Supplier performance management has long been the corporate equivalent of flossing. Everyone knows they should do it. Everyone intends to do it. Many even tell their bosses — and dentists — that they do it. But few actually have a consistent and effective routine for measuring and managing supplier performance.

And, just like failure to floss can result in damaged dentures and more serious health problems, insufficient or inconsistent supplier measures can expose your comany to supply disruptions, customer disatisfaction, lost sales, and brand damage. Unfortunately, findings from the latest Aberdeen Group report — Supply Risk Increasing While the Market Stands Still — suggest that most companies — maybe even yours — will soon pay the price for ineffective supplier performance management.

According to Aberdeen’s latest benchmark of supply management and supply chain executives at more than 210 companies, less than half of enterprises have formal procedures or systems in place for consistently measuring supplier performance or managing supply risks.

Insufficient supplier and risk management has always been cause for concern. However, Aberdeen argues that, in today’s unpredictable global market, the pervasive inadequacies of supplier performance and risk management are a corporate crisis:

“The global transformation of procurement through the advancement of low-cost country sourcing (LCCS) as a viable strategy has exposed the management of supply to more risk,” writes report authors William Browning and Vance Checketts. “The countries targeted by LCCS are also often unstable politically or economically while also lacking the infrastructure to enable visibility into operational and logistical activities.”

While much of the report holds up LCCS as the poster child for heightened supply risk (and as fodder for why supplier performance management is so critical today), other widely accepted supply management best practices — such as outsourcing, supply base rationalization, and lean and just-in-time (JIT) — have made enterprises more vulnerable to supply disruptions than ever before. (Not to mention elevated political, economic, and natural disaster risks around the globe.)

The most alarming part of the new study’s findings is that supply management organizations haven’t made any progress since Aberdeen first supplier performance management benchmark in 2002. A cross-reference of Aberdeen’s three benchmarks in this area reveals that the percentages of companies lacking formalized and effective supplier performance and risk management procedures, measures, and systems have remained unchanged across the years. Yet, the majority of responding enterprises in each study expect supply risks to increase and have prioritized resources and budget to better predict and manage supplier performance and risk. (This reported disconnect between supply risk awareness and actual preparedness is consistent with reports from AMR Research.)

In its latest study, Aberdeen examines the cause of this disconnect, identifies the practices of top-performers in supplier performance and risk management, and provides actionable recommendations for initiating a formal supplier performance measurement and risk management program. I will be examining the key findings and recommendations from the Aberdeen report in coming weeks. (You can get your own free copy here.)

To augment these findings, I recommend that Supply Excellence readers attend the next Top 5 Supply Strategies Webinar Series, Jumpstarting a Supplier Performance Management Program on Tuesday, April 10th at 11:30 a.m. Eastern.

This complimentary web seminar will go beyond the stats to provide first hand accounts of how industry leading consultants and practitioners have employed common performance measures, procedures, and technologies to better assess and control supplier performance and risk. Featured speakers include:

• Chris Herbst, Supply Chain Program Manager at Constellation Brands, one of the world’s leading producers and marketers of wine, beer, and spirits.
• Dawn Tiura, Partner at Denali Consulting and world-reknowned expert on supplier management strategies.

Supply Excellence readers can register here.