teams, and suppliers, to foster transparency and alignment.

By visualizing supplier quality metrics in one dashboard, you can easily identify trends, patterns, and areas requiring attention, enabling proactive management of supplier relationships and continuous improvement initiatives.

Conclusion

By leveraging these 10 supplier quality metrics, operations and procurement managers can gain valuable insights into supplier performance, identify areas for improvement, and implement targeted actions to enhance supply chain efficiency and reliability.

Monitoring and managing supplier quality effectively are essential for maintaining competitive advantage, meeting customer expectations, and driving sustainable business growth.