Deciding on which metrics to use in your supplier development process is critical to the success of the process. Essentially there will be three different types of Metrics that you will use. You will use programme management metrics that will firstly measure the SROI and Diversity outcomes of the programme. You will also measure the growth and sustainability of the individual company and lastly you will measure supplier performance metrics that will have an impact on the bottom line of the company that is developing the supplier.
Deciding on what to measure can be quite complicated.
In South Africa Supplier Development practitioners have added complexity above that of their international counterparts. Internationally, supplier development has a focus on lean and six sigma performance improvement, while in South Africa many Supplier Development requirements are related to the growth and sustainability of the company. This will also be the predominant focus in your Enterprise Development measurements.
As a supplier development practitioner it is important not to become confused regarding the different types of measurements. You will need to measure the three different types of metrics separately as some of the metrics have trade-offs impacting on long term and short term success.
We will discuss all these metrics in more detail in a later post, but for now let’s have a look at what makes these metrics different.
Programme Metrics (Very Long Term)
Your programme metrics will differ depending on the outcomes of the project. State Owned Enterprises for instance have certain specific outcomes that they require with the development of large projects. As discussed in a previous post, it is unfortunate that very few of the large construction projects lead to long term job creation. Mostly the jobs in these projects are temporary in nature. That said, this still has significant societal benefit.
Mature companies make use of both input and output metrics to track success. In those areas where you might make use of more than one Business Development Support provider it is important to track your input metrics. Due to the complexity and requirement for objectivity, systems such as Performa can be used to track these between various contractors and BDS providers.
Maturity in measurement and evaluation has increased over recent years and there are now various types of metrics that can be used to track programme outcomes here.
Supplier Development Growth Metrics (Long Term)
These metrics relate to the old saying of an entrepreneur having to work ‘on’ his company rather than ‘in’ his company. Included in these metrics might also be some liquidity metrics that are required to assist SMME’s to enter the supply chains of large multinational companies. Many companies have used both profitability and turnover metrics here, but it should be noted that these are not necessarily good metrics for measuring Entrepreneurial companies.
Although all these metrics could affect the sustainability of the beneficiary company you could argue that they are not directly contributing to the performance improvement of your operations.
Continuous Improvement Performance Metrics (Short Term)
These are the metrics that would normally be put into an SLA and would affect the performance of the buying company. It would therefore be closely aligned to the company paying your salary and dominate most of the conversations with the end users within your company. Metrics here can have both leading and lagging indicators. You will seek to measure both types of indicators, but initially you will be placing a lot of emphasis on leading indicators.
We will discuss all of these different types of metrics in more detail in later posts, but for now it is important that you understand the different metrics, how they relate to each other and why you need to measure them.