How to measure supplier performance KPI?

Different KPIs are measured differently, so the first step is to choose the KPIs that correspond to your business objectives. Once you’re done, look at their calculation method and go through your records to measure it. For example, if you want to measure the On-time Delivery metric to see how many times a supplier has delivered their order on time, you’ll have to calculate the fraction of orders delivered timely to the total number of orders fulfilled by that supplier. KPI measurement is vital to effective vendor management.

Two things are crucial in this process: the access to all the data on your organization’s orders and the assurance of complete and correct data entries. This can often not be achieved through traditional file work and manual procurement processes. Your organization can opt for supplier management software that automatically calculates your chosen KPIs and generates custom reports for you. As the software itself tracks orders, the data entry process is automated, accurate, and complete.